Contributed By ISOLAS LLP
Corporate vehicles in Gibraltar may take various forms; these include foundations, limited partnerships, limited liability partnerships, companies limited by guarantee (with or without a share capital), companies limited by shares, protected cell companies, and unlimited companies.
As each form of corporate vehicle contains its own unique set of characteristics, the most suitable vehicle for a particular use case will depend on various factors, such as the nature of the underlying business activity or reasons for the establishment of the vehicle (eg, asset protection or succession planning).
Companies limited by shares are by far the most common form of corporate vehicle in use in Gibraltar. These may be set up as a private company (in which case the company’s shares or debentures are not allowed to be offered to the general public) or as a public company (in which case the company’s shares or debentures are allowed to be offered to the general public).
The principal sources of corporate governance requirements for companies in Gibraltar are the following.
Companies Act 2014
The Companies Act 2014 is the principal statutory instrument governing the formation, operation and dissolution (excluding companies in compulsory liquidation) of companies in Gibraltar.
Financial Services Act 2019
The Financial Services Act 2019 (FSA) and its accompanying sector-specific Regulations establish Gibraltar’s regime for financial services and securities law. The FSA applies to any person who carries on a regulated activity in or from within Gibraltar. The FSA also establishes the restrictions that apply to an offering of securities to the public made in or from Gibraltar.
The FSA and its accompanying Regulations came into force on 15 January 2020, following the largest-ever reform programme of Gibraltar’s Financial Services legislation and provide a modern legislative framework for all financial and professional services sectors in Gibraltar.
The reform consolidated approximately 90 pieces of legislation within an enhanced, more accessible and modernised structure, which introduces cross-sectoral terminology and powers for the Gibraltar Financial Services Commission (GFSC), aimed at ensuring consistency across all regulated activities.
The Regulations compliment the new structure, concepts and terminology of the FSA by consolidating prudential, business conduct and other requirements applicable to each financial services industry within respective sets of sector-specific Regulations.
Common law relates to the body of uncodified laws based on legal precedents established by the courts.
The common law and the rules of equity from time to time in force in England and Wales apply to Gibraltar, subject to any modifications or exclusions made by Her Majesty in Council, an Act of the UK Parliament or an Act passed by the Gibraltar Parliament pursuant to the Gibraltar English Law (Application) Act 1962.
Whilst Gibraltar’s legal system is based on that of England and Wales, Gibraltar’s statute law has developed differently insofar as the Gibraltar Parliament has enacted and amended laws to suit Gibraltar's own particular requirements. Accordingly, it is important to note that English common law is not binding in Gibraltar, but can be a highly persuasive authority in Gibraltar legal proceedings where the statutory background is sufficiently similar.
The fiduciary duties that directors owe to a company, for example, are products of common law and are not codified in statute.
Insolvency Act 2011
The Insolvency Act 2011 contains provisions relating to the insolvency and winding up of companies in Gibraltar.
Corporate Governance Code for Collective Investment Schemes
In 2013, the Gibraltar Funds and Investments Association (GFIA) introduced a Code of Conduct for Collective Investment Schemes (the Code), that was meant to address best practices in the context of Experienced Investor Funds and Private Funds.
The Code captured existing accepted principles of good practice and guidance, and further developed these principles by capturing Gibraltar-specific issues such as the governance of self-managed funds and oversight of Experienced Investor Funds structured as Protected Cell Companies.
As well as dealing specifically with the role and responsibilities of a fund director, the Code seeks to set out directors’ duties during each stage of the life cycle of a typical fund and defines what is expected in respect of the effective oversight and supervision of service-providers to the fund. It also covers specific elements of the composition of a fund's board and its collective skill set.
In 2018, through a specific addendum to the Code, Gibraltar became the first jurisdiction in the world also to issue specific standards in the structure of crypto funds, including corporate governance, risk management, valuation, custody, safekeeping and security, and a host of other important touchpoints.
