Small companies, accounts of

Updated: Aug 20, 2021

This definition must be read in a historical context.

The Companies Act 1985 confirms the provisions first introduced in the 1981 Companies Act regarding information to be supplied in the annual I audited accounts of limited companies in order both to make them more comprehensive and to bring U.K. regulations more into e with E.E.C. directives. In doing this the Act makes some allowance for smaller ‘. Companies, enabling them to file modified sets of accounts, including documents to be attached thereto, with the Registrar of Companies, i.e. for effective public inspection. The Act applies only to the filed copies. These smaller companies still have to publish detailed accounts for their members.

The companies enjoying this limited concession are divided into two categories: small companies and medium-sized companies. A small company is one which (1) has no more than fifty members, (2) has a balance sheet total of no more than £700,000 and (3) has a turnover not in excess of £1,400,000. A medium-sized company is one which (I) has no more than 250 members (2) has a balance sheet total not exceeding £2,800,000 and (3) has a turnover of not more than £5,750,000.

The concessions are briefly as follows. A small company need file only a modified balance sheet together with certain specified, modified notes. It need not file a profit and loss account, nor a directors’ report, nor information regarding emoluments of directors and higher-paid employees. It may also file a modified form of auditor’s report, which must state that the conditions which entitle the company to claim the status of a small company do actually exist. The con¬ cessions available to medium-sized companies are more limited. They consist principally of permission to combine in one figure certain items in the profit and loss account which in the prescribed formats contained in the Act would need to be shown separately. Additionally, the requirement to show breakdown of turnover is removed.

It should be noted that these concessions available to small and medium-sized companies do not apply to companies within a group, for which group accounts are required, unless the group taken as a whole satisfies the exemption conditions.

Reference: The Penguin Business Dictionary , 3rd edt.

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