Section 414A

homepage-img2

flag United Kingdom

Criminal liability Economic sanctions Reporting

Section 414A of the Companies Act requires the directors of a company (except those falling within the small companies exemption) to prepare a strategic report for each financial year. This provision also makes directors liable for the offence of failing to comply with the requirement to prepare a strategic report, and penalises this offence with a fine.

Notes

The strategic report is a publicly available document which must be filed with Companies House for all financial years ending on or after 30 September 2013 (ss. 445 to 447 CA 2006) . It must also be sent to members, debenture holders, everyone entitled to receive notice of general meetings (s423 CA 2006) and nominated persons (s145 CA 2006).

Text

Section 414A. Duty to prepare strategic report:

(1) The directors of a company must prepare a strategic report for each financial year of the company.

(2) Subsection (1) does not apply if the company is entitled to the small companies exemption.

(3) For a financial year in which— (a) the company is a parent company, and (b) the directors of the company prepare group accounts, the strategic report must be a consolidated report (a “group strategic report”) relating to the undertakings included in the consolidation.

(4) A group strategic report may, where appropriate, give greater emphasis to the matters that are significant to the undertakings included in the consolidation, taken as a whole.

(5) In the case of failure to comply with the requirement to prepare a strategic report, an offence is committed by every person who— (a) was a director of the company immediately before the end of the period for filing accounts and reports for the financial year in question, and (b) failed to take all reasonable steps for securing compliance with that requirement.

(6) A person guilty of an offence under this section is liable— (a) on conviction on indictment, to a fine; (b) on summary conviction, to a fine not exceeding the statutory maximum.

Law / United Kingdom / Companies Act 2006

The Companies Act 2006 (“CA 2006”) was amended by Regulation 2013/1970, to include provisions requiring the directors of a company (except those falling within the small companies exemption) to prepare a strategic report for each financial year. Quoted companies must include, amongst other things, information about the company’s employees and social, community and human rights issues in their strategic report. This includes information about the company’s policies in relation to these issues.

The purpose of the regulation is to enhance corporate governance and provide shareholders of listed companies with a greater range of information about the company. It is therefore not designed to combat human trafficking. It does however compel listed companies to publicly disclose information about human rights issues affecting their business, allowing for greater scrutiny of their policies.

The strategic report is a public document which must be filed at Companies House. There is a mechanism for enforcement against the company’s directors and they can be fined for non-compliance.