It is important to note, however, that the Code is not legally binding and operates under the principle of “comply or explain”. That is to say, the Code is not there to say how something must be done. The Code is there to encourage licensees to consider certain issues and, where the licensee feels that those issues are better dealt with in a different fashion, to document their thought-process.
In addition to the requirements discussed in 1.2 Sources of Corporate Governance Requirements, companies with shares that are publicly traded must also comply with the EU Market Abuse Regulation, which continues to apply in Gibraltar, subject to certain amendments introduced under the Financial Services (Market Abuse) (Amendment) (EU Exit) Regulations 2020 in order to address deficiencies and to ensure that the EU Market Abuse Regulation is able to operate effectively in Gibraltar law following Gibraltar’s withdrawal from the European Union.
In addition to the foregoing, a company’s articles of association set out the rules for running the company. The provisions of a company’s articles of association bind the company and its shareholders to the same extent as if there were covenants on the part of the company and of each shareholder to observe those provisions.
A company may either adopt its own bespoke articles of association or the model articles prescribed under the Companies Act. The model articles are deemed to apply automatically by default, unless (i) a company registers its own bespoke articles of association on incorporation, and/or (ii) the bespoke articles expressly exclude the application of the model articles.
To the extent that bespoke articles are filed, and those articles do not contain wording that expressly excludes the application of the model articles, the Companies Act states that the model articles continue to be deemed (as far as applicable) to form part of the company’s articles in the same manner and to the same extent as if articles in the form of the model articles had been duly registered.
Under the Companies Act, a large company (as defined by the Companies Act) which is a public-interest entity is required to issue a non-financial information statement within the directors’ report. The information required by the statement must include information relating to:
The statement must also provide brief details of the company’s business model.
The principal bodies involved in the governance and management of a Gibraltar company can be broken down into shareholders, the board of directors and the secretary.
A company must have at least one registered shareholder, who may be either a natural person or a body corporate. A person, having agreed to become a shareholder, becomes a shareholder of a company upon its name being entered in the company’s register of shareholders.
There is no limit on the maximum number of shareholders that a private company can have. The Companies Act had previously restricted private companies to a maximum of 50 shareholders. However, this restriction has since been removed, and private companies can therefore consist of an unlimited number of shareholders without the need to be registered as a public company.
The company must record the details of the new shareholders in the register of shareholders.
Board of Directors
Directors are appointed to direct, control and supervise the activities and affairs of a company. Directors are a connecting line between the company and third parties. By definition, a director “includes any person occupying the position of director by whatever name called”. This definition is wide in order to include those who are effectively dealing with the affairs of the company, but do not bear the title "director". It also ensures that there is no legal distinction between executive directors and non-executive directors, although differences will usually be found in the roles they perform.
The conduct of board meetings is generally not covered by the Companies Act. The main statutory provisions affecting board meetings concern minutes of board meetings being kept and disclosure by directors of interests in contracts. The rules for conducting board meetings depend on the company’s articles of association and this gives a company great flexibility. For example, Gibraltar law does not prevent board meetings from being held anywhere in the world and for directors to participate at board meetings through electronic means. However, there may be tax consequences for a company in doing so.
Every company incorporated in Gibraltar must appoint a secretary. Both natural persons and corporate bodies are eligible to be appointed as a secretary. If a corporate body is undertaking this function, it would have to ensure that it is not required to be licensed by the GFSC in order to undertake such services. In the case of a public company, the secretary must have specific knowledge and experience to discharge the functions of secretary of a public company.
The board of directors of a company is appointed to direct, control and supervise the activities and affairs of a company. Accordingly, the articles of association ordinarily empower the directors to exercise all decision-making powers of the company which are not required, by the Companies Act or by the articles of association, to be exercised by the shareholders.
The Companies Act prescribes a number of matters that are reserved to the shareholders, and that can only be passed by a shareholders’ resolution. These include:
While the statutory requirements cannot be overridden by a company’s articles of association, in some instances, the Companies Act allows the Company to delegate some of these matters to the board of directors under its articles of association. For example, under the Companies Act, changes to a company’s articles of association must be approved by a special resolution, unless the articles of association provide otherwise.
