It is a criminal offence under the Companies Act 2006 (“the Companies Act”) for directors to file their company accounts late. There isn’t really any leeway in whether accounts have been filed late or not, and as soon as a company is late with its accounts, the clock starts ticking for the directors on the risk of a possible criminal prosecution.

This may well come as an unwelcome surprise to busy company directors struggling to file their accounts on time because of, say, a shareholder dispute or some other issue delaying preparation of the company’s accounts. Unfortunately, for what may seem a relatively minor infraction in the grand scheme of things, a conviction for late filing of accounts can have surprisingly far-reaching consequences, including foreign travel restrictions as well as obligations to notify relevant professional regulatory bodies.

A growing risk of prosecution

Late filing of accounts is a growing issue for companies and Companies House alike, with filing penalties for 2022-2023 in England and Wales said to have been circa £150 million. Directors may, rightly or wrongly, take the view that payment of a late filing penalty is an acceptable business cost versus the commercial benefit of extending the relevant filing deadline. However, Companies House is increasingly of the view that the relevant filing penalties are evidently not a sufficient deterrent to drive compliance with the filing obligations in the Companies Act. Consequently, its approach to enforcement has become more aggressive, with prosecutions now much more common. The days of just filing accounts late and expecting no further action are now long gone.

Travel restrictions and self-reporting obligations

One of the significant tail risks for directors convicted of a late filing offence (which becomes a spent conviction after 12 months in the UK) is that it may have to be declared on foreign travel applications like the US ESTA or the EU equivalent, for years to come. Further, for directors who are regulated professionals, their professional rules will, in many cases, require them to self-report the fact of the conviction. Clearly, that could have significant professional, financial and/or personal repercussions.

How can directors reduce their risk of conviction?

The problem for directors is that the late filing offence is, in essence, a ‘strict liability’ offence. Broadly, that means that, unlike most criminal offences, the prosecution don’t have to prove intent on the part of the directors, but only that they didn’t file the accounts on time. That isn’t a very high bar for the prosecution.

Now, before all hope is abandoned, there are a limited number of factual and legal defences available. Broadly, if a director can prove that they did everything they reasonably could to file the accounts on time or that they acted honestly and reasonably in the circumstances and should therefore be excused from conviction, then they will have reasonable prospects of seeing off the prosecution. That said, submitting these defences typically results in significant fact-gathering and presentation exercises. Companies House is typically more receptive to explanations involving issues that are not entirely in the directors’ control, such as, for example, difficulties in the preparation of accounts where there has been a group restructuring and the accounts of the subsidiaries have been found to be deficient in some way.

There are also some legal defences available to directors, which focus on various aspects of due process within criminal law. These defences can be deployed to make it more difficult for Companies House to secure successful prosecutions.

If you have questions or concerns about any of the matters in this article, please contact Nick Scott and Jonathan Chibafa.

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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.