Companies and their officers may be forced to rethink their approach to what may previously have been considered 'minor' breaches of business legislation.
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 was given royal assent on 1 May 2012. It includes provisions which will see an increase in the level of fines payable for criminal offences tried in magistrates' courts.
Once the relevant provisions do come into force the changes will apply to a raft of legislation applicable to businesses, including the Financial Services and Markets Act 2000, the Data Protection Act 1998, the Competition Act 1998 and the Companies Act 2006. Legislation such as this includes numerous provisions under which criminal sanctions are applicable to both companies and their officers.
For offences currently carrying a fine capped at £5,000 (often expressed to be the 'statutory maximum') or above, the cap will be removed and, unless the Secretary of State sets a new cap for specific legislation, no upper limit will apply. This will enable magistrates to impose what the government deems to be more appropriate fines for 'wealthy or corporate offenders or organisations'.
For offences where fines are currently capped at below £5,000, the caps can be increased by the Secretary of State, although the levels are yet to be determined.
Statistics published by Companies House in relation to 2010/2011 reveal that there were 3,440 prosecutions for failure to file accounts and 1,703 prosecutions for failure to file annual returns. The figures indicate that Companies House takes breaches of provisions of the Companies Act 2006 seriously.
As the level of fines that directors and officers of a company may face personally is set to increase to an unknown level, companies need to rethink their approach to compliance. Statutory breaches can no longer be considered 'minor' because they attract a relatively low fine. Heavier fines on repeat offenders and large corporate organisations that should do more to adhere with the legislation are likely to follow.
Companies concerned that they may not have sufficient processes in place to ensure compliance with the provisions of the Companies Act 2006 and other relevant legislation, should consider using professional company secretarial services to ensure all appropriate filings are made and records maintained.
For information on services provided by the Shoosmiths company secretarial team, please contact Sian Sadler on 03700 868440.