Board of Directors
Board decisions are generally passed in the form of resolutions taken at board meetings. The decision-making process at board meetings is not covered by the Companies Act. The main statutory provisions relating to board meetings concern minutes of board meetings being kept and disclosure by directors of interests in contracts. Therefore, any meetings of directors are governed by the company’s articles of association and by any rules made by the directors themselves by virtue of powers given to them by the articles of association. This gives companies great flexibility.
The articles of association will generally set out, among other things, the notice periods to be followed in respect of directors’ meeting, the process to be followed in cases where not all directors are present physically at the meeting, as well as the quorum and voting requirements. In most instances, a board resolution will require a simple majority vote.
Gibraltar law does not prevent board meetings from being held anywhere in the world and allows directors to participate at board meetings through electronic means. However, there may be tax consequences for a company in doing so.
Where a company’s articles of association allow, the board of directors may also pass a resolution in the form of a written resolution without the need to convene a physical board meeting.
There are three types of resolutions which shareholders can validly pass.
An extraordinary resolution is a resolution that has been passed by a majority of not less than 75% of those shareholders who, being entitled to do so, vote in person or, where proxies are allowed, by proxy, at a general meeting of which seven days’ notice (unless the articles of association require otherwise), specifying the terms of the resolution and the intention to propose the resolution as an extraordinary resolution, has been given.
A special resolution is a resolution which has been passed by whatever majority is required for the passing of an extraordinary resolution for which not less than 21 days’ notice has been given.
An ordinary resolution is a resolution which has been passed by a simple majority at a general meeting of which seven days’ notice is given (unless the articles of association require otherwise). Anything that may be done by ordinary resolution may also be done by special resolution.
It should be noted that, under the Companies Act, anything that can be done by a resolution of the shareholders of a company in a general meeting can be done without a meeting by means of a written resolution signed by all the shareholders of a company, provided the articles of association allow this. However, written resolutions must be passed by the unanimous consent of shareholders, rather than the specific majority that would ordinarily be required at a general meeting.
Under the Companies Act, every company must have at least two directors, except in the case of a private company which must have at least one director. There is no statutory maximum number of directors, although a company may make provision for a maximum number of directors within its articles of association. A sole director of a company shall not also be the secretary of that company.
There are no formal requirements or qualifications to become a director and it is possible for both natural persons and corporate bodies to be appointed as directors. There is also no legal requirement for a company to appoint a natural person as its director, so, in effect, a company can be managed and controlled by a sole director that is constituted as a body corporate. The foregoing is subject to the company not being one which is licensed, authorised, recognised or registered by the Gibraltar Financial Services Commission to undertake a restricted or controlled activity. The auditor of a company cannot be a director or secretary of that company.
Directors may but are not required to hold a share qualification, so it is not a requirement to hold one or more shares in order to qualify as a director.
The Companies Act does not predefine the role for each of the board members. Typically, the board will include any number of executive directors who have management responsibilities and who perform operational and strategic business functions such as managing people and looking after business assets. One executive director can be, and usually is, nominated as chairperson. The chairperson presides over the board discussions and usually has a casting vote (unless the articles of association provide otherwise).
The board may also contain non-executive members. The non-executive director’s role is to provide a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors. However, it is important to note that under Gibraltar law there is no distinction between executive and non-executive directors. As a consequence, non-executive directors have the same legal duties, responsibilities and potential liabilities as their executive counterparts.
See 4.1 Board Structure.
Companies are required to send to Companies House a return in the prescribed form containing particulars specified in the register of directors and a notification of any change among its directors, or in any of the particulars contained in the register, within 14 days:
Therefore, in effect, a company has 14 days from the date of its incorporation to provide Companies House with particulars of its first directors.
