Books of Account
Companies must keep proper books which show their business transactions and financial position on an ongoing basis.The accounts must record the day-to-day transactions and financial activity of the company. The accounts must show the purchases and sales of goods and services, stocks and work in progress as is appropriate to the nature of the business.
It must be possible to identify particular underlying purchases and sales, stock and cash movements through from entry in the books of first entry and ultimately into the annual financial statements. The linking records must be kept as necessary. The accounts must make it possible to show the financial position of the company at any time. They must enable the company to prepare the financial statements.
The directors must prepare a profit and loss account, balance sheet and directors report and lay it before the annual general meeting. These annual statutory financial statements (accounts and notes) are prepared on the basis of the underlying books of account. The financial accounts must be prepared on a consistent basis and follow the requisite accounting standards.
The books of accounts and accounting records may be kept in a documentary or electronic form. The books of account must be kept at the registered office or where the directors otherwise decide.
Company records must be kept for at least six years, under the Companies Act. They may be required to be kept for a longer period under other legislation.
The accounting records must contain entries of the day to day sums of money received and expended by the company and matters in respect which the receipt and expenditure take place. Adequate accounting records are those which
- correctly record and explain the transactions of the company;
- enable, at any time, the assets, liabilities, financial position and profit or loss of the company to be determined with reasonable accuracy,
- enable the directors to ensure that any required financial statements and directors’ report comply with the requirements of the Act or where applicable, international accounting standards; and
- enable those financial statements of the company so prepared to be audited.
The accounting records shall be kept on a continuous and consistent basis so that the entries in them shall be made in a timely manner and be consistent from one period to the next. If those records are not kept by making entries in a bound book but by some other means, adequate precautions shall be taken for guarding against falsification and facilitating discovery of such falsification, should it occur.
Adequate accounting records are deemed to have been maintained if they comply with this obligations, explain the company’s transactions and facilitate the preparation of financial statements that give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and, if relevant, the group.
Trading and Assets
If the company’s business involves dealing in goods, the accounts shall contain
- a record of all transactions whereby goods are purchased and whereby goods are sold, showing the goods and the sellers and buyers (except buyers of goods in ordinary retail trade) in sufficient detail to enable the goods and the sellers and buyers to be identified and a record of all the invoices relating to such purchases and sales;
- statements of stock held by the company at the end of each financial year and all records of stocktakings from which any such statement of the stock has been, or is to be, prepared.
If company’s business involves the provision or purchase of services, the accounts shall contain a record of all transactions whereby services are provided and whereby services are purchased, to whom they were provided or from whom they were purchased (unless provided or purchased by way of ordinary retail trade) and of all the invoices relating thereto.
The accounting records kept shall contain a record of the assets and liabilities of the company.
Maintenance of Records
The company’s accounting records must be kept at its registered office or at such other place as the directors think fit. If accounting records are kept at a place outside the State, there shall be sent to and kept at a place in the State such information and returns relating to the business dealt with in the accounting records so kept as will—
- disclose with reasonable accuracy the assets, liabilities, financial position and profit or loss of that business at intervals not exceeding 6 months, and
- enable to be prepared in accordance with the Companies Act (and, where applicable, the IAS or IFRS requirements)
The adequate accounting records required to be kept, including the information and returns required by the legislation shall be kept either in written form in an official language of the State, or so as to enable the accounting records, including the information and returns, to be readily accessible and readily convertible into written form in an official language of the State.
Accounting records (including underlying records) required to be kept shall be preserved by the company concerned for at least six years, after the end of the financial year to which the records information or return relates.
Records Outside State
Any server computer that provides services to another computer, being services the provision of which to the latter is necessary so that the accounting records and the other foregoing information and returns, stored in the latter can be accessed at all times, shall be kept in a place in the State.
Where the accounting records are kept outside the State, the Minister may by regulations make requirements on companies so keeping their accounting records for the purpose of securing the effective access, in accordance with this Act, at all times to the accounting records stored in the computers concerned.
A holding company which has a subsidiary undertaking in relation to which the preceding requirements or similar such requirements do not apply, shall take all reasonable steps to secure that the subsidiary undertaking keeps such adequate accounting records as will enable the directors of the holding company to ensure that any group financial statements required are prepared under the Companies Act or the IAS / IFRS standards.
Inspection of Accounting Records
A company must keep its accounting records and information available at all reasonable times for inspection without charge by the officers of the company and other persons entitled to inspect. The records, information and returns shall be available in an official language of the State at all reasonable times for inspection without charge by the persons so entitled.
