The Companies (1986 Order) (Investment Companies and Accounting and Audit Amendments) Regulations (Northern Ireland) 2006

Explanatory Note

(This note is not part of the Regulations)

These Regulations amend the accounting and audit provisions of the Companies (Northern Ireland) Order 1986 (“the 1986 Order”), and also amend the distribution rules for investment companies.

Part II of the Regulations (regulation 2) amends Article 273 in Part IX of the 1986 Order concerning the distribution of profits of an investment company. The amendments are in further implementation of Article 15.4 of the Second Council Directive 77/91/EEC (Official Journal No. L26/1 of 31st January 1977), on the co-ordination of safeguards in respect of the formation of public limited liability companies and the maintenance and alteration of their capital.

The Regulations amend Article 273 to provide that an investment company may make a distribution out of revenue profits if the amount of its assets is at least equal to one and a half times the aggregate of its liabilities to creditors as shown in accounts of the company (previously the references were to “liabilities”). The amendments reflect changes in accounting practice whereby certain shares are to be classified as liabilities in a company’s accounts.

Part III of the Regulations (regulations 3 to 11) replaces the requirement in paragraph 4(2) of Schedule 4 to the 1986 Order (and the equivalent requirements in Schedules 8, 8A, 9 and 9A to the 1986 Order) for corresponding amounts in company accounts to be adjusted if not comparable with a discretion to make such adjustments. The requirement derived from the exercise of a Member State option in Article 4.4 of Council Directive 78/660/EEC on the annual accounts of certain types of companies (Official Journal No. L222/11 of 14th August 1978). Part III of the Regulations also removes the requirements in Schedule 4 and the other accounting Schedules for disclosures of prior year amounts to be given in the notes to the accounts. As a result of changes in accounting practice, the issue of adjustment of non-comparable amounts and of disclosure of corresponding amounts in the notes to the accounts is to be left to accounting standards.

Part IV of the Regulations (regulations 12 to 16) makes amendments to provisions in Part VIII of the 1986 Order concerning small and medium-sized companies consequential on recent legislation. Regulation 12 amends Article 254 so that small companies are not required to make the disclosure in Article 239A concerning employees. Article 239A was inserted by regulation 3 of, and paragraph 11 of Schedule 1 to, the Companies (1986 Order) (International Accounting Standards and Other Accounting Amendments) Regulations (Northern Ireland) 2004 (S.R. 2004 No. 496).

Regulations 13 to 16 ensure that small and medium-sized companies which carry out certain activities for which permission is required under Part 4 of the Financial Services and Markets Act 2000 do not cease to be able to take advantage of special accounting and audit exemptions by reason only of carrying on those activities. The activities are defined in regulation 16. Amendments consequential to the amendments made by regulations 13 to 16 are made to the Limited Liability Partnerships Regulations (Northern Ireland) 2004 (S.R. 2004 No. 307) by regulation 17.