Handling accounts system access

How do finance directors handle requests by junior directors to access the accounts?

As a finance director, you'll almost certainly have full access to your company's accounts system. If you don't, you really need to question your relationship with your MD and your shareholders. However, how do you handle requests by junior directors to access the accounts?

The law makes it clear that all company directors need access to the company's management accounts and accounting records to do their job properly.

There is a statutory right to access those records under section 388(1) of the Companies Act 2006 and furthermore these records should be kept available for inspection (by the Company's officers) at all times at the Company's registered office (or other place as the directors think fit). If they understand their obligations properly, all directors will demand this right if they don't have it at the moment.

By 'director', we mean a board director. However, companies frequently give individuals job titles with the word 'director' in them, even if they are not board directors.

This is not a sensible practice, for reasons not relevant to this article, but unless those individuals are board directors, or what the law calls 'shadow directors', then the right to access accounts does not extend to them.

You will be aware that all the directors are potentially personally liable for the company's debts if it becomes insolvent. This is why the law places an obligation on them to take steps to protect the creditors, and give them the rights to access the accounts.

However, this doesn't mean that junior directors need the ability to make changes to the accounts, or make ledger entries. Read-only access is sufficient.

You should impress on junior directors as part of their induction process the fact that the company's accounting systems contain confidential information, and take appropriate steps to protect that confidentiality, including placing suitable provisions on the transfer of the information elsewhere, storing it on laptops, ensuring it is encrypted, and effectively deleting it or returning it if the director leaves the company.

The flip side of this is that if full access to the accounts system is restricted to one or two people, death or incapacity of those people can be critical to the business if no one is able to access the accounting systems.

This is a contingency that directors have a duty to plan for, and one option may be for the passwords to be held with a trusted third party (such as the company's auditor) with instructions to release them specified other directors only on the death or incapacity of the existing holders.

Also, remember that there is a whole set of passwords which are likely to be vital to the company. As well as access to the accounts system, there is the computer's administrator password, the access password to the company's broadband accounts, passwords to any security systems and alarms, encryption keys, passwords to allow access to data backups. The loss of any one of these could be critical to the company's survival.

Encourage junior directors to raise any questions they may have with you initially. This is preferable to them mis-understanding something they have seen and having them immediately running off to seek advice elsewhere, or raising the alarm (although you must never try to prevent them from exercising those rights).

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