Companies and their directors are subject to a panoply of legal requirements under the Companies Act 2006 and other legislation. Breach of some of these requirements is a criminal offence which can lead to fines and, in some cases, imprisonment. The offences vary in seriousness, which is reflected in the penalties which can be imposed for breach and the court in which they will be tried. The most serious may be tried in the Crown Court or by magistrates: for example, if any business of a company is carried on with intent to defraud creditors or for any fraudulent purpose, every person who is knowingly a party to the carrying on of the business in that manner commits an offence and may face up to 10 years in prison, an unlimited fine or both.
Less serious offences are tried only by magistrates who may impose a fine on the company and on every director and any company secretary who authorised or permitted, participated in, or failed to take all reasonable steps to prevent, the offence. There is often a further "daily default fine" if a person is convicted a second time. The maximum fine for many of these offences is "level 3 on the standard scale", which is currently £1000. For others, the maximum fine is "level 5 on the standard scale". This used to be set at £5000, but this limit was removed in March 2015 so that these fines are no longer subject to any maximum.
Examples of offences in the Companies Act 2006 which now carry a penalty of an unlimited fine for companies and their directors include:
- failing to deliver the annual return on time
- failing to keep an up to date register of directors and separate register of directors' residential addresses
- failing to update Companies House of changes to directors or their particulars
- failing to keep the register of directors available for inspection by members without charge and by the public on payment of a prescribed fee
The removal of the upper limit on fines for offences where the maximum fine is expressed to be "level 5 on the standard scale" does not apply just to the Companies Act, but to all legislation. Companies and directors may now therefore face unlimited fines across a range of legal requirements which used to give rise only to limited fines. This includes, for example, certain health and safety offences, such as failing to comply with a requirement of an inspector or intentionally obstructing an inspector.
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