Accounting Records & Financial Year

Part 6 – Financial Statements, Annual Return and Audit

A company must keep adequate accounting records. What that means is set out in Section 281. This requirement was found up until now in Section 202 of the Companies Act 1990.

The basic requirements which must be met are set out here (Section 282). While there are some minor amendments to the rules, there is nothing in the rules which could be said to be brand new.

The accounting records are to be kept at the company’s registered office, as stated here (Section 283), unless the directors deem it fit to keep them elsewhere.

Access to the company’s accounting records is dealt with here (Section 284). Members generally have no right to inspect the accounting records, unless the company’s constitution says otherwise.

The company must keep its accounting records for six years (Section 285).

The penalties for breaching these rules are set out here (Section 286). It should be noted that a person guilty of a Category 1 Offence is liable, on summary conviction, to be fined €5,000 or imprisoned for up to 12 months (on indictment the fine increases to €500,000 and the imprisonment to 10 years). A person guilty of a Category 2 Offence is liable to the same amount and same prison time on summary conviction, but on indictment the maximum fine is €50,000 and maximum prison sentence is 5 years

Category 1 Offences – in this context – are where the default in compliance persists for three years; where a company is later wound up and the contravention contributed to the company’s inability to pay its debts; and where the contravention involved a failure to correctly record or explain a transaction whose value exceeded €1m (or 10% of the company’s net assets, whichever is greater).

References to a company’s financial year end date are references to the last day of the financial year of the company.

Section 288 defines when the financial year of the company starts and finishes.

In general, the directors of a subsidiary should ensure that its financial year ends on the same day as its holding company. This requirement is new.

A company may alter its financial year end if it gives notice to the CRO. One difference in the rules is that a financial year end date may not be changed if it would mean that the company’s financial year would exceed an 18 month period.

If a company has changed its financial year end once, it must wait another five years before it can change it again. There are three exemptions to this rule, and they can be found here (Section  288(10)).