The Companies Act 1985 (Accounts of Small and Medium-Sized Enterprises and Publication of Accounts in ECUs) Regulations 1992

Made: 15th October 1992

Laid before Parliament: 19th October 1992

Coming into force: 16th November 1992

The Secretary of State, in exercise of the powers conferred on him by section 257 of the Companies Act 1985[^f00001] and of all other powers enabling him in that behalf, hereby makes the following Regulations:—

Citation and interpretation

1

These Regulations may be cited as the Companies Act 1985 (Accounts of Small and Medium-Sized Enterprises and Publication of Accounts in ECUs) Regulations 1992 and shall come into force on 16th November 1992.

2

In these Regulations “the 1985 Act” means the Companies Act 1985.

Delivery and publication of accounts in ECUs

3

The following section is inserted in the 1985 Act, after section 242A[^f00002]—

(242B) (1) The amounts set out in the annual accounts of a company may also be shown in the same accounts translated into ECUs. (2) When complying with section 242, the directors of a company may deliver to the registrar an additional copy of the company’s annual accounts in which the amounts have been translated into ECUs. (3) In both cases— (a) the amounts must have been translated at the relevant exchange rate prevailing on the balance sheet date, and (b) that rate must be disclosed in the notes to the accounts. (4) For the purposes of section 240 any additional copy of the company’s annual accounts delivered to the registrar under subsection (2) shall be treated as statutory accounts of the company and, in the case of such a copy, references in section 240 to the auditors' report under section 235 shall be read as references to the auditors' report on the annual accounts of which it is a copy. (5) In this section— - “ECU” means a unit with a value equal to the value of the unit of account known as the ecu used in the European Monetary System, and - “relevant exchange rate” means the rate of exchange used for translating the value of the ecu for the purposes of that System.

Modifications of Part VII of the 1985 Act with respect to small and medium-sized companies and groups

4

• (1) In section 246 of the 1985 Act (exemptions for small and medium-sized com-panies)[^f00003], the following subsections are inserted after subsection (1)—

(1A) A company which qualifies as a small company in relation to a financial year is entitled to the exemptions provided by Part I of Schedule 8 with respect to the preparation of annual accounts for that year if its balance sheet contains, immediately above the signature required by section 233— (a) a statement that advantage has been taken, in the preparation of the accounts, of special exemptions applicable to small companies, and (b) a statement of the grounds on which, in the directors' opinion, the company is entitled to those exemptions. (1B) A company which qualifies as a small company in relation to a financial year is entitled to the exemptions provided by Part II of Schedule 8 with respect to the preparation of a directors' report for that year if the report contains, immediately above the signature required by section 234A— (a) a statement that advantage has been taken, in the preparation of the report, of special exemptions applicable to small companies, and (b) where the company’s balance sheet for that year does not contain a statement under subsection (1A) (b), a statement of the grounds on which, in the directors' opinion, the company is entitled to those exemptions.

• (2) In the same section—

• (a) in subsection (1)(b) before the words “Schedule 8” there shall be inserted the words “Part III of”,

• (b) subsection (2) is hereby repealed, and

• (c) in subsection (3) for the words “subsection (1)” there shall be substituted the words “subsections (1), (1A) and (1B)”.

• (3) Schedule 8 to the 1985 Act[^f00004] is modified in accordance with the provisions of the Schedule to these Regulations.

5

• (1) Section 247 of the 1985 Act[^f00005] is modified as follows.

• (2) In subsection (2)(a), for the words “subsection (1)” there shall be substituted the words “subsection (1) above or was treated as so qualifying under paragraph (b) below”.

• (3) In subsection (3), under the heading “Small company”, for the words “Not more than £2 million” (for turnover) there shall be substituted the words “Not more than £2.8million” and for the words “Not more than £975,000” (for the balance sheet total) there shall be substituted the words “Not more than £1.4 million”.

• (4) In subsection (3), under the heading “Medium-sized company”, for the words “Not more than £8 million” (for turnover) there shall be substituted the words “Not more than £11.2 million” and for the words “Not more than £3.9 million” (for the balance sheet total) there shall be substituted the words “Not more than £5.6 million”.

6

• (1) Section 249 of the 1985 Act[^f00006] is modified as follows.

• (2) In subsection (2)(a), for the words “subsection (1)” there shall be substituted the words “subsection (1) above or was treated as so qualifying under paragraph (b) below”.

