Guernsey Company Law Series: Financial Records, Accounts, Annual Validations and Audit Requirements

• All Guernsey companies must comply with key statutory requirements in respect of financial records

• There are penalties which apply where Guernsey companies do not comply with these requirements

• This guide sets out key requirements in respect of accounting records, audit, and annual filings
  
   

What accounting records must a company keep?

Each Guernsey company must keep accounting records that are sufficient to show and explain its transactions and which:

• disclose with reasonable accuracy, at any time, its financial position; and

• enable the directors to ensure that any accounts prepared by the company are prepared properly and comply with the requirements of the Law.

What period should accounts relate to?

The directors must prepare accounts for each financial year, being a period of not more than eighteen months from the date of incorporation or, if the company has previously prepared accounts, eighteen months from the end of the period covered by the most recent set of accounts.

What accounting principles should be applied?

The accounts must be prepared in accordance with generally accepted accounting principles and the accounts must specify the principles adopted in their preparation.

Must the accounts be audited?

Guernsey companies must appoint an auditor for each financial year unless the members of the company have passed a waiver resolution exempting the company from the requirement to have its accounts audited. The waiver resolution must be passed before the start of the financial year(s) to which it relates, unless it relates to the company's first financial year in which case it must be passed before the end of the first financial year. It is possible to pass a waiver resolution to cover all future financial periods rather than having the make an annual filing. Companies categorised as "large companies" cannot waive the audit requirement, and in general companies regulated by the Guernsey Financial Services Commission ("GFSC") must produce audited accounts.

Is a directors' report required?

Guernsey companies must produce a directors' report outlining the principle activities of the company for each financial year unless the members of the company have passed a waiver resolution exempting the directors from the obligation to produce a directors' report. The waiver resolution must be passed before the start of the financial year(s) to which it relates, unless it relates to the company's first financial year in which case it must be passed before the end of the first financial year. It is possible to pass a waiver resolution to cover all future financial periods rather than having the make an annual filing. Companies regulated by the GFSC cannot waive the directors' report requirement.

Presenting the accounts

Every Guernsey company must send a copy of its accounts (and directors' report and auditor's report where one is required) to every member of the company within 12 months after the end of the financial year to which they relate, and must also lay its most recent accounts (and directors' report and auditor's report where one is required) before any annual general meeting. There is no requirement to publicly file accounts with the Guernsey Registry.

In general, companies regulated by the GFSC must provide their accounts to the GFSC and companies that are tax resident in Guernsey (or would be so resident but have exempt status) must file their accounts with the related income tax return.

Entitlement to copies of accounts

A shareholder that has not been provided with a copy of a company’s accounts may make a request to the company to be furnished with a copy of those accounts (and any directors' report and auditor's report). The company must provide a copy of the accounts (and any directors' report and auditor’s report) without charge within seven days of receipt of the request.

How long should the accounts be kept for?

The Law requires accounting records to be preserved by the company for at least six years from the date on which they are made.

Is an annual validation required?

All companies registered with the Guernsey Registry must file an annual validation with the Guernsey Registry between 1 January and the last day of February (except companies incorporated in December the previous year).

If a company wishes to be removed from the register, the appropriate process (eg voluntary strike off or voluntary winding up) must be followed prior to 31 December, otherwise it will be necessary to file and pay for the annual validation the following January/February.

The annual validation of a company must be signed by a director or the secretary and sets out various details and confirmations relating to the company, its activities, its subsidiaries and its resident agent. Annual validations are available for public inspection.

Failure by a company to file its annual validation by the deadline will be liable to a civil penalty, the company will be guilty of an offence and the company may to be struck off by the Registrar.

The information contained in this guide is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.