(1)If a company fails to comply with any provision of section 386 (duty to keep accounting records), an offence is committed by every officer of the company who is in default.
(2)It is a defence for a person charged with such an offence to show that he acted honestly and that in the circumstances in which the company's business was carried on the default was excusable.
(3)A person guilty of an offence under this section is liable—
(a)on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b)on summary conviction—
(i)in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii)in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).
Cases considering section 387 (7)
[2025] EWHC 485 (Ch) · 7 March 2025
Applies the obligation to maintain accounting records to the director’s failure to document company payments and cash withdrawals. The breach supported liability to repay the unexplained sums (see paras [14]; [82]; [87]).
[2023] EWHC 1979 (Ch) · 31 July 2023
The court relied on the potential criminal sanctions for failure to keep adequate accounting records in concluding that damages were inadequate and interim delivery-up relief was justified. (see paras [37]; [57]; [61])
[2021] EWHC 1239 (Ch) · 11 May 2021Limits
The court treated failure by an officer in default to ensure compliance with section 386 as capable of constituting misconduct and supporting disqualification. The criminal defence in section 387(2) did not automatically exculpate the director in disqualification proceedings. (see paras [34]-[35], [95])
The court noted the statutory criminal defence of honesty and excusability, but held that its availability would not by itself prevent a finding of misconduct under section 6. Extenuating circumstances would still have to be considered. (see paras [15], [35])
What each judgment says about section 387 is in the case-law panel in the full Act.
639.These sections set out the general duty to keep accounting records and specify where and for how long records are to be kept. They replace equivalent provisions in sections 221 and 222 of the 1985 Act. Their purpose is to ensure that businesses record transactions to enable them to show the company’s financial position and to prepare accounts which comply with the Companies Act and, where relevant, with International Accounting Standards. “Accounting records” is a broad term and there is no specific definition as the records may differ depending on the nature and complexity of the business. For a simple business these may include, for example, bank statements, purchase orders, sales and purchase invoices, whilst a more sophisticated business may have integrated records, which it holds electronically.
640.Section 387 creates a criminal offence for every officer of a company who is in default, where the company has failed to keep adequate accounting records under section 386. The section replicates the existing penalties under section 221(5) and (6) of the 1985 Act (imprisonment or a fine).
641.Section 389 makes similar provision in relation to failure to comply with section 388, replacing section 222(4) and (6) of the 1985 Act.