1. What exemption is available?
Dormant companies can claim exemption from audit and need only prepare and deliver to Companies House an abbreviated balance sheet and notes. A profit-and-loss account and directors' report do not have to be included in dormant company accounts filed at Companies House but a directors' report must be provided to members.
2. What is a dormant company?
A company is dormant if it has had no 'significant accounting transactions' during the period.
For accounting periods ending on or after 26 July 2000,when considering if a company is dormant you can disregard the following financial transactions:
- payment for shares taken by subscribers to the memorandum of association;
- fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and
- payment made in respect of civil penalties imposed by the Registrar of Companies for delivering accounts to the Registrar after the statutory time allowed for filing.
For accounting periods ending before 26 July 2000, only payment for shares taken by subscribers to the memorandum of association may be disregarded.
A company may not take advantage of the dormant company audit exemption if it is:
- a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity;
- a person who carries on insurance market activity.
If the company has not been dormant since incorporation, but has become dormant, it may take advantage of the exemptions provided that:
- it has been dormant since the end of the previous financial year; and
- it does not have to prepare group accounts for that year; and
- it qualifies as a 'small company' in relation to that year (see chapter 3), or would have qualified as small but for the fact that it is:
- a public company; or
- a member of a group of companies which included: a public company, a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity, or a person who carries on insurance market activity.
3. What information must dormant accounts contain?
Dormant accounts filed at Companies House need not include a profit-and-loss account or directors' report. Model balance sheets are shown at the end of this chapter.
Unaudited dormant accounts are much simpler than those of a trading company but must show:
- an abbreviated balance sheet containing statements above the director's signature to the effect that the company was dormant throughout the accounting period. The full text of the required statements is as question 4 below or, for financial years ending before 26 July 2000, at question 5 below);
- any previous year's figures for comparison - even though there are no items of income or expenditure for the current year;
- certain notes to the balance sheet - a full list of items to be covered appears at the end of this chapter.
4. What statements are needed on the balance sheet?
For financial years ending before 26 July 2000, see question 5.
For accounts in respect of financial years ending on or after 26 July 2000 the following statements must appear above the director's signature:
(a) For the year ended . . . (date) the company was entitled to exemption under section 249AA(1) of the Companies Act 1985.
(b) Members have not required the company to obtain an audit in accordance with section 249B(2) of the Companies Act 1985.
(c) The directors acknowledge their responsibility for:
- ensuring the company keeps accounting records which comply with section 221; and
- preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the company.
If the company chooses, it may deliver the un-abbreviated accounts prepared for its members. The same statements must appear on the un-abbreviated balance sheet.
5. What rules apply to dormant accounts in respect of financial years ending before 26 July 2000?
For accounts in respect of financial years ending before 26 July 2000, a dormant company is required to pass a special resolution to exempt itself from the obligation to appoint auditors. The resolution can be passed (either at a meeting of the company or by written resolution) at any time after copies of the accounts for a financial year ending before 26 July 2000 had been sent out to shareholders. For more information on resolutions, see the booklet, 'Resolutions'.
Some examples of how to word the resolution are set out at the end of this chapter. Alternatively, you may complete Form DEB 8, (or Acc/6 for companies registered in Scotland). These forms are available from Companies House. A copy of the resolution must be sent to Companies House within 15 days after the date it was passed.
The following statement must appear above the director's signature on a dormant company balance sheet dated before 26 July 2000:
"The company was dormant throughout the financial year".
6. Can I obtain a standard form for dormant accounts from Companies House?
Yes, although you do not have to use it. Form DCA, available from Companies House, is for dormant companies that have not traded since incorporation. This form is unsuitable for companies that became dormant after trading. However, model balance sheets and notes for all types of dormant companies are set out at the end of this chapter.
7. How long do I have to deliver dormant accounts to Companies House?
The same time applies as for all other accounts. The same penalties are imposed for late filing. See chapter 2.
8. What happens if my company starts trading again?
Any company will cease to be exempt from audit as a dormant company if it:
- begins commercial or trading activities during the financial period; or
- would no longer qualify for some other reason.