• (3) In subsection (3), under the heading “Small group” for the words “Not more than £2 million net (or £2.4 million gross)” (for aggregate turnover) there shall be substituted the words “Not more than £2.8 million net (or £3.36 million gross)” and for the words “Not more than £1 million net (or £1.2 million gross)” (for the aggregate balance sheet total) there shall be substituted the words “Not more than £1.4 million net (or £1.68 million gross)”.

• (4) In subsection (3), under the heading “Medium-sized group”, for the words “Not more than £8 million net (or £9.6 million gross)” (for aggregate turnover) there shall be substituted the words “Not more than £11.2 million net (or £13.44 million gross)” and for the words “Not more than £3.9 million net (or £4.7 million gross)” (for the aggregate balance sheet total) there shall be substituted the words “Not more than £5.6 million net (or £6.72 million gross)”.

Transitional provisions

7

• (1) These Regulations shall apply to annual accounts in respect of financial years ending on or after the date of coming into force of these Regulations, and to directors' and auditors' reports on those accounts.

• (2) In determining under section 247 or 249 of the 1985 Act whether a company or group qualifies as small or medium-sized in relation to financial years subsequent to its first financia l year which end on or after the date of coming into force of these Regulations:

• (a) the company or group shall be treated as having qualified as small or medium-sized (as the case may be) in each previous financial year ending on or after 9th November 1990 in which it would have so qualified under section 247(3) or 249(3) as amended by these Regulations; and

• (b) the company or group shall be treated as having qualified as small or medium-sized in any such financial year if they would have been so entitled had the company or group had the qualification it is treated as having had under sub-paragraph (a) above.

SCHEDULE — MODIFICATIONS OF SCHEDULE 8

Reorganisation of the Schedule

1

• (1) Parts I, II and III of Schedule 8 shall become, respectively, Section A, Section B and Section C of Part III of Schedule 8.

• (2) Paragraphs 1 to 10 of Schedule 8, as modified by paragraph 4 below, shall be renumbered as paragraphs 17 to 26 of Schedule 8.

• (3) The provisions set out in paragraph 2 below shall be inserted in Schedule 8 as a new Part I.

• (4) The provisions set out in paragraph 3 below shall be inserted in Schedule 8 as a new Part II.

• (5) The following shall be inserted in Schedule 8, immediately after the new Part II—

(16) In this Part of this Schedule— - Section A relates to small companies, - Section B relates to medium-sized companies, and - Section C contains supplementary provisions.

The new Part I

2

The following shall be inserted in Schedule 8, immediately afte

The new Part II

3

The following shall be inserted in Schedule 8 as Part II immediately after the Part inserted by paragraph 2 above:—

(15) The directors' report of a small company need not give any of the information required by or under the following provisions:— (a) section 234(1)(a) and (b) (fair review of business, amount to be paid as dividend and amount to be carried to reserves), (b) paragraph 1 of Schedule 7 (asset values), (c) paragraph 5A of Schedule 7 (insurance effected for officers or auditors), (d) paragraph 6 of Schedule 7 (miscellaneous disclosures), (e) paragraph 10 of Schedule 7 (health, safety and welfare at work of company’s employees), (f) paragraph 11 of Schedule 7 (employee involvement).

The modifications referred to in paragraph 1(2)

4

• (1) Paragraphs 1 to 10 of Schedule 8 shall be modified as follows.

• (2) In paragraph 3(1) for the words “paragraph 48(1) and (4)” there shall be substituted the words “paragraph 48(1) and (4)(a)”.

• (3) After paragraph 3(3) there shall be inserted the following sub-paragraph—

(4) The information required by section 390A(3) (amount of auditors' remuneration) need not be given.

• (4) In paragraphs 7(1), 8(1) and 10(1), for the words “Part I or II” there shall be substituted in each case the words “Section A or Section B of this Part”.

• (5) In paragraph 7(1)(a), for the words “Part I or, as the case may be, Part II” there shall be substituted the words “Section A or, as the case may be, Section B of this Part”.

• (6) In paragraph 7(2), there shall be inserted at the end “or, where section 246(1A) applies, immediately above the statements required by that section”.

• (7) In paragraph 9, for the words “Paragraphs 7 and 8” there shall be substituted the words “Paragraphs 23 and 24”.

• (8) In paragraph 10(2) and (3), for the words “this Schedule”, wherever they occur, there shall be substituted the words “this Part of this Schedule”.

