What are the legal consequences of failing to file company accounts on time?

Submitting annual company accounts to Companies House on time is one of the most important responsibilities of any UK-registered company’s director. Every year thousands of directors are accused of failing to file company accounts.

The financial year to April 2024 saw Companies House prosecute 2,718 company directors for failing to file accounts on time. Of these, just under half (43%) were convicted.

There are many reasons why a director may not file the correct accounts on time. They include genuine oversight or lack of awareness, or circumstances beyond the control of the individual director such as difficulties with accountants and auditors.

Whatever the reason, the consequences can be serious. Many directors do not appreciate that they could personally face criminal prosecution.

Hickman & Rose specialise in representing company directors accused of failing to file accounts on time. Here we answer some of the basic questions someone in this situation may ask.

What power does Companies House have to criminally prosecute directors for failing to file accounts on time?

Companies House has the power to investigate and criminally prosecute directors for breaches of their statutory responsibilities set out in the Companies Act 2006 (the Act).

The Act creates over 150 criminal offences related to the management and administration of companies. But arguably the most significant of these (and certainly the one which Companies House is most keen on enforcing) is the obligation on directors to file statutory accounts on time.

There are different rules for what type of accounts must be filed and when, depending on the size and type of company in question.

But if the relevant accounts are not delivered by the deadline, then the directors in post at that point can be criminally prosecuted under Section 451 of the Act.

Prosecution can take place even if a delay was due to circumstances beyond a director’s control. It can also occur if the director was not personally responsible for the filing of the accounts (which may be the case in larger organisations; or for directors of more than one company).

How does Companies House prosecute the crime of failing to file accounts on time?

Although warning letters are sometimes received, the first a company director may know of their prosecution by Companies House may be when they receive a summons to appear in court. If the company is incorporated in England & Wales this will require them to attend a hearing at Cardiff Magistrates’ Court near Companies House headquarters.

At the initial hearing, the director will generally be asked to indicate a plea (either “guilty” or “not guilty”) to the charge. If a not guilty plea is entered, then a trial date will be listed which the director will have to attend.

The evidence required for Companies House to bring a prosecution for failing to file company accounts on time is relatively limited. As far as the prosecutor is concerned all they need to show is:

• that the defendant was a director immediately before the end of the period to file the accounts;

• that the deadline has expired, and;

• that Companies House did not receive the documents by the time of that deadline.

It is important to recognise the directors potentially liable are the individuals who were in place immediately before the end of the period to file the accounts. This remains true even if they have subsequently left the company in question.

What are the defences against the charge of failing to file accounts on time?

A statutory defence to the offence of failing to file company accounts on time is that the director took “all reasonable steps for securing that those requirements would be complied with before the end of that period”.

The key words to note here are “all” and “reasonable”.  

In relation to “all”: it is not sufficient to demonstrate that the director took “some” or “many” reasonable steps to ensure the accounts were filed on time. If there were any other reasonable steps that they could have implemented – and which did not occur – then the defence is not made out.

In relation to “reasonable”: the director does need to have taken all “possible” steps. The steps need only to have been “reasonable”.

What are the punishments if convicted of failing to file accounts on time?

Failing to file company accounts on time is an offence triable only in the Magistrates Court. If convicted, the Court can impose an unlimited fine. Imprisonment does not apply.

Apart from the criminal conviction and financial penalty, a particular concern for some directors may be disqualification. If a person is persistently in default of companies’ legislation (including the requirement to file accounts on time), a Court can order that they are disqualified from acting as a company director for up to five years.

Persistent default can be conclusively proven by showing that, in the five years up to the date of the application for disqualification, the director has been found guilty of three or more relevant offences. This applies even if the convictions occurred on the same occasion.

This may be a significant risk for directors of many companies or companies which are late filing accounts for several years.

In addition, directors who are professionals such as solicitors and accountants may need to self report criminal proceedings and convictions and may find that their professional regulators investigate if this constitutes misconduct and take enforcement action.

What should a director under threat of Companies House prosecution do?

Any director who is contacted in relation to a potential prosecution for failing to submit accounts on time is advised not to ignore this communication.

Depending on the circumstances of the case, constructive and early engagement with the agency can help establish a defence by enabling the director to explain to the agency what the problems have been and how they will be resolved.

Hickman & Rose have often represented individuals in Companies House prosecutions and has had many successes persuading the agency to drop cases.