Introduction of companies house in the UK - Somes stipulations on accounts

I. COMPANIES HOUSE IN THE UNITED KINGDOM

1. Summary

Companies House became an executive agency on 3rd October 1988 as part of the Government’s Next Steps initiative. The agency subsequently took on a range of delegated powers from the then Department of Trade and Industry (now the Department for Business, Innovation & Skills - BIS) relating to Finance, Personnel and Support Services. Companies House is one of seven executive agencies, belonging to BIS. It commenced operating as a Trading Fund on 1st October 1991, receiving no taxpayer funding. It is financed entirely by its fees and pays a dividend to BIS reflecting its cost of capital. Late filing penalties are paid in their entirety to Her Majesty’s Treasury. 

Companies House has two main areas of activity:

• Information registration, including the incorporation and striking off of companies and maintaining a register of the documents delivered under companies, insolvency and related legislation.
• Information provision to the public on companies, for which purpose compliance is enforced with the statutory requirements on registered companies. This is available to customers in a variety of formats. Companies House continues to develop its business along quasi-commercial lines within the framework agreed by Ministers and Treasury guidelines.

The main functions of Companies House are to:

• incorporate and dissolve limited companies;
• examine and store company information delivered under the Companies Act and related legislation; and
• make this information available to the public.

Companies House in the UK includes 3 bodies, as follow:

• Companies House in England, Wales: registering and managing all limited companies in England, Wales;
• Companies House in Scotland: registering and managing all limited companies in Scotland;
• Companies House in Northern Ireland: registering and managing all limited companies in Northern Ireland.

The United Kingdom has enjoyed a system of company registration since 1844. Today, company registration matters are dealt with in law, by the Companies Act 2006.

2. Organizational Structure and Staff

Companies House sets up its organizational bodies as follows:

•  Strategy & Corporate Services:
  • Strategy & policy
  • Assurance risk & consultancy
  • Estates
  • Human resources
  • Finance
  • Finance Late Filling Penalties
  • Procurement

• Digital Services
  • Systems development
  • Business & systems analysts
  • Software management
  • Technical ops management
  • Programme & project management
  • Corporate communications & customer insight

• Customer Delivery
  • Late Filing Penalties (LFP)
  • Business change & development
  • London office
  • Edinburgh office
  • Belfast office
  • Enforcement
  • eFiling & document services
  • Considerative Processing and Examination Support
  • Customer support services: including 4 Information Centres in Cardiff, London, Edinburgh and North Ireland and The Contact Centre

• Other
  • Legal
  • Directors and support

The total number of employees of Companies House now is 967, in which 917 staff works in Cardiff, 17 in Belfast, 25 in Edinburgh and 8 in London.

(Photo: The office building of Companies House in Cardiff, Wales)

Those employees are working at by activities, namely:

• Central Operations, Customer Support & Late Filing Penalties: 604 staff;
• Digital Services: 154 staff;
• Finance, HR, Legal, Policy & Communications: 197 staff;
• Senior Managers and Support: 12 staff

3. List of incorporations registered in Companies House in the UK

All kinds of businesses are on Companies House’s Register, namely:

• Private limited companies
• Private limited by guarantee with no share capital
• Private limited by guarantee with no share capital (exempt from using ‘Ltd’)
• Limited liability partnerships
• Limited partnerships
• Oversea companies
• Industrial and provident societies
• Public limited companies  - PLC
• Private unlimited
• Further categories:

o   Assurance companies

o   Royal charter companies

o   Investment companies with variable capital

o   European economic interest grouping - EEIG

o   Private unlimited (no share capital)

o   Investment companies with variable capital (umbrella)

o   Unregistered companies

o   Old public companies

o   Private limited by share (exempt from using ‘Ltd’)

o   Converted/closed

o   Investment companies with variable capital (securities)

According to the Annual Report 2013-2014 of Companies House, up to 31^st March 2014, 3.3 million companies includes all companies required to file documents to Companies House: companies in the process of receivership; dormant and non-trading companies; and actively trading companies (it excludes dissolved companies). It can be listed as follows: Effective register (2,968,099); New incorporations (533,032); Companies restored (5,177); In receivership (10,681); Dissolved companies (332,275); In dissolution (199,534) and In liquidation (82,692).

