The Companies (Summary Financial Statement) (Amendment) Regulations 2005

Explanatory Note

(This note is not part of the Regulations)

These Regulations, which come into force on 1st October 2005, amend the Companies (Summary Financial Statement) Regulations 1995 (S.I. 1995/2092) (“the 1995 Regulations”). The provisions in the Regulations reflect amendments made to section 251 of the Companies Act 1985 (c. 6) (provision of summary financial statements to shareholders) by regulation 11 of the Companies Act 1985 (International Accounting Standards and Other Accounting Amendments) Regulations 2004 (S.I. 2004/2947) and regulation 12 of the Companies Act 1985 (Operating and Financial Review and Directors' Report etc.) Regulations 2005 (S.I. 2005/1011).

Regulations 2 to 11 extend to all companies the ability to send out summary financial statements (“SFS”) to members and others (“entitled persons”) instead of the full accounts and reports, subject to the conditions set out in the 1995 Regulations as amended being satisfied. Previously only listed public companies as defined in regulation 2(1) of the 1995 Regulations have had that ability. One of the conditions that must be satisfied is that the full accounts and reports for the year in question must have been audited (regulation 3(1A) of the 1995 Regulations as inserted by regulation 3 of these Regulations).

New regulation 10A of, and Schedule 3A to, the 1995 Regulations, inserted by regulations 11 and 15 of, and the Schedule to, these Regulations, specify the form and content of the SFS of companies and groups which prepare their accounts in accordance with international accounting standards.

Under the Regulations (regulations 12(3), 13(3) and 14(3)) a company’s SFS need no longer contain a summary of the directors' report. Companies may however include such a summary if they wish to and, in the case of quoted companies (as defined in section 262(1) of the Companies Act 1985), may include a summary of the operating and financial review (regulations 12(2), 13(2) and 14(2), and paragraph 1(3) of new Schedule 3A inserted by regulation 15).

The form of a consultation by notice under regulation 5 of the 1995 Regulations is amended by regulation 5 of these Regulations to take account of these changes, and so that the notice includes a statement that if a full copy of the operating and financial review prepared by a quoted company is not sent to an entitled person it will be published on a web site, stating where and how to access that web site.

The content of SFS is amended to reflect the fact that, as a result of amendments to Part 7 of the Companies Act 1985 made by S.I. 2004/2947, information concerning a company’s dividends is now contained in the notes to a company’s accounts rather than in the profit and loss account (regulations 12(4) to (6), 13(4) to (6) and 14(4) to (6)). For companies preparing accounts in accordance with international accounting standards dividend disclosures are required by paragraphs 3(2) and 4(2) of new Schedule 3A to the 1995 Regulations inserted by regulation 15 of these Regulations.

Amendments to the content of SFS also reflect changes to the provisions on adjustment of prior year amounts contained in regulations 3, 5, 8 and 10 of the Companies Act 1985 (Investment Companies and Accounting and Audit Amendments) Regulations 2005 (regulations 12(7), 13(7), and 14(7)).

Regulation 16 contains a transitional provision so that where a company (whether or not a listed public company) has before 1st October 2005 ascertained that an entitled person does not wish to receive full accounts and reports then that is valid for the purposes of the amended 1995 Regulations.

Regulation 17 repeals provisions of the 1995 Regulations that are spent.

A full regulatory impact assessment of the effect that these Regulations will have on the costs of business is available from the Department of Trade and Industry, Corporate Law and Governance Directorate, 5th Floor 1 Victoria Street, London, SW1H 0ET (they are also available electronically at www.dti.gov.uk/cld).Copies have also been placed in the libraries of both Houses of Parliament.