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Buachaill, Barrister
Category: Law
Satisfied Customers: 11396
Experience:  Barrister 17 years experience
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As a previous owner director for a business now sold, do I

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As a previous owner director for a business now sold, do I have the authority / obligation to correct an accounts error (I argue is material) for a number of years filed company accounts

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Customer: replied 12 months ago.
Thank you have you enough information?

1. Can you please clarify what is your objective in altering the accounts for a company which has been sold? What do you want to achieve? Have you considered that you may be prosecuted if you incorrectly stated accounts as a director? What is the effect of the material alteration in the accounts? Namely is more money owed to a third party, or is the value of the business you sold affected, or who else does it affect? Why did ou file incorrect accounts in the past?

Customer: replied 12 months ago.
I was the owner of a small company. SME do not need audited accounts. I used a institute of Taxation person to prepare and file accounts prepared by an in-house bookkeeper. The in-house book- keeper died and the Institute of taxation specialist then took over the book-keeping role (at least in part) The error concerns Depreciation of Plant and Machinery. It should have been depreciated over ten years but instead it was done over 4 years. I did not spot this error when I signed the accounts. I have spotted it recently when I obtained a copy of the asset register that I needed for another function. The cumulative effect of the error will have depressed the fixed assets and profits. It is unlikely to have had an impact on taxation due to a considerable increase in capital allowance during this period. Signing accounts that are wrong has sanctions. Knowingly not correcting them I suspect will have worse sanctions. The value I received for the company was adversely affected. The new owner is a large Company and had full access to all figures together with their Accountant and should have spotted this error at the time of the sale. They were also a minority shareholder and had a Director on board. The impact is only likely to be me financially and the data at companies House shows the company performing less we off . Other than for borrowing there should be no negative impact on anyone else. The company has no borrowings

2. The first thing you should know is that section 1096 of the Companies Act, 2006, provides that the Registrar in the Companies House may rectify account or any filing of accounts pursuant to the Order made by a court under this section. So, if you want to rectify the accounts, you really need to get yourself a company law solicitor and make an application under this section to the court. However, you can do this yourself, but I would not recommend it.

3. Be aware in making an application under this section, you need to state why the application is being made and how the error arose. Be aware that it is unusual that a former owner of a limited company would make this type of application. Be aware additionally, that in law, you won't be able to revisit the sale valuation given to you for the company. You cannot in effect alter the deal you freely entered into with knowledge of the error in the company accounts. This is the situation even though the purchaser also had a director on board. The responsibility for correctly filing accounts fell on all directors equally with the Company Secretary responsible for the administrative task of filing the accounts.

4. In your application, you would simply state that the incorrect set of accounts were filed and the corrected accounts represent the true and fair view of the position of the company. The court will accept a plea that human error was involved so long as it corrects the position.

5. Be aware that despite what you say, a change in allowable capital allowances will have an effect upon taxation. So, returns to HMRC for the company for this period will also have to be revisited.

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