Subsequent directors are appointed in accordance with the company’s articles of association. Under the model articles, any person willing to be appointed as a director, and permitted by law to do so, can be appointed by ordinary resolution of a general meeting or by resolution of the directors. Removal is again a matter for the company’s articles of association but it would be expected that such a decision would require a resolution of a general meeting.
The are no legal requirements regarding the independence of directors under Gibraltar law. However, where a company is undertaking an activity which is deemed to be restricted or controlled under the financial services regulatory framework, and consequently regulated by the Gibraltar Financial Services Commission (GFSC), the GFSC would expect the firm to be able to explain the basis for the number of independent non-executive directors appointed. The GFSC has established the following criteria, which should be considered when assessing the independence of individuals:
Where factors are identified which could suggest threats to independence, the board should consider and discuss whether the individuals are indeed independent and document their considerations in the board minutes.
Firms should re-assess the independence of the board and the individuals on the board periodically and should document and minute how the firm has considered these issues and has applied good practice.
Conflicts of Interest
Directors are subject to a fiduciary and common-law duty not to put themselves in a position where their personal interests and duty to the company conflict, unless given consent by the company, and a director must not make a profit from their position unless authorised by the company to do so.
Similarly, the Companies Act imposes a statutory duty on directors to declare the nature and extent of any direct or indirect interest they may have in a contract or proposed contract to be entered into by the company. A director’s failure to declare any interest in any contract or proposed contract to be entered into is an offence and the director would be liable to a fine.
Director and officer duties in Gibraltar are not codified under the Companies Act. Instead, they arise from English common law and the equitable and fiduciary duties that were in place prior to the introduction of the UK Companies Act 2006. Broadly, these include the following duties:
The Companies Act and other statutory instruments, as well as a company’s memorandum and articles of association, also impose additional duties and obligations on directors. For example, the Companies Act imposes a statutory duty on directors and officers to file certain returns with the Registrar of Companies (as further discussed in 6.1 Financial Reporting and 6.3 Companies Registry Filings).
As discussed in 4.6 Legal Duties of Directors/Officers, directors’ general duties are largely derived from equitable principles as well as common-law rules. The duties of directors have therefore evolved though decisions of the courts, which have held directors to be in a fiduciary relationship with the company and therefore to owe it fiduciary duties. The courts have considered directors to be in a special position of trust in relation to the company, similarly to trustees.
While directors’ duties are owed to the company, that is not to say that directors are not required to take into account the interests of anyone other than the company when discharging their duties. For instance, in order to act in the best interests of the company as a whole, directors should have regard to the interests of key stakeholders, such as employees, suppliers and customers.
Directors owe their duties to the company rather than to the shareholders, creditors or other directors of the company. A director may, however, owe duties to the creditors of the company rather than to the shareholders in an insolvency scenario.
As directors’ duties are owed to the company, this means that the company itself (acting through the board of directors) must take action against a director for breach of these duties, as any wrong is committed against the company itself. This precedent has been established in the leading case of Foss v Harbottle (1843) 2 Hare 461, where it was held that a wrong done to the company may be vindicated by the company alone.
The Companies Act does, however, establish an exception to this rule. See further detail in 5.4 Shareholder Claims.
In addition to a claim for breach of duty, as previously discussed, directors may be held liable for breaches of their statutory duties and obligations, such as those imposed under the Companies Act, the Insolvency Act and the financial services regulations (if applicable) which may, in certain instances, result in criminal penalties being imposed.
Under the previous Companies Act 1930, any provision in the articles of the company, or in any contract with the company, or otherwise, exempting any director, manager or officer or auditor of the company from, or indemnifying him or her against, any liability which would otherwise attach to him or her in respect of any negligence, default, breach of duty or breach of trust of which he or she may be guilty in relation to the company, was void. However, the Companies Act now clarifies that only indemnities provided by the company itself are void and further allows a company to purchase insurance for any director against any such liability.
The Companies Act also allows companies to indemnify its directors against any such liability incurred in defending any proceedings, whether civil or criminal, in which judgment is given in their favour or in which they are acquitted.
