The way in which companies disclose information about their related undertakings in their accounts has changed. 

Requirement - UK incorporated companies are currently required by the Companies Act 2006 to disclose certain information about their related undertakings in the notes to their annual accounts. The required information is set out in Schedule 4 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). Whilst the term "related undertaking" is not defined in those regulations, it includes (i) subsidiary undertakings; (ii) associated undertakings; (iii) certain joint ventures; (iv) other undertakings in which the company (or a consolidated undertaking) holds a 20 per cent interest or more or in which its interest represents at least 20 per cent of the company's assets; and (v) certain types of unlimited companies or "qualifying partnerships" of which the company is a member that are subject to the Partnerships and Unlimited Companies (Accounts Regulations) 1993.

Exemption - To date, the 2006 Act has provided an "excessive length" exemption to this disclosure obligation at section 410. Where the directors are of the opinion that the number of related undertakings in respect of which their company is required to make a disclosure is such that compliance would result in information of excessive length being given in the notes to the annual accounts, the company was permitted to limit the disclosures in the annual accounts to "the undertakings whose results or financial position, in the opinion of the directors, principally affected the figures shown in the company's annual accounts". If a company took advantage of the section 410 exemption, it was required to annex to its next annual return all details about its related undertakings which (but for the exemption) ought to have been included in the notes to the annual accounts. In the past few years, there has been an increasing instance of letters from the Registrar of Companies to those companies that have relied upon the section 410 exemption but subsequently failed to provide full information on their related undertakings in their next annual return.

Change - The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015, which came into force on 6 April 2015, have repealed the section 410 exemption. In practical terms this means that directors cannot take advantage of the exemption in relation to annual accounts approved on or after 1 July 2015. All related undertaking information must, therefore, be disclosed in such annual accounts. In most cases, this will result in lengthy disclosures. Companies should be mindful that non-compliance with the requirement may result in the Registrar of Companies rejecting the accounts.