Failing to File Company Accounts on Time & The Personal Liability for Company Directors
It cannot be underestimated how important it is to file company accounts and reports to Companies House every year, and to ensure they are submitted on time. Failure to do so can have serious consequences for company directors, who could personally face criminal prosecution.
KANGS possesses a wealth of experience representing company directors facing prosecution for failing to file accounts or failing to do so on time. Over the years, we have heard a plethora of reasons why a director may have been unable to comply with their statutory duty to file annual accounts and reports. In most cases, the failure arises from a simple oversight or circumstances beyond their control, such as a case detailed below, where the director we represented was reliant upon his lawyers and accountants.
According to data published in the Companies House Management Information on the gov.uk website, for the financial year April 2023 to March 2024, 2,718 company directors were summoned to court and 1,157 were convicted, that is around 43%.
This offence falls under section 451 of the Companies Act 2006 (‘the Act’), the ‘Default in filing accounts and reports.’ Companies House has the authority to investigate, criminally prosecute directors or issue financial penalties for late filing. However, if they issue a financial penalty, they cannot then prosecute individuals for the same conduct.
Companies House Late Filing Penalties
Financial penalties vary depending on the penalty band, which is determined by how late the filing is and the type of company such as a private limited companies, public limited companies or limited liability partnerships. The value of the penalties for late filing of annual accounts by private limited companies alone in 2023-24 was over £155 million.
The Law
The Companies Act 2006 (‘the Act’) provides as follows:
Section 441 Duty to file accounts and reports with the registrar
- The directors of a company must deliver to the registrar for each financial year the accounts and reports in accordance with the specific requirements for each class of company.
Section 451 Default in filing accounts and reports: offences
- If the requirements of section 441 are not complied with before the end of the period for filing those accounts and reports, every person who immediately before the end of that period was a director of the company commits an offence.
- It is a defence for a person charged with such an offence to prove that he took all reasonable steps for securing that those requirements would be complied with before the end of that period.
Success in Failure to File Company Accounts Case
In our most recent case alleging breaches of the Companies Act 2006, our team successfully secured the withdrawal of Prosecution proceedings issued against our client by the Secretary of State for Trade & Business. The proceedings related to an alleged failure to file accounts as required by the Companies Act 2006.
The Circumstances
Our client, a foreign national operating outside of the UK, is a director of a subsidiary company to a large multinational group. He is totally reliant on advice and assistance provided by professionals, including lawyers and accountants, based within the UK.
His newly incorporated company inadvertently missed the deadline for filing its accounts for the first financial year, due to a complex situation arising from its position as a subsidiary within an international group structure.
Our client was summonsed to attend Cardiff and the Vale of Glamorgan Magistrates’ Court in respect of the apparent breaches of the Companies Act 2006.
How We Assisted Our Client
Having discussed the circumstances with our client and the extent of his dependence upon the professional advice received, we determined that it would be inappropriate and not in the public interest for this prosecution to proceed.
Accordingly, we:
- collated and examined all the available evidence,
- advised our client upon the relevant law and the potential defence provided by s.451 of the Act,
- conducted correspondence with Companies House obtaining an adjournment of the proceedings to enable us to properly prepare his defence,
- prepared and submitted detailed Representations to the Prosecutor explaining the unfortunate position imposed upon our client.
The Highly Successful Outcome
Once it had considered all the contemporaneous evidence and documentation accompanying the Representations presented, the Prosecutor confirmed that it was withdrawing the proceedings which had been issued against our client, stating:
“I am satisfied based on the information disclosed, and the explanation provided from your client regarding the late filing of the accounts… that it is not in the public interest to continue with this prosecution.
The decision to withdraw the prosecution as stated is made based on the written representations submitted by the defence.”
Understandably, our client was highly delighted with this outcome achieved by the team at KANGS.
How Can We Assist You?
Our team of solicitors has extensive expertise gained over many years assisting clients subjected to criminal investigation and prosecution, for alleged breaches of all aspects of the prevailing company laws.
As previously mentioned, Companies House has the authority to commence criminal proceedings against a company director. If convicted, it will not only be the stigma of a criminal conviction but also in the imposition of substantial fines and, in some cases, disqualification as a director.
If you are under investigation or accused of a criminal offence relating to a UK company, the team at KANGS is ready to provide legal assistance. For expert advice and guidance, please do not hesitate to contact us and schedule a consultation with one of our experienced solicitors.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
Top ranked by leading legal directories Chambers UK and the Legal 500.