The Companies Act does not require any specific approvals in relation to a director's service contract. A director's service contract must therefore be approved in the same manner as any other commercial matter, ie, approved by the board, having regard to their duties and obligations to the company.
Under the Listed Companies (Members’ Rights) Regulations 2011, a listed company (that is, a company which has its registered office in Gibraltar and whose shares are admitted to trading on a regulated market situated or operating within the European Union) must establish a remuneration policy as regards its directors, which must be approved at a general meeting and may only remunerate its directors in accordance with the remuneration policy.
Listed companies may derogate from the remuneration policy only in exceptional circumstances, and provided always that the policy includes procedural conditions by which such a derogation can take place and specifies the elements of the policy from which a derogation is possible.
The directors' remuneration policy is a binding policy and must be approved by the shareholders at least once every four years.
The Companies Act does not require the public disclosure of director remuneration.
Listed companies are required under the Listed Companies (Members’ Rights) Regulations to prepare a remuneration report providing a comprehensive overview of the remuneration, including all benefits, in whatever form, awarded or due during the most recent financial year to individual directors, including to newly recruited and to former directors and to make this report publicly available on its website, free of charge, for a period of ten years, beginning on the date it is first made public.
Shareholders provide some or all of the financial backing for a company. In exchange for investing in the company, a shareholder may receive a dividend and may also benefit from capital appreciation of the value of their shares. The money produced by the sale of shares enables the company to commence and continue its business.
Under Gibraltar law, a company has its own legal personality, which is separate from that of its shareholders. Shareholders will therefore only be liable for losses incurred by the company up to the value (if any) unpaid on their respective shares. It must be noted, however, that the concept of “piercing the corporate veil” is recognised in Gibraltar, and there may be certain instances whereby the company’s separate legal identity will be set aside by the courts and the shareholders may become personally liable for the debts and liabilities of the company. For instance, courts will look behind the veil in cases of fraud or deliberate breaches of trust. In these cases, the courts ensure that an appropriate remedy is available against the individuals who have committed a wrong using a company they control.
The Companies Act establishes that the provisions of a company’s constitution bind the company and its members to the same extent as if there were covenants on the part of the company and of each member to observe those provisions. Therefore, the shareholders’ relationship with the company is contractual. The rights of each shareholder will depend on the rights attached to their respective shares, and this will be set out in the company’s articles of association.
In addition, shareholders may also elect to enter into a private shareholders’ agreement to govern the terms on how they will behave in relation to the company. However, a shareholders’ agreement is not compulsory. In addition, shareholders cannot be compelled to enter into a shareholders’ agreement, and they may choose to do so only if it is in their interests. Therefore, while the articles bind all of the shareholders and the company, a shareholders’ agreement would only bind the shareholders that are party to the agreement, and the usual remedies for breach of contract will be available if any of the parties commits a breach of its terms.
Shareholders’ agreements may take many forms, and the need for them can arise in very different circumstances. The key benefit offered by a shareholders’ agreement is that it is a private document which, in most cases, does not need to be made publicly available. A shareholders’ agreement can therefore deal with private and personal matters which the shareholders prefer to keep off the public record. The articles of association, however, must be filed at Companies House and made available for public inspection. It must be noted, moreover, that shareholders’ agreements must not include anything that fetters the company’s powers to exercise its statutory duties.
Shareholders’ agreements can also be useful to protect minority shareholders, as general contractual principles establish that all shareholders would need to approve a change to the agreement, whereas under the Companies Act, shareholder power is determined by a proportion of voting rights in the company.
Ordinarily it is the board of directors that makes the day-to-day decisions affecting the company, and the articles of association normally delegate to the directors the exercise of the powers of the company. The board of directors will involve the shareholders and call them to a meeting only when the need arises under the Companies Act, for example because it is required to change the articles of association or to change the company’s name.
