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The “how to confuse directors” Annual Return

The “how to confuse directors” Annual Return

The Companies Act 2006 was introduced on 1st October 2009 as a way of bringing UK companies into the 21st century. It consists of 1300 sections and is the single largest piece of legislation ever made.

The 2006 Act effectively replaces almost all of the Companies Act 1985, the Companies Act 1989 and the Companies Act 2004.

Most of the existing legislation was written back in the days of the quill pen and it was generally accepted that it needed modernising. Smaller businesses form the vast majority of companies registered with Companies House, and were being bogged down with excessive administration due to the out-of-date legislation. Something had to change.

Following the arrival of the Companies Act 2006, a new Annual Return was introduced. Now given the fact that every company registered in the UK has to file an Annual Return, one could quite reasonably expect it to be;

easy to understand,
easily completed,
with good guidance
and completion online.

How does one out of four (online completion) grab you?

Lets take a closer look at the form itself:

One of the first questions it asks is whether you are a ‘traded company’. I suspect the vast majority of directors would answer ‘yes’ – we are not dormant so are trading….right?. A closer inspection of the guidance notes shows that you should be answering ‘no’. A traded company is one in which its shares are publicly traded on the stock markets.

Moving on…

Next you are asked whether you have a SAIL address (or a Single Alternate Inspection Location). I foresee some blank faces but if you ignore the question it goes away, which is probably the right answer.

You are then required to confirm the addresses of directors. Same as before you might think. But if you confirm that, you are confronted with an error message saying that you need to enter the Country of Residence. You need to enter when you changed your Country of Residence as well. ‘But I haven’t’ you might say, but you cannot progress without giving a date on which you did move, even though you have not! It seems safest to use the same date as the made-up date for the Annual Return.

You are then given a number of options for Country of Residence. The most popular options are;

* United Kingdom
* England (seems to be the safest choice, if you do live in England
* UK
* Great Britain

At this point you may also catch sight of notes asking whether you are an EEA Company, or maybe a Non-EEA Company? Don’t worry as these do not apply but it is a little tricky to know that they do not apply without reading the First Company Law Directive (68/151/EEC). Don’t have that to hand? – ignore the note, that is easiest.

On to Capital : Update/Amend. That is ok, share capital and shareholders are the same as last year, so this section must be easy, right? I am afraid not. You are asked to free-type the ‘Prescribed particulars of rights attached to the shares’. I wonder how many directors of small companies know these rights?

Most companies operating with ordinary shares will be safe with the following answer;

‘Fully voting, fully participating, non-redeemable shares’

I hope the above allows you to get through your Annual Return without too much pain, if you are due to make one. It is disappointing though, that a simplification exercise immediately makes things, more difficult and confusing.

John Mumford is the Accounting Director of Carrington Accountancy
© 2009 All rights reserved. Reproduction in whole or in part without permission is prohibited

Image: Migraine Barbie has Snapped! by Migraine Chick

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