Further questions for UK Boards:

Following on from our brief article published on 12 September 2017, on “Questions for UK Boards”, we have the some further questions for UK Boards:

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If the FRC maintain or assert that you have to act with Entrepreneurial Leadership, (see this Guidance-on-Risk-Management-Internal-Control-and-Related-Reporting document for the background or our first article) how do you reconcile this with your ‘General Duties of Directors’ as required under section 172 of the Companies Act 2006:

The Act states:

Section 172: Duty to promote the success of the company

 (1) A director of a company must act in the way he considers, in good faith, would

be most likely to promote the success of the company for the benefit of its

members as a whole, and in doing so have regard (amongst other matters) to—

(a) the likely consequences of any decision in the long term, [our emphasis]

(b) the interests of the company’s employees,

(c) the need to foster the company’s business relationships with suppliers,

customers and others,

(d) the impact of the company’s operations on the community and the

environment,

(e) the desirability of the company maintaining a reputation for high

standards of business conduct, and

(f) the need to act fairly as between members of the company.

Focusing specifically on sectiom 172(1))(a) (as highlighted above):

  • What factors or methodolgy do you consider as part of the ‘likely consequencesconsideration that you as Board member must apply in the decision-making process?
  • Do you apply or depaly some form of risk-based   assessment methodology?dice-tax

This is not a check box exercise, however, you need to reconcile the general duties with being entrepreneurial, within the context of the Companies Act and Corporate Governance principles, right?

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Do you have a tool, methodology, process or mental model to apply in order to assess potential scenarios and outcomes?

In the next article in this series, we will draw on inspirartion from the Value-Based Management school of thought on applying a bit more science and rigour to decsion-making and balancing ‘duties of care’ with exploring your inner Entrepreneurial spirit.

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©2017 Rohan Badenhorst

FRS105 – The new Financial Reporting Standard for Small Entities (in draft)

The Financial Reporting Council (FRC) has recently published FRED 58, being the Exposure Draft for FRS105, which in turn will become the new FRSSE (or replace the existing FRSSE, we believe).

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Comments on the Exposure Draft was due by 30 April 2015, so if you missed it, we are afraid the the train has already left the station.

In a nutshell, we have some serious conceptual and philosophical concerns the FRED 58 does not address (and staff at the FRC at a recent event in London, prior to the General Election, could not provide assurances on).

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Effectively FRS 105 (as it will be know), once it is ratified and adopted in parliament, will not be IFRS ‘Lite-lite‘, although it will have some of the overall principles of Fair Value Accounting contained within it.

At a fundamental level micro-entities (* as defined below) can choose to adopt either FRS 105 or FRS 102.  However, be very careful in which one you choose, as the two standards have some fundamental differences contained within them, which, later down the line (as the proverbial can is kicked up the road), might cost you additional compliance fees and time and effort, if you need to convert from FRS 105 reporting to FRS 102 (New UK GAAP).

Our concern is this:

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“The overall objective of all the initiatives (driven from Brussels) is HARMONISATION.  The differences in approach between FRS 105 and FRS 102 do not underscore this fundamental principle!”

Hence, our health warning:  Think and consult carefully, before adopting either standard (FRS 102 or FRS 105) if you are a micro-entity caught in the compliance reporting net.

If you have any questions or concerns, please contact us for more details.

©2015 – Rohan Badenhorst

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*Definition of a micro-entity:

Micro-entities – HMRC guidance – May 2015

Micro-entities are very small companies. Your company will be a micro-entity if it has any 2 of the following:

  • a turnover of £632,000 or less
  • £316,000 or less on its balance sheet
  • 10 employees or less

If your company is a micro-entity, you can:

  • prepare simpler accounts that meet statutory minimum requirements
  • send only your balance sheet with less information to Companies House
  • benefit from the same exemptions available to small companies

Filing CIC (Community Interest Company) Annual Accounts

If you have not yet filed Annual Accounts for a CIC (Community Interest Company), then please be aware that the process and procedures for filing the Annual Accounts at Companies House is different from normal electronic filings.

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 Firstly you cannot file electronic Annual Accounts.

Guidance is published here at the Companies House web site.

In order to file the Annual Accounts you will need to prepare a form CIC 34 which can be downloaded from the link.

The completed and signed (by a director or company secretary) CIC 34 form, together with a printed copy of the Annual Accounts and a £15 filing fee must be sent to Companies House well in advance of the filing deadline.  This is to avoid any late filing penalties, should Companies House reject the initial filing and you need to make any amendments that might be necessary in order to re-file the Annual Accounts.

Companies House officials were not yet able (during April 2015) to provide us with information as to when the electronic filing of CIC Annual Accounts will be possible.

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Hence, just like filing Limited Liability Partnership Annual Accounts, the traditional hard copy and postage paid (preferably recorded delivery) or handing in the documents at a Companies House official Contact Centre office location, is still the only way to get the Annual Accounts filing compliance check done, for the time being.

©3resource – 2015