Where they are kept in non-written form, the company must secure that the records can be converted without charge into the written form in an official language of the State if the person entitled to inspect so requests. Where accounting records or any information and returns are kept in a foreign language, the company shall secure that the records or information are converted, without charge, into written form in an official language of the State if the person making the request so requires.
No member (not being a director) has a right to inspect any financial statement or accounting record of the company except as conferred by statute, by the company’s constitution or as authorised by the directors or by the company in general meeting. The directors may determine whether and to what extent and at what times and places and under what conditions or regulations the financial statements and accounting records of the company or any of them shall be open to the inspection of its members, not being directors of the company.
Offences re Accounts I
A director of a company who fails to take all reasonable steps to secure compliance by the company with its obligation to maintain, keep and prepare accounts or has, by his own intentional act, been the cause of default by the company, is guilty of category 2 offence. The company and every officer of the company in default is subject on summary conviction to imprisonment up to 12 months and/ or a fine or both or on conviction on indictment to a fine and /or imprisonment up to 5 years.
If the company is being wound up in an insolvent winding up and proper books of account have not been kept, then if the court finds that this contributed to the company’s insolvency, resulted in a substantial uncertainty in relation to the company’s assets and liabilities or impeded the winding up of the company, then every officer of the company in default is guilty of a category 1 offence.
Each such person may also be guilty of a category 1 offence
- where the company is wound up and is unable to pay its debts;
- where the contravention has persisted for three continuous years; or
- where the contravention involved the failure to correctly record and explain one or more transactions of a company the value or aggregate value of which transaction or transactions exceeded €1 million or 10 percent of the net assets of the company, whichever is the greater.
Offences re Accounts II
The company and every officer of the company in default is subject on summary conviction to imprisonment up to 12 months and/ or a fine or both or on conviction on indictment to a fine and /or imprisonment up to 10 years.
It is a defence that the director took all reasonable care and had reasonable grounds for believing that a competent and reliable person under the supervision and control the director was discharging the responsibilities. In any proceedings for the above offences (consisting of a failure to take reasonable steps to secure compliance by the company with its accounting obligations), it is defence to prove that the defendant had reasonable grounds for believing and did believe that
- a competent and reliable person was charged with the duty of undertaking those requirements;
- was in a position to discharge the duty and
- that the discharge of that duty by such competent and reliable person was monitored by the defendant by means of a reasonable method, properly used.
Where the company is being wound up in an insolvent winding up and proper books of account have not been kept, then if the court finds that this contributed to the company’s insolvency, resulted in a substantial uncertainty in relation to the company’s assets and liabilities or impeded the winding up of the company, then the court, if it believes proper, may order that any director or former director in default should be liable personally to an unlimited or limited extent for the debts of the company.
The application can be made for a civil order in these terms by a member, creditor or liquidator. The court can place a charge on any monies owed by the company to the person concerned.
As in the case of criminal proceedings, it is a defence that the director took all reasonable steps to secure compliance or had reasonable grounds for believing that a competent and reliable person under the supervision and control the director was discharging the responsibilities. This civil liability is independent of the criminal liability and may apply notwithstanding the director concerned has or has not been convicted of the corresponding criminal offence.
References and Sources
Companies Act 2014 S. 281- S.286 (Irish Statute Book)
Companies Act 2014: An Annotation (2015) Conroy
Law of Companies 4th Ed. (2016) Ch. 18 Courtney
Keane on Company Law 5th Ed. (2016) Ch. 30 Hutchinson
Other Irish Sources
Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury
Introduction to Irish Company Law 4th Ed. (2015) Callanan
Bloomsbury’s Guide to the Companies Act 2015 Courtney & Ors
Company Law in Ireland 2nd Ed. (2015) Thuillier
Pre-2014 Legislation Editions
Modern Irish Company Law 2nd Ed. (2001) Ellis
Cases & Materials Company Law 2nd Ed. (1998) Forde
Company Law 4th Ed. (2008) Forde & Kennedy
Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy
Companies Acts 1963-2012 (2012) MacCann & Courtney
Constitutional Rights of Companies (2007) O’Neill
Court Applications Under the Companies Act (2013) Samad
Company Law – Nutshell 3rd Ed. (2013) McConville
Questions & Answers on Company Law (2008) McGrath, N & Murphy
Make That Grade Irish Company Law 5th Ed. (2015) Murphy
Company Law BELR Series (2015) O’Mahony
Companies Act 2006 (UK) (Legilsation.gov.uk)
Statute books Blackstone’s statutes on company law (OUP)
Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington
Company Law in Context 2nd Ed. (2012) D Kershaw
Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam
Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington
UK Practitioners Services
Tolley’s Company Law Handbook
Palmer’s Company Law