By Philip Hayden, 13th November 2018
Section 366 of the Companies Act 2014 has made provision for the adjustment or revision of financial statements to be made easier. Under previous acts, alterations of this type were only allowed when accompanied by an application to the High Court.
Rectification of Defective Financials
This new provision under the Companies Act 2014, has been implemented to cover a range of inconsistencies or errors in financial statements. It has been developed in response to clerical, company law or general accounting errors and corrections that happen in many cases. Factors in the requirements of the Act, an International Accounting Standard inconsistency or factual elements of a Directors’ Report can all be addressed using this new procedure. Indeed, it is worth noting that even statements that have been approved by the board in the correct manner can be altered in this way.
A corrected set of financial statements are drafted up and approved under the same process any other financials undergo. Once approved by the board of the company, the company financial information can be submitted to the Companies Registration Office to correct the originals. In all cases, the below must be observed:
- Adjustments or alterations should be filed within 28 days of the revision
- It must be noted in the new statements that they are a rectification of an original
- An addition may be required to the directors’ report to expand on the alteration
- Both the original and new financial statements remain on public record
- Where required, an auditor will draft a new or additional report documenting the changes made
- New statements should be drafted under the same legislative provisions as the originals
Do I need to make an Application to the High Court?
While Section 366 of the Companies Act 2014 allows for the adjustment of defective financial statements, it does not provide for the removal of the incorrect original from the public register. In some cases, the financial statements may contain information that should or can be omitted from the register. Even with the above provision in place, the only way to completely remove company financial information from the public register is to make an application to the high court.
An affidavit is drafted up, signed off on by the directors of the company and is then submitted to obtain a court date. The barrister will then present the case for the removal of the accounting errors and corrections, providing support as to why it should no longer be available on public record.
Company Bureau can aid with an application under Section 366 of the Companies Act 2014. In addition, if wish to find out more about the treatment of company financial information, or accounting errors and corrections don’t hesitate to contact the team at email@example.com or call us on 01-6461625.