If either of these happened, full accounts would be required for the financial year in which the company ceased to be exempt, and the directors might need to appoint auditors for the company. It may be that the company would qualify for exemptions as a medium-sized or small company. More information about company audit requirements and audit exemption for small companies is covered in the chapters 3 and 4 of this booklet.
Question 5
Model Special Resolution exempting a dormant company from the need to appoint auditors in respect of accounts for financial years ending before 26 July 2000.
DORMANT COMPANY RESOLUTION
Company No ______________________
Special Resolution of
_____________________________________________________ Limited
At a general meeting of the above company held on........... the following resolution was passed.
(Either)
The company, having been dormant since formation, resolves to make itself exempt from the provisions of Part VII of the Companies Act 1985 relating to the audit of accounts and from the obligation to appoint auditors.
(Or)
The accounts of the company for the financial year ending ....... having been sent out in accordance with Section 238 of the Companies Act 1985 and the company, having been dormant throughout that year, resolves to make itself exempt from the provisions of Part VII of the Companies Act 1985 relating to the audit of accounts and from the obligation to appoint auditors.
SIGNED ___________________________
Director/Secretary of the company
DATE ______________________
Question 6
Model balance sheets to be delivered to the Registrar of Companies by dormant companies
The formats on the following pages provide a guide to the information you need to include. These formats are designed to reflect all possible assets and liabilities that a company may have but you only need to include a particular heading if there is an amount other than nil to be shown.
These model balance sheets are for illustration only, they should not be reproduced and used for submission to Companies House
If the company has traded in a previous financial year, bear in mind that your previous year's balance sheet will show the company's financial position as it was then. If there have been no accounting transactions since, you could just be carrying forward the figures from last year. |
There are two formats - marked A and B - either of which may be followed. The content of the two formats is identical; they simply present the balance sheet headings in a different order.
The balance sheet must balance:
- In format A, net assets must equate to the aggregate of capital and reserves.
- In format B, assets must equate to liabilities (including capital and reserves as balancing items).
Each entry must be an amount in figures (not words) or '0.00'. Companies House will not accept any document which shows 'Nil' where a figure should appear.
Each column of figures must be headed with the date on which the current and previous financial year ended.
For both formats, the matters to be included in the notes to the balance sheet, if applicable, can be found in Chapter 5, question 8.
When you are preparing your accounts, please follow the guidelines in question 13 of chapter 2.
The statements to confirm that the company was dormant, which must appear on the balance sheet, depend on the date of the balance sheet:
- For balance sheets dated before 26 July 2000, the statement above the director's signature must read "The company was dormant throughout the financial year". A special resolution not to appoint auditors must also be filed at Companies House.
- For balance sheets dated on or after 26 July 2000, the statements above the director's signature must read:
(a) For the year ended . . . (date) the company was entitled to exemption under section 249AA(1) of the Companies Act 1985.
(b) Members have not required the company to obtain an audit in accordance with section 249B(2) of the Companies Act 1985.
(c) The directors acknowledge their responsibility for:
- ensuring the company keeps accounting records which comply with section 221; and
- preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the company;
There is no need to pass a special resolution not to appoint auditors in relation to accounts for financial years ending on or after 26 July 2000. "
DORMANT COMPANY BALANCE SHEET FORMAT A
COMPANY NO. ............................
COMPANY NAME ..........................................
