Have you Filed your Annual Returns?
There can be very costly consequences both for a company and for directors of a company that fail to file their annual returns on time. The Companies Registration Office (CRO) is the body charged with enforcing compliance with the Companies Act 2014 and it takes the matter of filing annual returns very seriously. The financial consequences for failing to file on time include late filing fees and penalties, on the spot fines and the loss of audit exemption for a company’s accounts. In some situations non-compliance may eventually result in the striking-off of the company and the criminal prosecution of companies and of directors.
The Obligation to File Annual Returns
Section 343 of the Companies Act 2014 states the following:
Subject to the provisions of this section, a company shall deliver to the Registrar an annual return in accordance with subsection (4) not later than 28 days after the annual return date of the company.
However, if the annual return is made up to an earlier date than the company’s annual return date, it shall be so delivered not later than 28 days after that earlier date.
An annual return of a company shall—
(a) be in the prescribed form and contain the prescribed information, and
(b) be made up to a date that is not later than its annual return date,
except that the first annual return falling to be made by a company after it is incorporated shall be made up to the date that is its first annual return date.
So what are the Possible Penalties for Late Filing?
1. Late filing fees
Annual returns which are filed late with the CRO incur a late filing penalty of €100 with effect from the expiry of the company’s filing deadline, with a daily penalty of €3 accruing thereafter, up to a maximum of €1,200 per return.
2. On the Spot fines
The registrar may issue on the spot fines which must be paid within 21 days.
3. Loss of Audit Exemption
Lost of an Audit Exemption will attach to the defaulting company’s accounts for two years which is sure to mean an unwelcome increase in costs for the company.
4. Involuntary Strike-Off Proceedings
In more severe cases, the CRO may decide to bring proceedings to strike-off the offending company.
Criminal Prosecution & Disqualification
Section 343 of the Companies Act 2014 states that companies and directors of companies may be prosecuted for failure to file an annual return. A director who has received three such convictions may be disqualified from acting as director, or having any involvement in the management, of any company.
The Companies Registration Office (CRO) justifies the seriousness of its approach in the following terms:
‘Incorporating a company and availing of limited liability brings with it serious legal obligations, one of which is the filing of prompt and accurate annual returns with the CRO. Failure to file an annual return is a serious matter, the company and any of its officers who are in default shall be guilty of a criminal offence.’
Section 343 (5) – District Court Application to Extend Time
Up until recently the only recourse available was to proceed with a very expensive High Court application. Thankfully, things have changed. Section 343 (5) of the Companies Act 2014 introduced an application to extend time to file annual returns to take place in the District Court where the legal costs for the company are very much reduced.
The court, on an application made (on notice to the Registrar) by a company, may, if it is satisfied that it would be just to do so, make an order extending the time for the purposes of subsection (2) or (3) in which the annual return of the company in relation to a particular period may be delivered to the Registrar; only one such order may be made as respects the particular period to which the return concerned of the company relates.
The CRO must be given at least 21 days’ notice of the application and the court date and an Affidavit must be sworn by one of the Officers of the company explaining the reason as to why the accounts were not filed on time. On receipt of the notice and Affidavit, the CRO will respond with a letter either consenting or objecting to the application. If the CRO are objecting, then a representative of the CRO may attend at court. In such a scenario the District Court Judge may hear evidence from both the CRO and the company representative before deciding whether or not to grant the application to allow for an extension of time. If the application is successful then the Annual Returns will need to be filed within a period (usually 28 days) of the court date. Once this is done on time, all of the above penalties are avoided.
From more information please contact Neal Horgan.
Tel No: +353 21 7300200