Compliance update for companies
Changes to company financial reporting obligations have impacted annual general meeting requirements and how company annual returns are filed.
These changes came into force in April 2014 under the Financial Reporting Act 2013 (FRA) and the Companies Act 1993 (Act) and necessitate a complete review of annual company compliance processes.
Historically, details of a company’s annual general meeting (AGM) or resolution in lieu of meeting were required when filing an annual return with the Companies Office. In March 2013, for administrative ease, the Companies Office updated its online annual return form so that mandatory AGM details were no longer required. Nevertheless, companies were still obliged under the Act to appoint an auditor each year unless a unanimous resolution was passed not to do so. For the most part, this meant that the AGM and annual return filing processes remained linked.
In April 2014, significant changes were made to the Act which meant the appointment of auditor requirement and exceptions no longer apply. Now, generally only issuer companies, Financial Markets Conduct (FMC) reporting companies, public listed companies, large overseas or overseas-owned companies (unless they have opted out of compliance) and small companies who have opted in are required to appoint auditors and file audited financial statements with the Registrar of Companies. These financial reporting requirements are complex and reference should be made to the FRA and the Act to determine each company’s annual compliance requirements.
While all companies are still obliged to hold an AGM or pass a resolution in lieu of meeting, companies with no positive obligation to appoint an auditor or new directors (under their constitution or shareholder arrangements) and with no general business to consider may find there is little in substance to resolve. In these circumstances, the well-established practice of simply resolving not to appoint an auditor before filing the company’s annual return is no longer appropriate.
In light of recent changes, annual company requirements for each company must be carefully reviewed. This may also mean updating the company constitution to bring it in line with the FRA and the Act.