Companies Act 1989
An Act to amend the law relating to company accounts; to make new provision with respect to the persons eligible for appointment as company auditors; to amend the Companies Act 1985 and certain other enactments with respect to investigations and powers to obtain information and to confer new powers exercisable to assist overseas regulatory authorities; to make new provision with respect to the registration of company charges and otherwise to amend the law relating to companies; to amend the Fair Trading Act 1973; to enable provision to be made for the payment of fees in connection with the exercise by the Secretary of State, the Director General of Fair Trading and the Monopolies and Mergers Commission of their functions under Part V of that Act; to make provision for safeguarding the operation of certain financial markets; to amend the Financial Services Act 1986; to enable provision to be made for the recording and transfer of title to securities without a written instrument; to amend the Company Directors Disqualification Act 1986, the Company Securities (Insider Dealing) Act 1985, the Policyholders Protection Act 1975 and the law relating to building societies; and for connected purposes.
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
Part I Company Accounts
Introduction
1 Introduction.
F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions applying to companies generally
2 Accounting records.
F2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 A company’s financial year and accounting reference periods.
F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 Individual company accounts.
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 Group accounts.
F5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 Additional disclosure required in notes to accounts.
F6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 Approval and signing of accounts.
F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8 Directors’ report.
F8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 Auditors’ report.
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 Publication of accounts and reports.
F10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11 Laying and delivering of accounts and reports.
F11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12 Remedies for failure to comply with accounting requirements.
F12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exemptions and special provisions
13 Small and medium-sized companies and groups.
F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14 Dormant companies.
F14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15 Public listed companies: provision of summary financial statement.
F15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16 Private companies: election to dispense with laying of accounts and reports before general meeting.
F16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17 Unlimited companies: exemption from requirement to deliver accounts and reports.
F17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18 Banking and insurance companies and groups: special provisions.
F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplementary provisions
19 Accounting standards.
F19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20 Power to alter accounting requirements.
F20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21 Parent and subsidiary undertakings.
F21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22 Other interpretation provisions.
F22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consequential amendments
23 Consequential amendments.
The enactments specified in Schedule 10 have effect with the amendments specified there, which are consequential on the amendments made by the preceding provisions of this Part.
Part II Eligibility for Appointment as Company Auditor
Introduction
24Introduction.
F23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eligibility for appointment
25 Eligibility for appointment.
F24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26 Effect of appointment of partnership.
F25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27 Ineligibility on ground of lack of independence.
F26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28 Effect of ineligibility.
F27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29 Power of Secretary of State to require second audit.
F28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognition of supervisory bodies and professional qualifications
30 Supervisory bodies.
F29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 Meaning of “appropriate qualification”.
F30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32 Qualifying bodies and recognised professional qualifications.
F31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33 Approval of overseas qualifications.
F32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34 Eligibility of individuals retaining only 1967 Act authorisation.
F33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Duties of recognised bodies
35 The register of auditors.
F34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36 Information about firms to be available to public.
F35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37 Matters to be notified to the Secretary of State.
F36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38 Power to call for information.
F37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39 Compliance orders.
F38. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40 Directions to comply with international obligations.
F39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Offences
41 False and misleading statements.
F40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42 Offences by bodies corporate, partnerships and unincorporated associations.
F41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43 Time limits for prosecution of offences.
F42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44 Jurisdiction and procedure in respect of offences.
F43. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplementary provisions
45 Fees.
F44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46 Delegation of functions of Secretary of State.
F45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4646ACircumstances in which Secretary of State may delegate functions to existing body
F47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47 Restrictive practices.
F48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48 Exemption from liability for damages.
F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49 Service of notices.
F50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50 Power to make consequential amendments.
F51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51 Power to make provision in consequence of changes affecting accountancy bodies.
F52. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52 Meaning of “associate”.
F53. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53 Minor definitions.
F54. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54 Index of defined expressions.
F55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part III Investigations and Powers to Obtain Information
Amendments of the Companies Act 1985
55 Investigations by inspectors not leading to published report.
“(2A)
Inspectors may be appointed under subsection (2) on terms that any report they may make is not for publication; and in such a case, the provisions of section 437(3) (availability and publication of inspectors’ reports) do not apply.”.