Shareholders cannot simply overturn board decisions if they do not like the way in which the board in running the company. Instead, the shareholders have the right to appoint and remove directors from office in the articles of association. Therefore, the shareholders could remove the directors from office and replace them. In doing so, the shareholders should consider any potential employment or company law repercussions.
There are two types of meetings of shareholders of a company, namely, (i) annual general meetings, and (ii) extraordinary general meetings.
In each year, every company shall hold a general meeting as its annual general meeting, in addition to any other meetings in that year, and shall specify the meeting as that in the notices calling it. Not more than 15 months shall elapse between the date of one annual general meeting of a company and that of the next. However, as long as a company holds its first annual general meeting within 18 months of its incorporation, it need not hold it in the year of its incorporation or in the following year.
A company may, by special resolution, dispense with the requirement to hold annual general meetings. Therefore, the provisions of the Companies Act requiring that a company appoint an auditor or auditors at each annual general meeting shall be deemed to have no effect in respect of that company for such time and in respect of such years as the resolution shall have effect. This does not, however, circumvent the requirement placed on a company to appoint an auditor, but rather allows it to make a single appointment, without the requirement to review the appointment on a yearly basis.
Subject to the provisions of a company’s articles of association, the Companies Act establishes the provisions that have effect as to meetings and votes. These include:
Notice of a general meeting of a company must be given either in hardcopy form, in electronic form or by means of a website, or partly by one such means and partly by another.
As discussed in 4.8 Consequences and Enforcement of Breach of Directors’ Duties, directors’ duties are owed to the company and not to the shareholders or any other stakeholder. Therefore, the general rule is that the company itself (acting through the board of directors) must take action against a director for breach of these duties, as any wrong is committed against the company itself.
However, in limited circumstances, the Companies Act allows shareholders to bring a derivative action on behalf of the company to enforce the company’s rights and to seek relief on behalf of the company. This is an exception to the Foss v Harbottle rule.
Permission of a court is not needed to bring a derivative action, but it is needed to continue an action. A derivative action can be brought by a shareholder to bring a claim against another shareholder or director, for example for transactions at an undervalue and any action about which they feel aggrieved.
Derivative actions can only be brought in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty/trust by a director.
A shareholder can also apply to a court on the grounds that the company’s affairs are being conducted in a manner that is unfairly prejudicial to the members (or a percentage of them). Unfair prejudice claims are usually brought by minority shareholders in situations where they feel that their rights have been infringed by the majority shareholders or by the board of directors. The complaint may be based on past, present or even anticipated future events, and the court has expansive powers in this regard including, among other things, the power to order the company to take or refrain from taking certain actions and the power to order the company to amend its articles.
There are no disclosure or other obligations on shareholders in publicly traded companies.
Every company is required to deliver, at least once in every calendar year, an annual return to Companies House, setting out particulars relating to the company as specified in the Companies Act. The annual return is a snapshot of certain information relating to a company, which includes:
Companies are also required to provide in their annual return details of their main activity. There is a prescribed format for the annual return, which can be found in Schedule 5 of the Companies Act.
The Companies Act establishes a separate regime in respect of the filing of annual returns by collective investment schemes. If a company notifies Companies House that it is a collective investment scheme, licensed, authorised or otherwise regulated under the Financial Services Act 2019, then in the case of such a collective investment scheme (which is not a Private Fund), the annual return can omit details of shareholders and shareholding and is only required to include the amount of authorised and issued share capital respectively. All other particulars required under the annual return would still need to be completed. An Experienced Investor Fund for instance, could take advantage of this exemption.
In both of the aforementioned cases, the annual return must be delivered within 30 days after the date up to which the annual return is made.
Private Funds are required to deliver an annual return in the prescribed format, although they must deliver the return within six months after the date up to which the annual return is made. In addition, the Companies Act requires Private Funds to deliver a Statement of Allotments, Redemptions and Purchase of own shares, together with every annual return. This in turn substitutes the requirement for these types of collective investment schemes to deliver a return of allotment every time it makes an allotment of shares and to notify Companies House every time it makes a redemption. A collective investment scheme which is not a Private Fund (for instance, an Experienced Investor Fund) is neither required to complete a Statement of Allotments, Redemptions and Purchase of own shares nor inform Companies House of every occasion where it allots or redeems shares.
