Explained: how to approve company accounts

What are company accounts?

Usually, company accounts must include:

• a profit and loss account (or income and expenditure account if the company is not trading for profit);

• a balance sheet signed by a director on behalf of the board and the printed name of that director;

• notes to the accounts; and

• group accounts (if applicable).

All company accounts must generally be accompanied by:

• a directors’ report signed by a secretary or director and their printed name, including a business review (or strategic report) if the company does not qualify as small; and

• an auditors’ report (unless the company is exempt from audit) - this must state the name of the auditor, and be signed and dated by them.

Who is responsible for approving and filing a company’s annual accounts?

Under section 414 of the Companies Act 2006 (the main piece of company law in the UK), a company's annual accounts must be approved by the board of directors and signed on behalf of the board by a director of the company. The signature must be on the company's balance sheet.

If annual accounts are approved that do not comply with the requirements of the Companies Act 2006, a director of the company will commit an offence if they:

• knew that they did not comply, or were reckless as to whether they complied, and

• failed to take reasonable steps to secure compliance with those requirements or, as the case may be, to prevent the accounts from being approved,

A director guilty of such an offence is liable:

• on conviction on indictment, to a fine;

• on summary conviction, to a fine not exceeding the statutory maximum.

It is therefore crucial that directors know how to approve company accounts and get it right - Docue’s example board minutes approving accounts can be a key tool for achieving this.

How do I approve and file accounts in accordance with UK company law?

Accounts must be filed every financial year. For an existing company, the financial year starts on the day after the previous financial year ended. For a new company, the financial year starts on the day of incorporation of the company.

Financial years are determined by reference to an accounting reference period that ends on a specified date. This is known as the accounting reference date (ARD). You can choose to make up your accounts to the ARD or a date up to 7 days on either side of it.

Every company must send a copy of its annual accounts for each financial year to:

• every member / shareholder of the company;

• every holder of the company’s debentures; and

• every person who is entitled to receive notice of general meetings.

The company’s board of directors must approve the accounts before they send them to the company’s members:

• a director must sign the balance sheet on behalf of the board and print their name - any exemption statements must appear above the director’s signature;

• a director or the company secretary must sign the directors’ report on behalf of the board and print their name - any statement about “being prepared under the small companies regime” must appear above the signature;

• if the company has to attach an auditor’s report to the accounts, the report must include the auditor’s signature and their name must be printed; and

• where the auditor is a firm, the auditor’s report must state the name of the auditor and the name of the person who signed it as senior statutory auditor on behalf of the firm.

All private and public companies in the UK must file their accounts with Companies House - this can be done online using Companies House’s web-filing function.

How long does my company need to keep its accounting records?

Private companies must keep accounting records for 3 years from the date they were made. Public companies must keep them for 6 years.

How can Docue help? Use our example board minutes approving accounts

Docue’s board minutes template can be used as an example board minutes approving accounts - all you need to do is select the option to include wording approving accounts and the minutes will be automatically updated to include relevant content.

As it is a requirement of the Companies Act 2006 (the main legislation for company law in the UK) that the annual accounts of a company must be approved by the board of directors and signed on behalf of the board by a director of the company, using Docue’s example board minutes approving accounts can help you meet that requirement.

Sign up now to use Docue’s example board minutes approving accounts.