In our last e-shot we set out details of the Government’s proposal to introduce regulations implementing the EU’s Directive on reporting of payments by “large” companies in the extractive industries (mining and quarrying companies).
Since then the Government’s consultation on those draft regulations has closed and it has published its response, together with draft regulations (“the Reports on Payments to Governments Regulations 2014”).
Subject to parliamentary approval, the Government intends for the regulations to come into force on 1st December 2014, so that the reporting requirements will apply in the UK for the financial year commencing on or after 1st January 2015. This is well ahead of the EU’s deadline for the implementation of the rules at national level (20 July 2015).
The main points that have come out of the consultation and reflected in the regulations are:-
1. Confirmation of the sterling values of thresholds applicable to the regulations;
2. Transitional arrangements for UK subsidiaries with parent companies in other EU member states; and
3. Penalties for non-compliance.
The relevant thresholds have been confirmed as:
A “large undertaking” for the purposes of the regulations, (and one therefore potentially within its ambit), is an undertaking that satisfies at least two of the following:
1. Its balance sheet total on its balance sheet date exceeds £18 million;
2. Its net turnover on its balance sheet date exceeds £36 million;
3. The average number of employees during the financial year to which the balance sheet relates is more than 250.
The threshold at which a payment needs to be disclosed has been set at £86,000.
The regulations provide that the UK subsidiary of a parent company registered in another EU member state will have transitional relief from preparing and filing payment information in the UK if they would normally report such payments through the parent company.
However, these transitional arrangements will only apply for one year. Therefore, UK subsidiaries of a parent company in a member state which hasn’t implemented the Directive in time for a financial year beginning on or after 1st January 2016, will presumably need to file a report of its own.
The regulations set out the penalty regime for non compliance.
The Government did look at whether the late filing regime under the UK Companies Act, that applies to the late filing of accounts, would be adequate for this new reporting regime. However, it decided that such a regime would not be sufficient to ensure compliance, not least because Companies House would not necessarily know which companies were obliged to file payment information.
The regulations set out a scheme whereby Companies House can, if it believes the company should have filed payment information, serve a notice on the company requiring it to respond confirming whether such a report is required or not. If the company fails to comply with a notice within 28 days, an offence is then committed by the company and every director. That offence is punishable by payment of a fine.
If a company files information that is incorrect or the company has responded to say that no return is necessary but it was, then the company’s directors could be prosecuted under Section 1112 of the Companies Act 2006 (the offence of delivering false, misleading or deceptive information).
On conviction for such an offence the person liable can be sent to prison for up to 2 years or face an unlimited fine. In addition, the courts will have the power on the application of a shareholder of the company, or Companies’ House, to make an order requiring the directors (or any of them) to file a report or a response to a Companies House notice under the regulations.
Simon Trahair-Davies is a partner in the mining and minerals team at Stephens Scown LLP. The firm has more than 70 years’ experience representing mining and minerals clients and its specialist team has recently been recognised once again by independent guides to the law Legal 500 and Chambers. Simon can be contacted on +44 (0)1872 265100 or email email@example.com. For more information visit www.stephens-scown.co.uk