56 Production of documents and evidence to inspectors.
(1)
Section 434 of the Companies Act 1985 (production of documents and evidence to inspectors) is amended as follows.
(2)
In subsection (1) (duty of officers to assist inspectors), for “books and documents” substitute “documents”.
(3)
“(2)
If the inspectors consider that an officer or agent of the company or other body corporate, or any other person, is or may be in possession of information relating to a matter which they believe to be relevant to the investigation, they may require him—
(a)
to produce to them any documents in his custody or power relating to that matter,
(b)
to attend before them, and
(c)
otherwise to give them all assistance in connection with the investigation which he is reasonably able to give;
and it is that person’s duty to comply with the requirement.”.
(4)
“(3)
An inspector may for the purposes of the investigation examine any person on oath, and may administer an oath accordingly.”.
(5)
“(6)
In this section “documents” includes information recorded in any form; and, in relation to information recorded otherwise than in legible form, the power to require its production includes power to require the production of a copy of the information in legible form.”.
(6)
“(1)
If any person—
(a)
fails to comply with section 434(1)(a) or (c),
(b)
refuses to comply with a requirement under section 434(1)(b) or (2), or
(c)
refuses to answer any question put to him by the inspectors for the purposes of the investigation,
the inspectors may certify that fact in writing to the court.”.
57 Duty of inspectors to report.
“(1B)
If it appears to the Secretary of State that matters have come to light in the course of the inspectors’ investigation which suggest that a criminal offence has been committed, and those matters have been referred to the appropriate prosecuting authority, he may direct the inspectors to take no further steps in the investigation or to take only such further steps as are specified in the direction.
(1C)
Where an investigation is the subject of a direction under subsection (1B), the inspectors shall make a final report to the Secretary of State only where—
(a)
they were appointed under section 432(1) (appointment in pursuance of an order of the court), or
(b)
the Secretary of State directs them to do so.”.
58 Power to bring civil proceedings on the company’s behalf.
F56. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59 Expenses of investigating a company’s affairs.
(1)
Section 439 of the Companies Act 1985 (expenses of investigating a company’s affairs) is amended as follows.
(2)
“(1)
The expenses of an investigation under any of the powers conferred by this Part shall be defrayed in the first instance by the Secretary of State, but he may recover those expenses from the persons liable in accordance with this section.
There shall be treated as expenses of the investigation, in particular, such reasonable sums as the Secretary of State may determine in respect of general staff costs and overheads.”.
(3)
In subsection (4) for “the inspectors’ report” substitute “
an inspectors’ report
”
.
(4)
“(5)
Where inspectors were appointed—
(a)
under section 431, or
(b)
on an application under section 442(3),
the applicant or applicants for the investigation is or are liable to such extent (if any) as the Secretary of State may direct.”.
60 Power of Secretary of State to present winding-up petition.
(1)
Section 440 of the M3Companies Act 1985 (power of Secretary of State to present winding-up petition) is repealed; but the following amendments have the effect of re-enacting that provision, with modifications.
(2)
“(b)
in a case falling within section 124A below.”.
(3)
“124A Petition for winding up on grounds of public interest.
(1)
Where it appears to the Secretary of State from—
(a)
any report made or information obtained under Part XIV of the Companies Act 1985 (company investigations, &c.),
(b)
any report made under section 94 or 177 of the Financial Services Act 1986 or any information obtained under section 105 of that Act,
(c)
any information obtained under section 2 of the Criminal Justice Act 1987 or section 52 of the Criminal Justice (Scotland) Act 1987 (fraud investigations), or
(d)
any information obtained under section 83 of the Companies Act 1989 (powers exercisable for purpose of assisting overseas regulatory authorities),
that it is expedient in the public interest that a company should be wound up, he may present a petition for it to be wound up if the court thinks it just and equitable for it to be so.
(2)
This section does not apply if the company is already being wound up by the court.”.
61 Inspectors’ reports as evidence.
In section 441 of the Companies Act 1985 (inspectors’ reports to be evidence), in subsection (1) for “sections 431 or 432” substitute “
this Part
”
.
