The Companies Act 1985 (Accounts of Small and Medium-sized Companies and Minor Accounting Amendments) Regulations 1997

Explanatory Note

(This note does not form part of the Regulations)

These Regulations amend provisions in Part VII of the Companies Act 1985 (c. 6) (“the 1985 Act”) concerning the accounts of small and medium-sized companies (as defined in section 247 of the 1985 Act). They also make certain minor and consequential amendments to other accounting provisions of Part VII.

2.  Regulation 1 makes provision concerning the application of the regulations, and contains transitional provisions.

3.  Regulation 2 substitutes a new section 246 (special provisions for small companies) and Schedule 8 (form and content of accounts prepared by small companies), and inserts a new Schedule 8A (form and content of abbreviated accounts of small companies delivered to registrar of companies). The effect of these amendments is to set out in full the provisions governing the form and content of the accounts and reports prepared by small companies and delivered to the registrar, rather than, as previously, operating as a derogation from Schedule 4 to the 1985 Act. New section 246(8) also simplifies the statements required on the balance sheets and in the directors' reports of small companies. Otherwise there are no changes of substance.

4.  Regulation 3 inserts a new section 246A (special provisions for medium-sized companies) which brings together the special provisions applying to the accounts of medium-sized companies and simplifies the statement required on the balance sheet of such companies. Otherwise there are no changes of substance.

5.  Regulations 4 and 6 restate (without changes of substance) the provisions of the 1985 Act concerning the circumstances in which the special provisions for small and medium-sized companies do not apply (new section 247A) and the preparation of group accounts by small companies (new section 248A).

6.  Regulation 5 inserts a new section 247B which restates the provisions previously contained in paragraph 24 of Schedule 8 to the 1985 Act concerning the special auditors' report required when a small or medium-sized company delivers abbreviated accounts to the registrar of companies. There are two changes of substance. Firstly, the auditors are no longer required to make a report to the directors as was formerly provided by paragraph 24(1) of Schedule 8. Secondly, the special report of the auditors delivered to the registrar need no longer in all cases be accompanied by, or set out in full, the auditors' report under section 235. It need only do so where the section 235 report was qualified, or contained a statement under section 237(2) (accounts, records or returns inadequate or accounts not agreeing with records and returns) or section 237(3) (failure to obtain necessary information and explanations).

7.  Regulation 7 contains amendments to the 1985 Act consequential on the amendments effected by regulations 2 to 6. It also makes other minor amendments to the provisions in Part VII of the 1985 Act. In particular regulation 7(4) makes amendments to section 250 consequential both on the amendments effected by regulations 2 to 6 and on the repeal of section 250(2)(a) of the 1985 Act effected by regulation 11 of the Companies Act 1985 (Miscellaneous Accounting Amendments) Regulations 1996 (S.I. 1996/189). Regulation 7(9) further amends paragraph 48(1)(b) of Schedule 4 to the 1985 Act to make clear that disclosure should only be of amounts due after more than 5 years. Regulation 7(10)(a), (11) and (12) makes amendments consequential on the repeal of paragraph 59 of Schedule 4 to the 1985 Act effected by regulation 14(1) of, and paragraph 15 of Schedule 1 to, S.I. 1996/189.