Company Accounts: The Risks of Breaching the Rules
A former director’s disqualification for failing to keep proper accounting records is a reminder to all company officers of the importance of ensuring your corporate accounts and records are in order. Simon Stepsys, a self-proclaimed Bitcoin/crypto entrepreneur for rule breaches, was banned in 2020 from being a company director for seven years.
And he has just been handed a 16-week jail sentence (suspended) in December after pleading guilty to failing to keep proper accounting records – a risk no director should be willing to take. Stepsys had for years been running various ‘get rich quick’ Ponzi schemes. According to the Insolvency Service, no accounts were kept for his company - ironically named Simon Stepsys Success International Limited – for some four years.
The company was incorporated in March 2003. No accounts were kept between 2016 and 2019 and when the company was wound up in 2019, the Official Receiver had no accounts to deal with. Stepsys then failed to produce accounting records when requested. He admitted not fulfilling his duties as a company director and owed a reported £171,000 to HM Revenue and Customs – money which he spent on himself and his family.
The latest statistics reveal that during the year 2021-2022, 802 directors were disqualified under the Company Directors Disqualification Act 1986; and 130 directors faced criminal charges brought by the Insolvency Service (119 were convicted). Though the number of directors disqualified each year is not high, there remains the very present risk of legal action and prosecution if company accounts are not properly kept and maintained.
What are the legal requirements?
Company directors are reminded of their statutory duties under the Companies Act 2006 to maintain ‘adequate’ company accounts and records and keep those records for a minimum period of time. In the case of non-compliance, directors can be fined up to £3,000 and/or face disqualification from acting as a company director.
Accounting records must include minimum transactions and details of capital assets and debts, including all income and expenditure, who you bought and sold goods to and from, stock owned at the end of the financial year and the stocktakings used to calculate it. Receipts, invoices and other records must also be kept.
You must keep your records for:
· at least six years from the end of your last financial year
· longer than six years where a transaction covers more than one accounting year
· longer than six year if the company purchased an item likely to last more than six years
· longer than six years where a compliance check into your company tax return has been opened by HMRC
Don’t forget that in the event of non-compliance, any and every company officer is at risk of prosecution.
Key takeaway
As a company director, never underestimate the importance of complying with the statutory requirements to keep proper corporate accounts and records. Though the vast majority of companies outsource their accounting to professional accountants, it will be no defence to blame your accountants – the buck stops with the company’s officers.
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