Temporary extension of period for a public company to file accounts

May 28, 2020

By Katherine Traynor

The Corporate Governance and Insolvency Bill (“the Bill”) was put before Parliament on Wednesday 20 May, with a key focus on offering businesses some reprieve during the coronavirus pandemic. It should be noted that the changes are not yet in effect, as the bill is yet to be passed. It is likely this will happen imminently, with the second reading to take place on 3 June 2020. The Bill provides for a number of long-awaited changes to the UK’s insolvency regime however, a number of the provisions are temporary and will have retrospective effect.

The text of the Bill can be found here, with explanatory notes which can be found here.

The members of Exchange Chambers’ Restructuring and Insolvency team will be producing a dedicated series of daily e-bulletins that will consider in detail the impact of the various reforms introduced by the Bill.

This third e-bulletin considers the temporary extension of period for a public company to file accounts under the Bill.

Background: filing of company accounts and reports

A company has various obligations in relation to accounts and reports pursuant to the Companies Act 2006 (“CA06”); as indeed do company directors. The directors of a company have a duty to deliver its accounts and reports each financial year to Companies House, subject to exemptions for certain unlimited companies, and dormant subsidiaries. Other specific obligations in the CA06 relating to accounts and reports will vary depending on whether the company qualifies as small, medium-sized, quoted or unquoted.

Time limits for filing accounts and reports with Companies House

The period for filing accounts and reports with Companies House also varies according to whether the company is a private company or public company at the end of the financial year in question (s.442(2) CA06):

1. The directors of a private company must file accounts and reports with Companies House within nine months after the end of the accounting reference period (“ARP”) (s.391 CA06); and
2. The directors of a public company must file accounts and reports with Companies House within six months after the end of its ARP.

The period allowed for filing ends with the date in the relevant month corresponding to the specified date, or the last date of the previous period. So, for example, if the end of the ARP is 5 June, 6 months from then is 5 December. However, due to the unequal length of the months, there is often confusion as to whether six months, means ‘exactly six months’ to the date, or whether it means the end of the sixth month. Under the rules laid down in s.443 CA06, 6 months from 30 June would be 31 December reversing, the “corresponding date” rule as laid down by the House of Lords in Dodd’s v Walker [1981] 1 WLR 1027.

Simply put, if the specified date or the last day of the specified period is:

• the last day of a month: the period ends om the last date of the appropriate month, irrespective of whether that is the corresponding date; and,
• not the last day: so, for example, where the ARP of a private company ends on 30 May, the nine-month filing period ends on the last day of February.

In circumstances where the ARP is the company’s first ARP, and is longer than 12 months, then the period for filing ends (s.442(3) CA06):

• within nine or six months, subject to whether the company is a private or public company, from the date of the first anniversary of the company’s incorporation; or,
• if later, within three months after the end of the ARP.

General extension to file accounts

Outside of the Bill, and the impact of coronavirus, in circumstances where directors cannot meet the filing deadlines, they may apply to the Secretary of State for an extension of the filing period. Any such application must be made before the expiry of the allowed period – in these circumstances, the Secretary of State may grant such an extension by notice in writing to the company specifying such further period. It ought to be noted that the availability of extensions, and the specifics concerning the same, vary according to whether the company qualifies as small, medium-sized, quoted or unquoted – meaning, there will be some variation in the process of obtaining an extension.

Temporary extension of period for a public company to file accounts

Under the Bill, section 36 provides for a temporary extension of the period which a public company has to file accounts and reports with the registrar of the Companies House. The period allowed for the directors to comply with these obligations is to be taken to be a period that ends with the relevant day. By way of example, if a public company’s ARP ends on 1 December 2019, then pursuant to Section 442 of the CA06, the directors of the company must deliver to the registrar the company’s accounts, and reports on or before 1 June 2020. However, as this deadline falls within the time period specified in subsection (1), it is therefore extended by subsection (2) until 30 September 2020.

Section 36 applies specifically to public companies, however as per section 37, the Secretary of State has the power to extend periods for providing information to registrar – this applies to section 442 as a listed provision under section 38 (for more information on this see e-bulletin: Extension of various time periods for providing information to registrar).

Conclusion

Section 36 affords public companies with an extension to the period for a public company to file accounts – this essentially means, that public companies will be given additional time to update the registrar to help them avoid penalties. In order to benefit from section 36, the application must be sent to the registrar before the usual filing deadline and must include a full explanation of why the extension is required.

The proposed changes set out in the draft Bill are welcomed by businesses as it gives directors some breathing space during the coronavirus pandemic. However, directors should continue to act with diligence, adhere to deadlines where possible and uphold their director’s duties. The measures set out in the Bill do not modify the existing regime on directors’ duties, or penalties under the relevant regulations.

Over the next week Exchange Chamber’s will consider the Bill in more detail, and our e-bulletins aim to provide an analysis of the Bill.