Do Articles still apply re Audit and Bal Sheet?

Application of Articles

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Limited company was set up in 1945 under 1929 Companies Act. Articles contain section re audit, referring to sections 129,132,133 and 134 of that act. https://www.legislation.gov.uk/ukpga/1929/23/contents/enacted

Articles have not been amended to reflect later Companies Act updates. Accounts submitted to Companies House claim exemption from audit as per s476 of the Companies Act 2006.

So my questions is - is audit required?

Also in s129 1929 Co Act 2 signatures required for balance sheet, yet recent Bal Sheets only have one. So my question is - which is currently required - one or two signatories?

Directors are not au fait with Co legislation and since retiring I am not fully up to date with legislation, so am seeking additional views.

 

 

 

 

Replies (13)

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By Paul Crowley
04th Apr 2024 13:05

Who raised the subject, and why?

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By David Ex
04th Apr 2024 13:26

JayEffBee wrote:

Directors are not au fait with Co legislation and since retiring I am not fully up to date with legislation, so am seeking additional views.

They need legal advice and, if you’re retired, I’d suggest you should avoid providing advice - especially where that’s based on comments from an anonymous internet forum.

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By paul.benny
04th Apr 2024 14:55

Paul raises a good question and I do agree with David - at least if it is more than idle curiosity.

My understanding is that a new Companies Act does not of itself change company articles. And the Articles supplement CA requirements but cannot disapply CA provisions .

So if your Company's articles require audit, an audit is required, even though CA 2006 may allow otherwise. To dispense with audit, the articles need to be revised.

And if articles reference Table A, the Table A applicable is the one in force at time of the articles.

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Replying to paul.benny:
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By FactChecker
04th Apr 2024 15:07

Totally agree with your 2nd para.
Also, an interesting point in your final para (given frequency with which companies adopt whatever the default is at time of incorporation) - and those defaults tend to use a lot of similar, lazy short-cuts.

There used to be quite a lot of articles on the need to keep Articles under review (particularly after any changes to CA) ... not just with regard to Audit.

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Replying to paul.benny:
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By JayEffBee
04th Apr 2024 15:16

Thank you for answers so far received.

Who raised it? As member of the Company, I did as my concern is that if accounts had been audited by qualified auditor as per articles, legacy funds that members agreed should be designated for a specific purpose would not have been used for other purposes. Other issues have arisen from only having internal examination by unqualified members.

My understanding is as per Paul's i.e. Articles would take precedence re audit, being the stricter requirement. Similarly with signatories.

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Replying to JayEffBee:
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By Paul Crowley
04th Apr 2024 15:46

The cost of audits between then and now would probably have wiped out the reserve you are talking about. This is 30 years ago,1994.
The two signature stuff is compete rubbish
The person signing signs for the entire board. The entire board must agree and authorise accounts before they are signed.
I do not think you are going to get anywhere with this. The audit thing should have been sorted decades ago, and if anyone wanted an audit they could have requested one if 10% of the members agreed.
This sounds like a members dispute that is likely to kill the company if the members choose idiotic actions.
Sounds like a golf club to me. So time to trigger the puns.

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Replying to JayEffBee:
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By Roland195
04th Apr 2024 16:59

I am not sure what side you are on in this matter. Are you an advisor who is seeking to have this matter put right or a disgruntled member trying to make mischief?

Assuming this is indeed a charity, are you aware of what the minimum fee for a statutory audit is these days?

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Replying to Roland195:
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By JayEffBee
04th Apr 2024 17:08

Your comments lead me to direct you to my response to Paul.

Also that emphasises the need to update the Articles.

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Replying to paul.benny:
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By Paul Crowley
04th Apr 2024 15:33

That is my understanding also. A lot of fuss was made at the time, companies were advised to adopt the new table A.
But chances are that Companies House really do not care about the few that did not get it right.
Same problem with Friendly societies and Industrial and Provident Societies. They needed to agree every year that audit was not wanted.

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By paul.benny
04th Apr 2024 16:23

@OP - A company is established by members (shareholders) who delegate management to directors. Shareholders have the power to appoint and remove directors and very little else. They certainly do not have power to direct how particular funds should be spent.

You mention legacy funds - I'm assuming you mean a bequest. In charity law, gifts can only be used for the purpose given. But you've not said this company is a charity. I vaguely recall that there are limits on how much control testators have from the grave. I don't suppose the law has ever envisaged bequests to companies but I'm sceptical whether company, in receipt of a bequest has any obligation to do anything particular with it.

It seems exceptionally lazy and sloppy for any active company and its advisers not to have updated its articles for 80 years with some substantial changes to the Companies Acts - almost to the extent that I wonder whether you have missed something.

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Replying to paul.benny:
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By JayEffBee
04th Apr 2024 17:01

Replying to Paul

The directors back in 2002 proposed that the bequest be designated for a specific purpose, and that this was then agreed by the members. That decision has not been reversed.

Back in 2002 the company was registered with HMRC as a charity as evidenced by tax refunds from covenanted donations. In 2014 a proposal to register with Charities Commission as a charity the process was started but stifled due, as I understand it, to the lengthy process that would be involved in updating the Articles first to bring them up to date. Thereafter Co has not been recognised as a charity.

I have no knowledge as to whether accounts have been previously audited as per Articles so cannot say how many years have elapsed without such an audit.

Back in 2002 the bequest was almost £200k, so not insignificant when about ¾ of it has been expended.

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Replying to JayEffBee:
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By FactChecker
04th Apr 2024 17:47

Fine (although not for you as, by the sound of it, a disgruntled member) ... but you appear not to have taken on-board all the helpful comments already made.

IF (and that's a mighty big IF based on the info provided so far) there has been any malfeasance, then the only options are between reporting that to the appropriate authority (depending on which rules you claim have been broken) or instructing lawyers to do battle on your behalf.
Oh and of course probably the most sensible option ... move on to other problems.

A public forum was never likely to resolve your problem with certainty - and what you are flagging up is about law not accounting, so not for here.

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By paul.benny
04th Apr 2024 19:12

@OP. You seem to be very exercised about alleged misdeeds from years ago. Why now?

I'm not convinced that a shareholder vote on a matter within directors' powers is anything more than advisory.

As for the charitable status (or not)...

I'm out.

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