62 Investigation of company ownership.
“(3)
If an application for investigation under this section with respect to particular shares or debentures of a company is made to the Secretary of State by members of the company, and the number of applicants or the amount of shares held by them is not less than that required for an application for the appointment of inspectors under section 431(2)(a) or (b), then, subject to the following provisions, the Secretary of State shall appoint inspectors to conduct the investigation applied for.
(3A)
The Secretary of State shall not appoint inspectors if he is satisfied that the application is vexatious; and where inspectors are appointed their terms of appointment shall exclude any matter in so far as the Secretary of State is satisfied that it is unreasonable for it to be investigated.
(3B)
The Secretary of State may, before appointing inspectors, require the applicant or applicants to give security, to an amount not exceeding £5,000, or such other sum as he may by order specify, for payment of the costs of the investigation.
An order under this subsection shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(3C)
If on an application under subsection (3) it appears to the Secretary of State that the powers conferred by section 444 are sufficient for the purposes of investigating the matters which inspectors would be appointed to investigate, he may instead conduct the investigation under that section.”.
63 Secretary of State’s power to require production of documents.
F57. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64 Entry and search of premises.
(1)
“448 Entry and search of premises.
(1)
A justice of the peace may issue a warrant under this section if satisfied on information on oath given by or on behalf of the Secretary of State, or by a person appointed or authorised to exercise powers under this Part, that there are reasonable grounds for believing that there are on any premises documents whose production has been required under this Part and which have not been produced in compliance with the requirement.
(2)
A justice of the peace may also issue a warrant under this section if satisfied on information on oath given by or on behalf of the Secretary of State, or by a person appointed or authorised to exercise powers under this Part—
(a)
that there are reasonable grounds for believing that an offence has been committed for which the penalty on conviction on indictment is imprisonment for a term of not less than two years and that there are on any premises documents relating to whether the offence has been committed,
(b)
that the Secretary of State, or the person so appointed or authorised, has power to require the production of the documents under this Part, and
(c)
that there are reasonable grounds for believing that if production was so required the documents would not be produced but would be removed from the premises, hidden, tampered with or destroyed.
(3)
A warrant under this section shall authorise a constable, together with any other person named in it and any other constables—
(a)
to enter the premises specified in the information, using such force as is reasonably necessary for the purpose;
(b)
to search the premises and take possession of any documents appearing to be such documents as are mentioned in subsection (1) or (2), as the case may be, or to take, in relation to any such documents, any other steps which may appear to be necessary for preserving them or preventing interference with them;
(c)
to take copies of any such documents; and
(d)
to require any person named in the warrant to provide an explanation of them or to state where they may be found.
(4)
If in the case of a warrant under subsection (2) the justice of the peace is satisfied on information on oath that there are reasonable grounds for believing that there are also on the premises other documents relevant to the investigation, the warrant shall also authorise the actions mentioned in subsection (3) to be taken in relation to such documents.
(5)
A warrant under this section shall continue in force until the end of the period of one month beginning with the day on which it is issued.
(6)
Any documents of which possession is taken under this section may be retained—
(a)
for a period of three months; or
(b)
if within that period proceedings to which the documents are relevant are commenced against any person for any criminal offence, until the conclusion of those proceedings.
(7)
Any person who intentionally obstructs the exercise of any rights conferred by a warrant issued under this section or fails without reasonable excuse to comply with any requirement imposed in accordance with subsection (3)(d) is guilty of an offence and liable to a fine.
Sections 732 (restriction on prosecutions), 733 (liability of individuals for corporate default) and 734 (criminal proceedings against unincorporated bodies) apply to this offence.
(8)
For the purposes of sections 449 and 451A (provision for security of information) documents obtained under this section shall be treated as if they had been obtained under the provision of this Part under which their production was or, as the case may be, could have been required.
(9)
In the application of this section to Scotland for the references to a justice of the peace substitute references to a justice of the peace or a sheriff, and for the references to information on oath substitute references to evidence on oath.
(10)
In this section “document” includes information recorded in any form.”.
(2)
In Schedule 24 to the M5Companies Act 1985 (punishment of offences), in the entry relating to section 448(5)—
(a)
in the first column for “448(5)” substitute “448(7)”, and
(b)
“Obstructing the exercise of any rights conferred by a warrant or failing to comply with a requirement imposed under subsection (3)(d).”.