BALANCE SHEET AS AT ..../..../.......
|
CURRENT YEAR
|
PREVIOUS YEAR |
| A CALLED UP SHARE CAPITAL NOT PAID |
XX |
XX |
| B FIXED ASSETS |
| I. Intangible assets |
XX |
XX |
| II. Tangible assets |
XX |
XX |
| III. Investments |
XX |
XX |
|
________ |
|
XXX |
XXX |
| C CURRENT ASSETS |
| I. Stocks |
XX |
XX |
| II. Debtors |
XX |
XX |
| III. Investments |
XX |
XX |
| IV. Cash at bank & in hand |
XX |
XX |
|
________ |
|
XXX |
XXX |
| D PREPAYMENTS AND ACCRUED INCOME |
XX |
XX |
| E CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR |
(XX) |
(XX) |
| F NET CURRENT ASSETS/ LIABILITIES |
XXX |
XXX |
| G TOTAL ASSETS LESS CURRENT LIABILITIES |
XXX |
XXX |
| H CREDITORS:AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR |
(XX) |
(XX) |
| I PROVISION FOR LIABILITIES AND CHARGES |
(XX) |
(XX) |
| J ACCRUALS AND DEFERRED INCOME |
(XX)
(XXX) |
(XX)
(XXX) |
|
________ |
|
XXX |
XXX |
|
________ |
| K CAPITAL AND RESERVES |
| I. Called up share capital |
XX |
XX |
| II. Share premium account |
XX |
XX |
| III. Revaluation reserve |
XX |
XX |
| IV. Other reserves |
XX |
XX |
| V. Profit and loss account |
XX |
XX |
|
________ |
|
XXX |
XXX |
|
________ |
(Insert relevant statement(s) - see previous page)
Approved by the board of directors on...............(date)
and
signed on their behalf by......................(DIRECTOR)
DORMANT COMPANY BALANCE SHEET FORMAT B
COMPANY NO: ................................
COMPANY NAME: .............................................
BALANCE SHEET AS AT ../../....
|
CURRENT YEAR
|
PREVIOUS YEAR |
| ASSETS |
| A CALLED UP SHARE CAPITAL NOT PAID |
XX |
XX |
| B FIXED ASSETS |
| I. Intangible assets |
XX |
XX |
| II. Tangible assets |
XX |
XX |
| III. Investments |
XX |
XX |
|
________ |
|
XXX |
XXX |
| C CURRENT ASSETS |
| I. Stocks |
XX |
XX |
| II. Debtors |
XX |
XX |
| III. Investments |
XX |
XX |
| IV. Cash at bank & in hand |
XX |
XX |
|
________ |
|
XXX |
XXX |
| LIABILITIES |
| A CAPITAL AND RESERVES |
| I. Called up share capital |
XX |
XX |
| II. Share Premium Account |
XX |
XX |
| III. Revaluation reserve |
XX |
XX |
| IV. Other reserves |
XX |
XX |
| V. Profit and loss account |
XX |
XX |
|
XXX |
XXX |
|
|
| B PROVISION FOR LIABILITIES AND CHARGES |
XX |
XX |
| C CREDITORS |
XX |
XX |
| D ACCRUALS AND DEFERRED INCOME |
XX |
XX |
|
________ |
|
XXX |
XXX |
(Insert relevant statement(s) - see previous page)
Approved by the board of directors on...............(date)
and
signed on their behalf by.......................(Director)
Notes to the dormant company balance sheet
The following must be given as notes to the balance sheet:
- accounting policies, including those relating to depreciation and diminution in value of assets;
- authorised share capital;
- if shares of more than one class have been allotted, the number and aggregate nominal value of shares of each class allotted;
- information relating to any redeemable shares allotted;
- information relating to any shares which have been allotted during the financial year;
- information about fixed assets;
- details of indebtedness;
- basis on which sums originally in a foreign currency have been translated into sterling;
- in respect to every item above (other than fixed assets) the corresponding amounts for the previous year;
- details of any subsidiary undertakings and of shares held in them, and why group accounts are not required;
- where the company has acted as an agent for any person, the fact that it has so acted (applies to accounts in respect of financial years ending on or after 26 July 2000).
In addition, the following information may have to be given about the subsidiary undertakings:
- details of any undertakings in which the company has a 'significant holding', for example, the name and address of the business;
- the name of the company's ultimate parent company, and (if known) its country of incorporation;
- the names of certain intermediate parent companies, and their countries of incorporation or (if not incorporated) the addresses of their principal places of business;
- details of certain loans, guarantees and other such dealings made by the company in favour of directors and others.
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