This memorandum has been prepared for the assistance of our clients in connection with the provisions relevant to annual validation, accounts and audit under the Companies (Guernsey) Law, 2008 (the "Companies Law"). It is intended to provide only a summary of the main legal and general principles and it is not intended to be comprehensive in scope. It is strongly recommended that you seek specific legal advice on such matters and we would be pleased to assist in this respect. A series of briefings on other specific aspects of Guernsey companies has been produced by Ogier and is available on our website www.ogier.com. Transitional provisions have also been made (a separate briefing addresses the operation of these).
The memorandum has been prepared on the basis of the law and practice in Guernsey as at 1 July 2008.
The Companies Law came into force on 1 July 2008.
In each calendar year, before 31 January, every Guernsey company incorporated before 1 December in the previous calendar year must complete an annual validation containing information current on 31 December in that previous year. The validation must be delivered to the Registrar along with a declaration of compliance signed by a director or secretary of the company that all of the requirements of the Companies Law in respect of the annual validation have been fulfilled, and where necessary (i) such information as will allow the Registrar to confirm the fee payable and/or (ii) the company's consent to allow the Registrar to seek further information from the Guernsey Administrator of Income Tax in order to confirm the fee payable. A copy of the validation must also be filed in a register kept by the company for that purpose.
The annual validation must be in such form as the Registrar directs and shall state certain factual information about the company (as detailed in the Companies Law).
Every Guernsey incorporated company must keep accounting records for each financial year which are sufficient to show and explain its transactions and are such as to (i) disclose with reasonable accuracy, at any time, the financial position of the company and (ii) enable the directors to ensure that any accounts are prepared properly and in accordance with any relevant enactment for the time being in force.
Such accounting records must be kept at the company's registered office or such other place as the directors think fit (special provisions apply in the latter case) and must be kept for a period of six years after the date on which they are made.
The accounting records (and, where returns are sent, returns) shall at all reasonable times be open to inspection by any director, secretary or officer of the company at the place where they are kept.
The accounts must include a profit and loss account and a balance sheet and must (i) give (and state that they give) a true and fair view, (ii) be prepared in accordance (and state that they are in accordance) with generally accepted accounting principles (and state which accounting standards have been adopted) and (iii) comply (and state that they comply) with any relevant enactment for the time being in force. The accounts must be approved by the board of directors and signed on the directors' behalf by at least one of them.
The directors must also prepare a directors' report (which may be in summary form) for each financial year which must state the principal activities (if any) of the company in the course of the financial year. Further statements must also be included, the terms of which depend on whether the company is audited or unaudited.
Every Guernsey incorporated company must have its accounts audited by a qualified auditor, unless it is exempt under the provisions of the Companies Law.
An auditor (i) may not take office until any previous auditor ceases to hold office and (ii) shall cease to hold office at the end of the next period for appointing auditors, unless reappointed.
A company's auditor must make a report to the company's members on all accounts of the company of which copies are, during his tenure of office, required to be sent out to members in accordance with s.251 of the Companies Law. The auditor's report must state whether (i) in the auditor's opinion the accounts give a true and fair view, (ii) the accounts are in accordance with generally accepted accounting principles and (iii) the accounts comply with any relevant enactment for the time being in force. The auditor's report must also state the name of the auditor and be signed and dated.
The members of a Guernsey company may pass a resolution waiving the requirement for the company to be audited for a particular year. It should be noted, however, that such waiver only has effect in respect of a company's obligations under the Companies Law and does not affect any other obligations of a company to have its accounts audited (for example, any regulatory obligations it may have). It is expected that regulations will be made preventing companies which meet certain criteria from adopting the audit exemption. The terms of such proposed regulations are currently under discussion.
Every Guernsey company must send a copy of its accounts, its directors' report and its auditor's report (where required) to each member of the company within 12 months after the end of the financial year to which they relate. These documents must also be laid before all annual general meetings of the company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.