65 Provision for security of information obtained.
F58. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66 Punishment for destroying, mutilating, &c. company documents.
(1)
Section 450 of the M6Companies Act 1985 (punishment for destroying, mutilating, &c. company documents) is amended as follows.
(2)
In subsection (1) for the opening words down to “insurance company” substitute “An officer of a company, or of an insurance company”, for “body’s” substitute “company’s” and for “the body” substitute “the company”.
(3)
“(4)
Sections 732 (restriction on prosecutions), 733 (liability of individuals for corporate default) and 734 (criminal proceedings against unincorporated bodies) apply to an offence under this section.”.
(4)
“(5)
In this section “document” includes information recorded in any form.”.
67 Punishment for furnishing false information.
F59. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68 Disclosure of information by Secretary of State or inspector.
“451A Disclosure of information by Secretary of State or inspector.
(1)
This section applies to information obtained under sections 434 to 446.
(2)
The Secretary of State may, if he thinks fit—
(a)
disclose any information to which this section applies to any person to whom, or for any purpose for which, disclosure is permitted under section 449, or
(b)
authorise or require an inspector appointed under this Part to disclose such information to any such person or for any such purpose.
(3)
Information to which this section applies may also be disclosed by an inspector appointed under this Part to—
(a)
another inspector appointed under this Part or an inspector appointed under section 94 or 177 of the Financial Services Act 1986, or
(b)
a person authorised to exercise powers under section 44 of the Insurance Companies Act 1982, section 447 of this Act, section 106 of the Financial Services Act 1986 or section 84 of the Companies Act 1989.
(4)
Any information which may by virtue of subsection (3) be disclosed to any person may be disclosed to any officer or servant of that person.
(5)
The Secretary of State may, if he thinks fit, disclose any information obtained under section 444 to—
(a)
the company whose ownership was the subject of the investigation,
(b)
any member of the company,
(c)
any person whose conduct was investigated in the course of the investigation,
(d)
the auditors of the company, or
(e)
any person whose financial interests appear to the Secretary of State to be affected by matters covered by the investigation.”.
69 Protection of banking information.
(1)
Section 452 of the M7Companies Act 1985 (privileged information) is amended as follows.
(2)
F60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
“(1A)
Nothing in section 434, 443 or 446 requires a person (except as mentioned in subsection (1B) below) to disclose information or produce documents in respect of which he owes an obligation of confidence by virtue of carrying on the business of banking unless—
(a)
the person to whom the obligation of confidence is owed is the company or other body corporate under investigation,
(b)
the person to whom the obligation of confidence is owed consents to the disclosure or production, or
(c)
the making of the requirement is authorised by the Secretary of State.
(1B)
Subsection (1A) does not apply where the person owing the obligation of confidence is the company or other body corporate under investigation under section 431, 432 or 433.”.
(4)
F60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70 Investigation of oversea companies.
“(1)
The provisions of this Part apply to bodies corporate incorporated outside Great Britain which are carrying on business in Great Britain, or have at any time carried on business there, as they apply to companies under this Act; but subject to the following exceptions, adaptations and modifications.
(1A)
The following provisions do not apply to such bodies—
(a)
section 431 (investigation on application of company or its members),
(b)
section 438 (power to bring civil proceedings on the company’s behalf),
(c)
sections 442 to 445 (investigation of company ownership and power to obtain information as to those interested in shares, &c.), and
(d)
section 446 (investigation of share dealings).
(1B)
The other provisions of this Part apply to such bodies subject to such adaptations and modifications as may be specified by regulations made by the Secretary of State.”.
71 Investigation of unregistered companies.
“Part XIV (except section 446)
Investigation of companies and their affairs; requisition of documents.
—”.
Amendments of the Financial Services Act 1986
F6172. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F6273. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F6374. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F6475. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F6576. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amendments of other enactments
F6677. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F6778. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F6879. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80 Amendment of the Building Societies Act 1986.
“, or
(iii)
Part II, III or VII of the Companies Act 1989;”.
