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06th July 2012

Filing company documents late could have serious consequences

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Failing to file Annual Returns and Accounts at Companies House in time could result in serious consequences, including personal liability for directors and potential negligence claims against professionals who do not advise clients appropriately.

It is widely appreciated that in the event of late filing, a Company will be liable to pay late filing penalties.

A prolonged delay will also usually indicate to the Registrar of Companies that no business is continuing to be carried on and the Registrar may, of his own volition, apply under section 1000of the Companies Act 2006 to strike the company off the Companies Register. If the company is still operational, directors can generally resist the striking off by giving notice of trading to the Registrar and arranging to file any late documents promptly.

However, in addition to the consequences for the Company outlined above, directors should be aware that that they could also find themselves personally liable in one of the following ways:

1. Failing to deliver accounts and/or annual returns on time are criminal offences under the Companies Act 2006. Directors serving at the time of the missed deadline may be prosecuted and subject to a fine of up to £5,000 and for continued contravention, a daily default fine of £500;

2. Under the Company Directors Disqualification Act 1986, a Magistrates’ Court may make a Director Disqualification Order against a director who is found to have committed 3 or more breaches of companies legislation in the preceding 5 years; and

3. Failing to deliver company accounts and reports on time could amount to a breach of a director’s duty to promote the success of a company or to exercise reasonable care, skill and diligence. This could give rise to a claim against the director by the company or by a subsequently appointed Liquidator.

It is important to note that the late filing penalty regime operates in parallel to the criminal offences set out by the Companies Act 2006. Both a Company and a director could be penalised in respect of the same late filing and Companies House is increasingly bringing prosecutions against company officers who persistently breach company legislation. The consequences of disqualification can be significant to an individual’s livelihood and having a criminal record is also likely to cause difficulties when travelling abroad for business.

Companies House is now operating a policy of prosecuting for much less serious breaches than previously, including late filing of annual returns, and is unwilling to withdraw prosecutions even where the documents are filed after the summons has been issued.

Before the summons is issued it is likely that warning letters will be received and an opportunity to file, given. These should not be ignored. At the very least, it is important to contact Companies House to explain any difficulty and to request an extension of time.

There is a defence for a director that he took reasonable steps to ensure compliance. So, a director should firstly do all that he can to ensure documents are filed on time. If you are a director of a company which is late filing however, it is important to keep a record of the reasons for late filing and what you did to avoid it. This may be invaluable evidence to avoid a personal conviction and all its consequences.

To avoid liability, company officers and accountants should ensure that appropriate steps are taken to comply with filing obligations.

For further information, please contact our Office on 01223 461155 or click here to email us.