Environmental and social transparency under the ... - ClientEarth

74 | Environmental and social transparency under the Companies Act 2006Annex 1: UK law governing company environmental and social accounting and reporting | 75Companies are required to use 215 key performance indicators (KPIs) 216 inrelation to forward looking financial matters, and ‘where appropriate’ inrelation to environmental and social matters.Liability for non-compliances419 Approval and signing of directors’ report(1) The directors’ report must be approved by the board of directors and signed onbehalf of the board by a director or the secretary of the company.(2) If the report is prepared in accordance with the small companies regime, it mustcontain a statement to that effect in a prominent position above the signature.(3) If a directors’ report is approved that does not comply with the requirements ofthis Act, every director of the company who—(a) knew that it did not comply, or was reckless as to whether it complied,and(b) failed to take reasonable steps to secure compliance with those requirementsor, as the case may be, to prevent the report from being approved,commits an offence.(4) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory maximum.Where a directors’ report does not comply with the requirements of theCompanies Act 2006, every director who knew it was non-compliant orwas reckless as to compliance, and failed to take reasonable steps to securecompliance, is guilty of an offence and liable on conviction to a fine.CommencementSection 417 of the Companies Act 2006 came into effect on 1 October2007, 217 and applies to all reporting years starting on or after that date.Therefore at the time of writing very few reports had been published towhich the new narrative reporting requirements apply. For reports forfinancial years before this date, the provisions of the Companies Act 1985applied.The directors’ report before the Companies Act 2006Companies Act 1985s234 Duty to prepare directors’ report(1) The directors of a company shall for each financial year prepare a report—(a) containing a fair review of the development of the business of the companyand its subsidiary undertakings during the financial year and of their positionat the end of it, and(b) stating the amount (if any) which they recommend should be paid as dividendand the amount (if any) which they propose to carry to reserves.(2) The report shall state the names of the persons who, at any time during the financialyear, were directors of the company, and the principal activities of the companyand its subsidiary undertakings in the course of the year and any significantchange in those activities in the year.(3) The report shall also comply with Schedule 7 as regards the disclosure of thematters mentioned there.(4) In Schedule 7—Part I relates to matters of a general nature, including changes in asset values,directors’ shareholdings and other interests and contributions for political andcharitable purposes,Part II relates to the acquisition by a company of its own shares or a charge onthem,Part III relates to the employment, training and advancement of disabled persons,Part IV relates to the health, safety and welfare at work of the company’s employees,andPart V relates to the involvement of employees in the affairs, policy and performanceof the company.(5) In the case of any failure to comply with the provisions of this Part as to thepreparation of a directors’ report and the contents of the report, every personwho was a director of the company immediately before the end of the period forlaying and delivering accounts and reports for the financial year in question isguilty of an offence and liable to a fine.(6) In proceedings against a person for an offence under this section it is a defencefor him to prove that he took all reasonable steps for securing compliance withthe requirements in question.Under the Companies Act 1985, the directors’ report only had to contain afair review of the development of the business of the company and its subsidiariesduring the year, their position at the end of it, and the informationwhich was required by Schedule 7 of the Companies Act 1985. Schedule7 included matters of a general nature (including changes in asset values,directors’ interests political and charitable contributions); acquisition bythe company of its own shares or a charge on them; the employment, trainingand advancement of disabled persons; the health, safety and welfareat work of the company’s employees; and the involvement of employees inthe affairs, policy and performance of the company.