In light of COVID-19 we review the steps a company’s board of directors may now take to adapt the process for approving year end accounts.

Preparing and filing accounts are amongst the operational challenges facing companies as a result of the COVID-19 pandemic. Practical difficulties include physically preparing the accounts and conduct of the audit, as well as the accounts approval process and subsequent sign-off by directors.

These issues adversely affect companies’ ability to file their accounts on time, although some relaxation of filing deadlines had been granted by Companies House, the London Stock Exchange (for AIM companies) and the Financial Conduct Authority (for Main Market listed companies). We look at the ways in which directors can adapt their accounts approval process, as well as the temporary changes to company law being introduced by the Corporate Insolvency and Governance Bill 2019 – 2021 (the “Bill”). It is envisaged that the Bill will become law towards the end of June 2020 and have retrospective application from 26 March 2020.

Here we highlight the potential issues and how boards might adapt.

• The Board is required to approve company accounts but unable to meet in person.

The board can seek to hold a meeting by electronic means (e.g. by telephone or video conference). A company’s articles of association will often specifically provide that board meetings may be conducted electronically. Where this is not stated in the articles, it is generally accepted that board meetings may be conducted by electronic means, unless otherwise specifically prohibited by the articles.

If a board meeting is to be held electronically, the directors should ensure that:

- all directors entitled to receive notice have given their consent to the meeting being held electronically; and

- minutes of the meeting are sent to each director for approval following the meeting to ensure that they accurately reflect the matters discussed.

• Public companies are required (but may find it difficult) to present their accounts before shareholders at a general meeting within six months of the end of the financial year.

Under the Bill, it is proposed that companies will be able to hold AGMs (and other general meetings) between 26 March and 30 September 2020 (the “Relevant Period”) electronically (even if the company’s articles of association do not allow for this).The Relevant Period may be extended by regulation of the relevant national authority in three month increments, provided this period is not extended beyond 5 April 2021.

Of additional assistance, a company required to hold its AGM during the Relevant Period will be able to move the AGM back to 30 September 2020. The relevant national authority may, by regulation extend this period by up to eight weeks.  (Follow link to earlier article on General Meetings during COVID-19)

• Once accounts are approved, a director’s ‘sign-off’ is difficult to achieve in ‘wet ink’ for filing at Companies House.

To ease difficulties accessing printers and scanners in lockdown, we understand that Companies House has helpfully confirmed that the Registrar of Companies will accept annual accounts signed by a director using an electronic signature.

• What if a company is unable to ‘file’ its accounts by the applicable deadline?

The Bill will automatically extend deadlines for filing company accounts.

Public companies due to file accounts during the Relevant Period, will be taken to have a filing period that ends on the earlier of 30 September 2020 and the last day of the period of 12 months immediately following the end of the relevant accounting reference period. By way of example, if a public company’s accounting reference period ends on 1 December 2019 (meaning its usual deadline to file the company’s accounts at Companies House would be on or before 1 June 2020), the deadline will be extended to 30 September 2020.

Until the Bill is passed into law, if a company is unable to meet its filing deadline as a result of the coronavirus pandemic, it can apply to Companies House for an automatic and immediate three-month extension. Applications can be made through an online system which takes around 15 minutes to complete. The application must be made in advance of the company's filing deadline. It should be noted that companies that have already extended their filing deadline, or shortened their accounting reference period, may not be eligible for such an extension.