Part of the Government's deregulation initiative to reduce the burden on companies becomes operative on 1 April. The Companies Act 1985 (Miscellaneous Accounting Amendments) Regulations 1996 affects directors' reports and payment of creditors of small and medium-sized companies.

Unless stated, the changes apply to annual accounts and directors' reports for financial years ending on or after 2 February 1996 but become mandatory for financial years ending on or after 24 March 199v Directors' report

The regulations insert new provisions (as Part VI of Schedule 7) which require a company to disclose its policy on the payment of creditors in the directors' report. The payment policy provisions apply to public companies and large private companies which are members of a group whose parent is a public company.

The requirement is for the directors' report to state whether it is the company's policy to follow any code or standard on payment practice. If so, it must give the name of the code or standard and information about it. The directors also have to state whether it is company policy: to settle the terms of payment with suppliers when agreeing the terms of each transaction; to ensure that suppliers are made aware of the terms of payment; and to abide by the terms of payment.

Where a company's policy differs from that mentioned above for any of its suppliers, the directors must disclose the policy. If the policy is different for different suppliers or classes of suppliers, the report must identify the suppliers (or classes of suppliers) to which the different policies apply.

Suppliers are defined as trade creditors whose claims fall due for payment within one year in the balance sheet.

The requirement to disclose that a company has maintained liability insurance for its directors or auditors has been repealed, as has the provision relating to health, safety and welfare at work of employees, Part IV of Schedule 7 which never came into force.

Small and medium-sized companies

The calculation of the average number of employees to determine whether a company is small or medium-sized under section 247 has been changed.

The average number of employees employed in the year is now calculated on a monthly rather than weekly basis. This applies to accounts approved by the board of directors on or after 2 February 1996.

Where a parent company does not intend to prepare consolidated accounts because it qualifies as a small or medium-sized group, the auditors are no longer required to provide the directors with a report stating whether the company is entitled to the exemption. However, where the auditors think the company has wrongly taken the exemption, the regulations now require them to state this in their audit report on the company's accounts.

The exemption from the provisions of Part VII relating to the audit of accounts which is available to certain small companies, is extended to dormant subsidiary undertakings. These undertakings were previously not entitled to the exemption under section 249B. The section was amended by the regulations and dormant subsidiary undertakings may now be exempt from audit provided they are not otherwise prohibited, for example, because they are public companies. This will allow newly formed companies to avoid an audit where they are dormant throughout the financial year.

Public companies cannot take advantage of this audit exemption for small companies. However, the regulations also amend section 250 so that a small public company, which does not have to prepare consolidated accounts, may pass a resolution not to appoint auditors at any time on or after 2 February 1996, provided it is dormant.

Accounting reference dates

The regulations amend section 224 so that the accounting reference date (ARD) for companies incorporated on or after 1 April 1996 will be the last day of the month in which the anniversary of its incorporation falls. However, a company may alter that date by notifying the registrar of companies using the procedure in section 225, which has been simplified.

After 1 April 1996 a company will be free to alter its ARD in relation to a previous accounting reference period unless the period for filing the accounts has expired. There are, however, still some restrictions where the accounting reference period is to be extended more than once in five years.