F6981. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Powers exercisable to assist overseas regulatory authorities
82 Request for assistance by overseas regulatory authority.
(1)
The powers conferred by section 83 are exercisable by the Secretary of State for the purpose of assisting an overseas regulatory authority which has requested his assistance in connection with inquiries being carried out by it or on its behalf.
(2)
An “overseas regulatory authority” means an authority which in a country or territory outside the United Kingdom exercises—
F70(a)
any function corresponding to—
(i)
any function of the Secretary of State under the Companies Act 1985 F71or the Companies Act 2006;
(ii)
any function of the F72FCA, the PRA or the Bank of England under the Financial Services and Markets Act 2000;
F73(iii)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
any function in connection with the investigation of, or the enforcement of rules (whether or not having the force of law) relating to, conduct of the kind prohibited by F74Part V of the Criminal Justice Act 1993 (insider dealing), or
(c)
any function prescribed for the purposes of this subsection by order of the Secretary of State, being a function which in the opinion of the Secretary of State relates to companies or financial services.
An order under paragraph (c) shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(3)
The Secretary of State shall not exercise the powers conferred by section 83 unless F75he and the F76corresponding UK regulator (if any) are satisfied that the assistance requested by the overseas regulatory authority is for the purposes of its regulatory functions.
An authority’s “regulatory functions” means any functions falling within subsection (2) and any other functions relating to companies or financial services.
F77(3A)
In subsection (3), “the corresponding UK regulator” means such one or more of the FCA, PRA and the Bank of England as appears to the Secretary of State to exercise functions corresponding to the regulatory functions for the purposes of which the request is made.
(4)
In deciding whether to exercise those powers the Secretary of State may take into account, in particular—
(a)
whether corresponding assistance would be given in that country or territory to an authority exercising regulatory functions in the United Kingdom;
(b)
whether the inquiries relate to the possible breach of a law, or other requirement, which has no close parallel in the United Kingdom or involves the assertion of a jurisdiction not recognised by the United Kingdom;
(c)
the seriousness of the matter to which the inquiries relate, the importance to the inquiries of the information sought in the United Kingdom and whether the assistance could be obtained by other means;
(d)
whether it is otherwise appropriate in the public interest to give the assistance sought.
(5)
Before deciding whether to exercise those powers in a case where the overseas regulatory authority is a banking supervisor, the Secretary of State shall consult the F78FCA and the PRA.
A “banking supervisor” means an overseas regulatory authority with respect to which the F79FCA or the PRA has notified the Secretary of State, for the purposes of this subsection, that it exercises functions corresponding to those of F80the body giving the notification F81in relation to authorised persons with permission under the Financial Services and Markets Act 2000 to accept deposits.
F82(5A)
In subsection (5), “authorised person” has the meaning given in the Financial Services and Markets Act 2000 and the references to deposits and their acceptance must be read with—
(a)
section 22 of that Act;
(b)
any relevant order under that section; and
(c)
Schedule 2 to that Act.
(6)
The Secretary of State may decline to exercise those powers unless the overseas regulatory authority undertakes to make such contribution towards the costs of their exercise as the Secretary of State considers appropriate.
(7)
References in this section to financial services include, in particular, investment business, insurance and banking.
83 Power to require information, documents or other assistance.
(1)
The following powers may be exercised in accordance with section 82, if the Secretary of State considers there is good reason for their exercise.
(2)
The Secretary of State may require any person—
(a)
to attend before him at a specified time and place and answer questions or otherwise furnish information with respect to any matter relevant to the inquiries,
(b)
to produce at a specified time and place any specified documents which appear to the Secretary of State to relate to any matter relevant to the inquiries, and
(c)
otherwise to give him such assistance in connection with the inquiries as he is reasonably able to give.
(3)
The Secretary of State may examine a person on oath and may administer an oath accordingly.
(4)
Where documents are produced the Secretary of State may take copies or extracts from them.
(5)
A person shall not under this section be required to disclose information or produce a document which he would be entitled to refuse to disclose or produce on grounds of legal professional privilege in proceedings in the High Court or on grounds of confidentiality as between client and professional legal adviser in proceedings in the Court of Session, except that a lawyer may be required to furnish the name and address of his client.
(6)
A statement by a person in compliance with a requirement imposed under this section may be used in evidence against him.