For one year from 31^st March 2013 to 31^st March 2014, the total number of documents filed was 8.5milion, in which 78.1% of all transactions were filed digitally and 21.9% of them filed by paper. Companies House reached 98.1% of incorporations was filed electronically.

4. Electronic Management

Companies House scans all delivered the papers and forms to produce an electronic image and stores the original and uses the electronic image as the working document.

When company file a document electronically, Companies House automatically creates an electronic image from the data company has provided.

When a customer searches the company records, he can see the electronic image reproduced online. So it is important not only the original is legible, but that it can also produce a clear copy. 

5. Coordination

Companies House also worked closely with Her Majesty’s Revenue & Customs (HMRC) and had establish a HMRC/Companies House Steering Group that provided high level engagement to govern joint initiatives in areas where we have common customers. On 1 September 2009 Companies House and HMRC issued a joint statement announcing the development of a common approach to the online filing of accounts. This reduced the regulatory burden on business by allowing accounts to be produced once and sent to each Agency through a single point – creating the data once and using it twice. This service was due to go live in autumn 2010.

Companies House is also working with HMRC and Businesslink.gov.uk on a new one-stop-shop for customers wishing to start a company

6. Expenditure for reinvestment

Companies House reserves an annually considerable capital expenditure for reinvestment, developments software or improvements information technology capability and capacity by further enhancing the main Companies House operational software (CHIPS), upgradation the necessary hardware, and improvements to the infrastructure and working environment

Table 1.1: Capital Expenditure on upgradation hardware, software, infrastructure and working environment

(Source: synthesized from annual reports from 2010 to 2014 of Companies House, Section Investment)

7. International Cooperation

Companies House is taking part as a member of the Board of the European Business Register (EBR), continuing membership of the European Commerce Registers Forum – ECRF. Moreover, Tim Moss - Chief Executive and Registrar, is a president of the global Corporate Registers’ Forum (CRF)

The implementing in international cooperation with a number of forums, organizations of Companies House in order to exchange experiences helps to improve the international transparency to businesses and promote economic effects.

8. Fraud

Companies House is working with the National Crime Agency (NCA) to establish how best its database is used in their efforts to combat fraud. 

II. SOME STIPULATIONS ON ACCOUNTS

In the UK, as stipulated in the Companies Act 2006 and the relevant regulations, not in case of dissolutions, every company must deliver its business report as 3 kinds of these, including an Annual return, Company account and Accounts. 

According to Annual Report & Accounts 2013/14, from 31^st March 2013 to 31^st March 2014, 98.5% of annual returns and 58.2% of other accounts were filed electronically

1. Annual Return

An annual return is a snapshot of certain company information at the made-up date (at which all the information must be correct). This return must be delivered to Companies House. The due date for delivering annual return is regulated as follow:

- Within  28 days after the anniversary of incorporation of a company; or

- Within  28 days of the anniversary of the made-up date of the last annual return registered with Companies House;

Note: Annual return is a separate document from a company’s annual accounts. An annual return must contain the following information:

• The name of the company;
• Its registered number;
• The date to which the annual return is made-up (the made-up date);
• The principal business activities of the company;
• The type of the company;
• The registered office address of the company;
• The address where the company keeps certain company records if not at the registered office, and those records held there;
• The details of the company secretary (corporate or individual), where applicable;
• The details of all the company’s directors(corporate or individual);
• If the company has share capital, the company must complete a statement of capital is a part of the annual return, including: (1) the total number of shares of the company, (2) the aggregate nominal values of shares, (3) for each class of shares (the voting rights attached to the shares, the total number of shares of that class, the aggregate nominal value of shares of that class), (4) the amount paid up and the amount (if any) unpaid on each share;
• If the public company trades on relevant markets, the company must provide the names and address of shareholders who hold 5% or more of the company’s issued share capital as at the made up date of the return.

Companies House will send a letter to company’s registered office to remind when its annual return is due. It is advised that filling the form electronically by using Companies House’s Software Filling or WebFilling services is the easiest and cheapest option. However, company can download a blank form AR01 of the annual return from the website or order a blank paper copy from Contact Centre).