Signed

N. Hamilton — Parliamentary Under-Secretary of State for Corporate Affairs, — Department of Trade and Industry — 15th October 1992

Explanatory note

(This note is not part of the Regulations)

1 These Regulations implement Council Directive 90/604/EEC (OJ No L317, 16.11.1990, pages 57 to 59) which amends Directive 78/660/EEC on annual accounts (OJ No. L222, 14.8.1978, pages 11 to 31) (the Fourth EC Company Law Directive) and Directive 83/349/EEC on consolidated accounts (OJ No. L193, 18.7.1983, pages 1 to 17) (the Seventh EC Company Law Directive) as concerns the exemptions for small and medium-sized companies and the publication of accounts in ECUs. It also takes advantage of some existing Member State options in Directive 78/660/EEC on annual accounts and makes some minor amendments to Part VII of the Companies Act 1985 (Accounts and Audit).

2 Regulation 3 permits delivery to the registrar of companies and publication of accounts translated into European Currency Units (ECUs).

3 Regulation 4 and the Schedule to the Regulations modify the requirements of Part VII of the Companies Act 1985 and Schedule 8 to that Act (Exemptions for small and medium-sized companies) in respect of the content of the annual accounts and directors' reports of small companies. These exemptions apply not only to the individual accounts of such companies but also to the group accounts where a small company prepares them. After the application of all the exemptions conferred by paragraph 3 of the Schedule, the individual balance sheet, of a small company which adopts format 1 would be as follows:

Format 1 A Called up share capital not paid B Fixed assets I Intangible assets 1 Goodwill 2 Other intangible assets II Tangible assets 1 Land and buildings 2 Plant and machinery etc III Investments 1 Shares in group undertakings and participating interests 2 Loans to group undertakings in which the company has a participating interest 3 Other investments other than loans 4 Others C Current Assets I Stocks 1 Stocks 2 Payments on account II Debtors 1 Trade debtors 2 Amounts owed by group undertakings and undertakings in which the company has a participating interest 3 Others III Investments 1 Shares in group undertakings 2 Other investments IV Cash at bank and in hand D Prepayments and accrued income E Creditors: amounts falling due within one year 1 Bank loans and overdrafts 2 Trade creditors 3 Amounts owed to group undertakings and undertakings in which the company has a participating interest 4 Other creditors F Net current assets (liabilities) G Total assets less current liabilities H Creditors: amounts falling due after more than one year 1 Bank loans and overdrafts 2 Trade creditors 3 Amounts owed to group undertakings and undertakings in which the company has a participating interest 4 Other creditors I Provisions for liabilities and charges J Accruals and deferred income K Capital and reserves I Called up share capital II Share premium account III Revaluation reserve IV Other reserves V Profit and loss account 4 Regulations 5 and 6 raise the thresholds contained in sections 247 and 249 of the Companies Act 1985 for the exemptions applicable to small and medium-sized companies and groups. 5 Regulation 7 contains transitional provisions. Regulation 7(1) provides for the Regulations to apply to accounts for financial years ending on or after the date of coming into force of the Regulations. Regulation 7(2) makes transitional provision to enable companies to take early advantage of the new thresholds for small and medium-sized companies. 6 The Regulations also correct two minor defects in the Companies Act 1985. Regulations 5(2) and 6(2) correct the position whereby certain small and medium-sized companies were technically precluded from filing abbreviated accounts with the registrar of companies. Paragraph 6(1)(b) of the Schedule to the Regulations restores the exemption for small companies from the requirement to disclose the auditors' remuneration in the abbreviated accounts they may deliver to the registrar of companies. This exemption was inadvertently removed by the Companies Act 1989.

Footnotes

[^f00001]: 1985 c. 6; section 257 was inserted by section 20 of the Companies Act 1989 (1989 c. 40).

[^f00002]: Section 242A was inserted into the 1985 Act by section 11 of the Companies Act 1989.

[^f00003]: Section 246 was inserted into the 1985 Act by section 13(1) of the Companies Act 1989.

[^f00004]: Schedule 8 was inserted into the 1985 Act by section 13(2) of the Companies Act 1989.

[^f00005]: Section 247 was inserted into the 1985 Act by section 13(1) of the Companies Act 1989.

[^f00006]: Section 249 was inserted into the 1985 Act by section 13(3) of the Companies Act 1989.