F83(6A)
However, in criminal proceedings in which that person is charged with an offence to which this subsection applies—
(a)
no evidence relating to the statement may be adduced, and
(b)
no question relating to it may be asked,
by or on behalf of the prosecution, unless evidence relating to it is adduced, or a question relating to it is asked, in the proceedings by or on behalf of that person.
(6B)
Subsection (6A) applies to any offence other than—
(a)
an offence under section 85;
(b)
an offence under section 2 or 5 of the M9Perjury Act 1911 (false statements made on oath otherwise than in judicial proceedings or made otherwise than on oath);
(c)
an offence under section 44(1) or (2) of the M10Criminal Law (Consolidation) (Scotland) Act 1995 (false statements made on oath or otherwise than on oath); or
(d)
an offence under Article 7 or 10 of the M11Perjury (Northern Ireland) Order 1979 (false statements made on oath otherwise than in judicial proceedings or made otherwise than on oath).
(7)
Where a person claims a lien on a document, its production under this section is without prejudice to his lien.
(8)
In this section “documents” includes information recorded in any form; and, in relation to information recorded otherwise than in legible form, the power to require its production includes power to require the production of a copy of it in legible form.
84 Exercise of powers by officer, &c.
(1)
The Secretary of State may authorise an officer of his or any other competent person to exercise on his behalf all or any of the powers conferred by section 83.
(2)
No such authority shall be granted except for the purpose of investigating—
(a)
the affairs, or any aspects of the affairs, of a person specified in the authority, or
(b)
a subject-matter so specified,
being a person who, or subject-matter which, is the subject of the inquiries being carried out by or on behalf of the overseas regulatory authority.
(3)
No person shall be bound to comply with a requirement imposed by a person exercising powers by virtue of an authority granted under this section unless he has, if required, produced evidence of his authority.
(4)
A person shall not by virtue of an authority under this section be required to disclose any information or produce any documents in respect of which he owes an obligation of confidence by virtue of carrying on the business of banking unless—
(a)
the imposing on him of a requirement with respect to such information or documents has been specifically authorised by the Secretary of State, or
(b)
the person to whom the obligation of confidence is owed consents to the disclosure or production.
In this subsection “documents” has the same meaning as in section 83.
(5)
Where the Secretary of State authorises a person other than one of his officers to exercise any powers by virtue of this section, that person shall make a report to the Secretary of State in such manner as he may require on the exercise of those powers and the results of exercising them.
85 Penalty for failure to comply with requirement, &c.
(1)
A person who without reasonable excuse fails to comply with a requirement imposed on him under section 83 commits an offence and is liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding level 5 on the standard scale, or both.
(2)
A person who in purported compliance with any such requirement furnishes information which he knows to be false or misleading in a material particular, or recklessly furnishes information which is false or misleading in a material particular, commits an offence and is liable—
(a)
on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine, or both;
(b)
on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum, or both.
86 Restrictions on disclosure of information.
(1)
This section applies to information relating to the business or other affairs of a person which—
(a)
is supplied by an overseas regulatory authority in connection with a request for assistance, or
(b)
is obtained by virtue of the powers conferred by section 83, whether or not any requirement to supply it is made under that section.
(2)
Except as permitted by section 87 below, such information shall not be disclosed for any purpose—
(a)
by the primary recipient, or
(b)
by any person obtaining the information directly or indirectly from him,
without the consent of the person from whom the primary recipient obtained the information and, if different, the person to whom it relates.
(3)
The “primary recipient” means, as the case may be—
(a)
the Secretary of State,
(b)
any person authorised under section 84 to exercise powers on his behalf, and
(c)
any officer or servant of any such person.
(4)
Information shall not be treated as information to which this section applies if it has been made available to the public by virtue of being disclosed in any circumstances in which, or for any purpose for which, disclosure is not precluded by this section.
(5)
A person who contravenes this section commits an offence and is liable—
(a)
on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine, or both;
(b)
on summary conviction, to imprisonment for a term not exceeding three months or to a fine not exceeding the statutory maximum, or both.