In case of not delivering the company’s annual return timely, the Registrar might assume that the company is no longer carrying on business or in operation and take steps to strike it from the register. In the other hand, company must pay penalties for late filling annual return. In case of striking the company from the register, the company is no long existed and its assets will be belonged to Her Majesty.

Fees

There is an annual document-processing fee of £40 for paper documents or £13 for users of Companies House’s Software Filling or Web Filling services which is payable when filling the annual return.

2. Company account

Every company must prepare accounts that report on the performance and activities of the company during financial year (normally 12 months, 9 months for a private company, 6 months for a public company), starting on the last day of the month of incorporation in the case of a new company, or after the previous financial year ended and must file to Companies House. For example, if the company was incorporated on 6 April 2008 its first accounting reference date would be 30 April 2009 and 30 April for every year thereafter.

Company may change an account reference date but must send a requesting form to Companies Hose or submit via Software Filling/Web Filling services before dateline. However, there are restrictions on extending accounting reference periods:

• May not extend a period so that it lasts more than 18 months from the start date of the accounting period, unless the company is in administration;
• May not extend more than once in 5 years, unless:

o   The company is in administration;

o   The company is aligning its account reference date with that of a subsidiary or parent undertaking under the law of the UK or other state in the European Economic Area.

3. Accounts

In general, accounts must include: a profit or loss account (or income and expenditure account if the company is not trading for profit), a balance sheet and notes to the accounts.

Every private or public company must deliver its accounts to Companies House. The dateline for delivery to Companies House is 21 months of the date of incorporation for private company and 18 months for public company.

Company can use Software Filling or Web Filling services of Companies House in order to fill in those accounts and send them electronically to Companies House.

4. Late Filling Penalties

Legal frameworks

The purpose of the late filing penalty scheme is to promote the timely delivery of accounts to Companies House. Penalties were first introduced in 1992 (according to Company Act 1985) in response to increasing public concern about the number of companies that failed to file their accounts on time or at all. It the case of filling account late, companies must pay a file for Late Filing Penalty -“LFP”.

It is obligated that every company must submit company information on time to Company House, but failing to do so or file late a number of accounts, including annual return, company account and account, is a criminal offence. This leads to the company and its officers may be prosecuted.

The late filling penalties arise automatically by operation of law (s453(1) of the Companies Act 2006). The amount of penalty due is calculated by reference to the date upon which the accounts are finally delivered: the longer the period of default, the greater the penalty. Penalties for kinds of companies are different. A public company is liable to pay a greater penalty than a private company for the same period of default.

Table 1.2: Comparisons of late filling penalties between private and public company 

(Source: Annual Report & Accounts 2013/14 of Companies House)

On 1 February 2009 the penalty regime was amended. The penalties were increased and, at the same time, the period allowed for filing accounts at Companies House was shortened. Double penalties were also introduced in Companies Acts 2006: where a company files its accounts late in 2 successive years, it is liable to double the penalty otherwise due in the second year.

Unlike previous Companies Acts, the Act extended to companies registered in Northern Ireland with effect from 1 October 2009. On that date, the Northern Ireland Companies Registry joined Companies House

Table 1.3: Number of penalties and value of penalties from 2009 to 2014

(Source: synthesized from annual reports from 2009 to 2014 of Companies House, Section Late Filling Penalties)

Two main reasons that reflect not to collect value of penalties are below:

• Companies are in the process of dissolution;
• Some of companies are unable to settle as they have no assets.

In 2013/14, 68% of the late filing penalties levied was collected in full, equivalent to £58 million. Those penalties are paid in their entirety to Her Majesty’s Treasury’s Consolidated Fund.

REFERENCES

1.      The Portal of Companies House (www.companieshouse.gov.uk)
2.      Annual Reports of Companies House in years: 2009/2010, 2010/2011, 2011/2012, 2013/2013 and 2013/2014
3.      Introduction of Department for Business Innovation & Skills - BIS at the Portal of Government Office (https://www.gov.uk/government/organisations/department-for-business-innovation-skills)
4.      Life of a company – Part 1, Annual Requirements, August 2014