UK Offence Report

Duty to prepare operating and financial review

regulation 242AA(5) of The Companies (1986 Order) (Operating and Financial Review and Directors' Report etc.) Regulations (Northern Ireland) 2005

This offence was read from the text as made, and no revised version was available, so a later revocation could not be ruled out. Check the current text at legislation.gov.uk.

What the provision says

5 If an operating and financial review does not comply with the provisions of this Part relating to the preparation and contents of the review, every director of the company who – a knew that it did not comply or was reckless as to whether it complied, and b failed to take all reasonable steps to secure compliance with the provision in question, is guilty of an offence and liable to a fine.

Text as made, from legislation.gov.uk. © Crown copyright, reused under the Open Government Licence v3.0. This is the text as originally made; later amendments are not shown here.

Who it binds, and what has to be proved

Binds
a company
Conduct
breaching the provision
Fault element
Strict liability
Burden of proof
No statutory defence — prosecution proves everything

The prosecution must prove that the conduct happened. This is a strict liability offence as drafted: the provision uses no word of intention, knowledge, recklessness or negligence, so there is no need to show that a company meant to do it, knew about it, or was careless.

Intention, knowledge and carelessness are irrelevant to guilt. They may still matter a great deal to sentence.

The provision states no defence, so the prosecution bears the burden on every element of the offence.

Classifier’s reasoning: no word of intention, knowledge, recklessness or negligence in the offence or its provision.

What would breach regulation 242AA(5)?

These are illustrations, not law. They are generated from the provision’s own words to show the shape of the offence. Whether any particular conduct is caught depends on the full text, on any amendment since, and on the facts.

  1. On these words an offence is committed where a company – a knew that it did not comply or was reckless as to whether it complied, and b failed to take all reasonable steps to secure compliance with the provision in question.
  2. Doing what the provision prohibits, or failing to do what it requires under the Companies (1986 Order) (Operating and Financial Review and Directors' Report etc.) Regulations (Northern Ireland) 2005.

Penalty

Mode of trial
Not determined
Maximum fine
Unlimited
Maximum prison (summary)
Not determined

'to a fine' with no stated maximum.

Sentencing

Offences of this kind are usually sentenced under the guidelines below. This is a mapping by subject, not a finding about this provision, and the links go to a search of the Sentencing Council’s own site.

Prosecution figures

No published per-offence figure was found for this provision, and it could not be matched to a Ministry of Justice offence code. Offences created by statutory instrument very largely do not have one. Absence of a figure is not evidence that the offence is unused.

Status and lifecycle

Current status
Status not determined
Made
2 March 2005
In force from
31 March 2005
Extent
Not stated

How this was established: read from the text as made; no revised version available, so later revocation could not be ruled out.

What the instrument is for

(This note is not part of the Regulations.) — the explanatory note published with the instrument, © Crown copyright.

These Regulations amend Part VIII of the Companies (Northern Ireland) Order 1986 (“the 1986 Order”) on accounts and audit in order to – introduce a new requirement for directors of quoted companies to prepare operating and financial reviews (“OFRs”) for financial years; implement requirements relating to the directors' report in articles 1.14, 1.17 (in part) and 2.10 of Directive 2003/51/EC of the European Parliament and of the Council of 18th June 2003 amending Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the annual and consolidated accounts of certain types of companies, banks and other financial institutions and insurance undertakings (Official Journal No. L178/16 of 17th July 2003) (“the Accounts Modernisation Directive”); make minor and consequential amendments to Part VIII. Part I (regulation 1) is introductory. It includes provision applying the amendments to the 1986 Order made by Parts II, III, IV and VI to companies' financial years beginning on or after 1st April 2005. The amendments in Part V (revision of defective reports and reviews) are to apply in respect of annual accounts, directors' reports and OFRs for companies' financial years beginning on or after 1st April 2006, save that the amendments to Article 253 of the 1986 Order in regulation 13, which permit quoted companies voluntarily to revise their OFRs, will apply from 1st April 2005. Part II (regulations 2 to 7) replaces Article 242 of, and amends Schedule 7 to, the 1986 Order, inserts new Articles 242ZZA and 242ZZB, in order to provide for further disclosures in the directors' report in implementation of Articles 1.14, 1.17 (in part) and 2.10 of the Accounts Modernisation Directive. New Article 242 contains a re-worded offence of failing to comply with the 1986 Order’s requirements in respect of the preparation and content of the directors' report. Regulation 3 implements the second part of Article 1.17 of the Accounts Modernisation Directive, requiring auditors to report on whether information in the directors' report is consistent with the annual accounts. The existing exemption for small companies in Article 254(4)(a) of the 1986 Order from the requirement to give a fair review in the directors' report is applied to the enhanced disclosure requirements (regulation 4). Medium-sized companies are exempted from making the disclosures concerning non-financial information (regulation 5 amending Article 254A of the 1986 Order). Small and medium-sized companies will not be prevented from taking advantage of these exemptions even if they are part of an ineligible group (regulation 6 amending Article 255A of the 1986 Order). Part III (regulations 8 to 10) introduces a new requirement in Article 242AA for quoted companies to prepare an OFR complying with the requirements of new Schedule 7ZA to the 1986 Order inserted by regulation 9. A quoted company is defined in Article 270 of the 1986 Order as a company whose equity share capital has been included in the official list in accordance with the provisions of Part VI of the Financial Services and Markets Act 2000 (c. 8), is officially listed in an EEA State, or is admitted to dealing on either the New York Stock Exchange or the exchange known as Nasdaq. Failure to comply with the requirements of the 1986 Order concerning the preparation and contents of the OFR will constitute a criminal offence (Article 242AA(5)). New Article 242AB imposes a criminal penalty for failure to comply with requirements in that Article for the approval and signature of the OFR. Regulation 10 inserts a new paragraph (3A) into Article 243 of the 1986 Order to provide for a review by a quoted company’s auditors of the OFR. Part IV (regulations 11 and 12) amends the regulation-making power for summary financial statements in Article 259 of the 1986 Order to make provision concerning the operating and financial review and the amended directors' report. Regulation 12 makes transitional provision for regulations made under Article 259 before the date on which these Regulations come into operation. Part V (regulations 13 to 16) amends Articles 253 to 253C of the 1986 Order to provide for the voluntary revision by the directors of a defective OFR, and for the compulsory revision of defective directors' reports and OFRs by application to the court by the Department or a person authorised by it. Part VI (regulation 17 and the Schedule) makes minor and consequential amendments to Part VIII of the 1986 Order resulting from the introduction of the OFR. A full regulatory impact assessment of the effect that this instrument will have on the costs of business is available from the Department of Enterprise, Trade and Investment, Company Law Branch, Londonderry House, 21-27 Chichester Street, Belfast BT1 4JB.

Read the full note and every offence in this instrument

Other offences in the same instrument

How this was identified as an offence

Everything above rests on the judgement that this provision creates a criminal offence, rather than mentioning one. That judgement is made by rule, from the words of the provision, and this is the rule that made it — with a confidence of 0.92.

Basis
the provision says a person is “guilty of an offence”
Confidence
0.92 of 1.00

A provision that states a penalty for an offence created elsewhere can read very like one that creates an offence, and the rules can mistake the one for the other. If the text quoted above sets a penalty for something made an offence by another provision, treat the classification on this page with that in mind, and read the instrument.

Check the source