87 Exceptions from restrictions on disclosure.
(1)
Information to which section 86 applies may be disclosed—
(a)
to any person with a view to the institution of, or otherwise for the purposes of, relevant proceedings,
(b)
for the purpose of enabling or assisting a relevant authority to discharge any relevant function (including functions in relation to proceedings),
(c)
to the Treasury, if the disclosure is made in the interests of investors or in the public interest,
(d)
if the information is or has been available to the public from other sources,
(e)
in a summary or collection of information framed in such a way as not to enable the identity of any person to whom the information relates to be ascertained, or
(f)
in pursuance of any F84EU obligation.
(2)
The relevant proceedings referred to in subsection (1)(a) are—
(a)
any criminal proceedings,
F85(b)
civil proceedings arising under or by virtue of the Financial Services and Markets Act 2000 and proceedings before the Upper Tribunal in respect of—
F86(i)
a decision of the FCA;
(ia)
a decision of the PRA;
(ii)
a decision of the Bank of England; or
(iii)
a decision of a person relating to the assessment of any compensation or consideration under the Banking (Special Provisions) Act 2008 or the Banking Act 2009,
(c)
disciplinary proceedings relating to—
(i)
the exercise by a F87relevant lawyer, auditor, accountant, valuer or actuary of his professional duties, or
(ii)
the discharge by a public servant of his duties.
F90(2A)
In subsection (2)(c)(i) “relevant lawyer” means—
(a)
a person who, for the purposes of the Legal Services Act 2007, is an authorised person in relation to an activity which constitutes a reserved legal activity (within the meaning of that Act),
(b)
a solicitor or barrister in Northern Ireland, or
(c)
a solicitor or advocate in Scotland.
(3)
In subsection (2)(c)(ii) “public servant” means an officer or servant of the Crown or of any public or other authority for the time being designated for the purposes of that provision by order of the Secretary of State.
(4)
The relevant authorities referred to in subsection (1)(b), and the relevant functions in relation to each such authority, are as follows—
Authority | Functions |
|---|---|
F91The Secretary of State | Functions under— (a)the enactments relating to companies or insolvency; (b)Part 2, this Part or Part 7 of this Act; (c)the Financial Services and Markets Act 2000. |
F92The Treasury. | Functions under— (a)this Part or Part 7 of this Act; (b)the Financial Services and Markets Act 2000. |
F93An inspector appointed under Part 14 of the Companies Act 1985. | Functions under that Part. |
F94A person authorised to exercise powers under section 447 of the Companies Act 1985 or section 84 of this Act. | Functions under that section. |
F94A person appointed under— (a)section 167 of the Financial Services and Markets Act 2000 (general investigations), (b)section 168 of that Act (investigations in particular cases), (c)section 169(1)(b) of that Act (investigation in support of overseas regulator), (d)section 284 of that Act (investigations into affairs of certain collective investment schemes), or (e)regulations made as a result of section 262(2)(k) of that Act (investigations into open-ended investment companies),to conduct an investigation. | Functions in relation to the investigation. |
An overseas regulatory authority. | Its regulatory functions (within the meaning of section 82 of this Act). |
The Department of Economic Development in Northern Ireland or a person appointed or authorised by that Department. | Functions conferred on it or him by the enactments relating to companies or insolvency. |
F95. . . | F95. . . |
F95. . . | F95. . . |
F95. . . | F95. . . |
F95. . . | F95. . . |
F95. . . | F95. . . |
F95. . . | F95. . . |
The Bank of England. | F96Any of its functions |
Functions under the enactments relating to friendly societies, under the Building Societies Act 1986 and under the Financial Services and Markets Act 2000. | |
F99A body corporate established in accordance with section 212(1) of that Act. | Functions under the Financial Services Compensation Scheme, established in accordance with section 213 of that Act. |
A recognised investment exchange or a recognised clearing house (as defined by section 285 of that Act). | Functions in its capacity as an exchange or clearing house recognised under that Act. |
A body designated under section 326(1) of the Financial Services and Markets Act 2000. | Functions in its capacity as a body designated under that section. |
F95. . . | F95. . . |
F100A body designated by order under section 1252 of the Companies Act 2006. | F100Functions under Part 42 of the Companies Act 2006. |
F101A recognised supervisory or qualifying body within the meaning of Part 42 of the Companies Act 2006. | F101Functions as such a body. |
F95. . . | F95. . . |
F102. . . | F102. . . |