It should be noted that these exemptions only apply to collective investment schemes that avail themselves of the voluntary notification process to Companies House of their specific status. A collective investment scheme may choose not to make such a disclosure and therefore, forfeit the rights to the exemptions afforded under the Companies Act.
Directors’ Report and Accounts
The directors of a company are required to prepare an annual report for each financial year. Generally, this report should include the following details of the company:
The Companies Act also prescribes the accounting principles to be observed in preparing the annual accounts, the layout of the balance sheet and profit and loss account and the content of the notes to the accounts.
Companies are classified as micro, small, medium or large, and the documents to be filed at Companies House vary according to their classification, as set out below:
a) micro – up to GBP632,000;
b) small – up to GBP10.2 million;
c) medium – up to GBP36 million;
d) large – over GBP36 million;
a) micro – up to GBP316,000;
b) small – up to GBP5.1 million;
c) medium – up to GBP18 million;
d) large – over GBP18 million;
a) micro – up to ten;
b) small – up to 50;
c) medium – up to 250;
d) large – over 250.
A company must fall within two of the three parameters (set out above) in the financial year in question and the preceding year, in order to be classified as small, medium or large. If a company exceeds or ceases to exceed the limits of more than one of the parameters, it will continue to qualify for the relevant year unless that continues to be the case in two consecutive years. If the financial year is the company’s first, the conditions only need to be met in its first financial year.
Accounts may be filed in a number of primary currencies (such as GBP, USD, EUR, JPY, CHF).
The relevant documents must be filed within 12 months of the financial year end. Special rules apply in the case of a company’s first reporting period.
Different rules apply to companies that opt to prepare accounts in accordance with international accounting standards.
Defective accounts and directors’ reports can be revised on a voluntary basis. Any revisions shall be confined to the correction of those respects in which the previous accounts or report did not comply with the requirements of the Companies Act and the making of any consequential amendments.
Under the Companies Act, a “mainstream company” whose securities are admitted to trading on a regulated market is required to include a corporate governance statement in its annual directors’ report and that statement shall be included as a specific section of the directors’ report and shall contain at least a reference to the following, where applicable:
A “mainstream company” is defined under the Companies Act as a company which is neither:
and is neither
In addition to the annual return and annual account filing obligations described under 6.1 Financial Reporting, companies are also required to deliver certain information to Companies House when particular changes occur within a company. Examples of event-driven filings include:
The Companies Act applies various filing dates, depending on the event which triggered a filing requirement. In the majority of cases, the Act imposes a 30-day filing period.
All documents filed with Companies House are publicly available.
Unless a company qualifies as a small company (as defined under the Companies Act), the shareholders must, at each annual general meeting, appoint an auditor or auditors to hold office until the next annual general meeting.
Prior to the first annual general meeting, the first auditors of the company may be appointed by the directors at any time before that meeting, and auditors so appointed shall hold office until that meeting. The auditors may be removed by the shareholders, who may appoint a replacement auditor.
If a company qualifies as a small company and certain other conditions prescribed under the Companies Act are met, the requirements of the Companies Act relating to the appointment of auditors and the audit of accounts in respect of the applicable financial year shall not apply to that company.
A company will be classed as a small company if it meets two of the following three parameters in the financial year in question and the preceding year. If the financial year is the company’s first, the conditions only need to be met in its first financial year:
There are requirements that govern the relationship between the company and the auditor, including that:
Under the Companies Act, the directors’ report must contain a description of the principal risks and uncertainties facing the company. In addition, it must also contain a description of the principal risks relating to the non-financial information discussed in 2.2 Environmental, Social and Governance (ESG) Considerations arising in connection with the company’s operations and, where relevant and proportionate: