The Companies Act 2006 is the legislation that forms the primary source of UK company law and dictates the corporate governance and compliance efforts of a wide range of UK organisations. It is therefore crucial for companies and their directors to be well informed on the offences that could inadvertently be committed under this Act.
Non-compliance with some of the Act’s provisions may create summary offences relating to comparatively minor defaults, usually involving failures to notify the Registrar of Companies of matters that impact on the company and its constitution, or to provide information to shareholders. Non-compliance with certain other provisions of the Act, however, may create serious crimes, mostly relating to fraud.
There is not always a clear distinction between these two categories, given the scope for minor irregularities and defaults to also frequently be associated with more serious crime. An example of this could be where the improper maintenance of accounts or records serves as a means of concealing fraudulent trading or unlawful dealings with directors.
Selections from the Companies Act 2006 schedule of offences
The list of offences that may be committed by a company and its directors under the Companies Act 2006 is a long one. These include, but are not limited to, under the category of ‘summary only’:
- Failing to send the registrar a copy of amended articles
- Failing to forward resolutions or agreements affecting the company’s constitution to the registrar
- Failing to give the registrar notice of changes made to the company constitution by court order
- The company amending its articles so that it ceases to be exempt from the requirement to have the word “limited” in its title
- Failing to keep a register of members and their particulars
- Failing to properly keep a register of directors containing requisite information
There are also certain offences in the schedule of offences that can come under the category of either ‘summary only’ or ‘trial on indictment’. Some examples of these include:
- Failing to hold annual general meetings for a public company, or as required by the articles or the members in the case of a private company
- Failing to prepare a strategic report
- Failing to comply with the approval and signing of the directors’ report and accounts
- Failing to send out copies of reports to those entitled to receive them
The fines and sentencing powers applicable under the Act
On summary conviction for offences committed under the Companies Act 2006 after 12 March 2015, an unlimited maximum fine applies. The maximum fine is also unlimited in instances of conviction on indictment. Furthermore, a court is required to impose a victim surcharge.
With regard to sentencing powers:
- Section 78 of the Powers of Criminal Courts (Sentencing) Act (PCCASA 2000) specifies the maximum imprisonment powers: a magistrates’ court shall not have power to impose imprisonment exceeding six months in respect of any one offence
- Also specifying the maximum powers of imprisonment is section 224(1) of the Sentencing Act 2020, which sets out that a magistrates’ court does not have power to impose imprisonment for more than six months in relation to any one offence
- Paragraph 24 of Schedule 22 to the Sentencing Act 2020 amends section 224(1), substituting 12 months for six months
- Section 1131 of the Companies Act 2006 deals with the transitional provision.
What about personal liability claims?
Finally, directors can also be at risk of any of a range of claims for personal liability arising from wrongdoing in their management of the company. Examples of such claims can include:
- To the company for breach of the directors’ general duties under the Companies Act 2006 or for wrongful trading under the Insolvency Act 1986
- To third parties, such as an investor for misrepresentation
- To employees for discrimination under the Equality Act 2010
- Under legislation that imposes personal liability on directors, such as health and safety legislation, environmental legislation, the Bribery Act 2010, the Corporate Manslaughter and Corporate Homicide Act 2007, and the Financial Services and Markets Act 2000
- For costs incurred in the defence of civil, criminal or regulatory proceedings
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