The Official Receiver or, in Northern Ireland, the Official Assignee for company liquidations or for bankruptcy. | Functions under the enactments relating to insolvency. |
A recognised professional body (within the meaning of section 391 of the Insolvency Act 1986). | Functions in its capacity as such a body under the M12Insolvency Act 1986. |
F95. . . | F95. . . |
F103The Pensions Regulator | Functions conferred by or by virtue of—
or any enactment in force in Northern Ireland corresponding to an enactment mentioned in paragraphs (a) to (d) above. |
The Board of the Pension Protection Fund | Functions conferred by or by virtue of Part 2 of the Pensions Act 2004 or any enactment in force in Northern Ireland corresponding to that Part. |
F104The Office of Fair Trading | Functions under the F105Financial Services and Markets Act 2000. |
F106A person authorised by the Secretary of State under sections 245C of the Companies Act 1985. | F106Functions relating to the securing of compliance by companies with the accounting requirements of that Act). |
F107The Director General of the National Lottery. | F107Functions under sections 5 to 10 inclusive and section 15 of the National Lottery etc. Act 1993. |
F108The Comptroller and Auditor General. | Functions under Part 2 of the National Audit Act 1983. |
F109The Scottish Ministers | Functions under the enactments relating to insolvency |
The Accountant in Bankruptcy | Functions he has under the enactments relating to insolvency. |
F110 The Regulator of Community Interest Companies. | Functions under the Companies (Audit, Investigations and Community Enterprise) Act 2004. |
F111The Gambling Commission | Functions under the Gambling Act 2005 |
F112Note: Article 3(4) of the Companies (Disclosure of Information) (Designated Authorities) (No. 2) Order 2002 restricts the circumstances in which disclosure for the purpose of enabling or assisting the Comptroller and Auditor General to discharge his relevant functions is permitted.
(5)
The Secretary of State may by order amend the Table in subsection (4) so as to—
(a)
add any public or other authority to the Table and specify the relevant functions of that authority,
(b)
remove any authority from the Table, or
(c)
add functions to, or remove functions from, those which are relevant functions in relation to an authority specified in the Table;
and the order may impose conditions subject to which, or otherwise restrict the circumstances in which, disclosure is permitted.
(6)
An order under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
88 Exercise of powers in relation to Northern Ireland.
(1)
The following provisions apply where it appears to the Secretary of State that a request for assistance by an overseas regulatory authority may involve the powers conferred by section 83 being exercised in Northern Ireland in relation to matters which are transferred matters within the meaning of the M13Northern Ireland Constitution Act 1973.
(2)
The Secretary of State shall before deciding whether to accede to the request consult the Department of Economic Development in Northern Ireland, and if he decides to accede to the request and it appears to him—
(a)
that the powers should be exercised in Northern Ireland, and
(b)
that the purposes for which they should be so exercised relate wholly or primarily to transferred matters,
he shall by instrument in writing authorise the Department to exercise in Northern Ireland his powers under section 83.
(3)
The following provisions have effect in relation to the exercise of powers by virtue of such an authority with the substitution for references to the Secretary of State of references to the Department of Economic Development in Northern Ireland—
(a)
section 84 (exercise of powers by officer, &c.),
F113(b)
section 449 of the Companies Act 1985 and sections 86 and 87 above (restrictions on disclosure of information);
(c)
section 89 (authority for institution of criminal proceedings);
and references to the Secretary of State in other enactments which proceed by reference to those provisions shall be construed accordingly as being or including references to the Department.
(4)
The Secretary of State may after consultation with the Department of Economic Development in Northern Ireland revoke an authority given to the Department under this section.
(5)
In that case nothing in the provisions referred to in subsection (3)(b) shall apply so as to prevent the Department from giving the Secretary of State any information obtained by virtue of the authority; and (without prejudice to their application in relation to disclosure by the Department) those provisions shall apply to the disclosure of such information by the Secretary of State as if it had been obtained by him in the first place.
(6)
Nothing in this section affects the exercise by the Secretary of State of any powers in Northern Ireland—
(a)
in a case where at the time of acceding to the request it did not appear to him that the circumstances were such as to require him to authorise the Department of Economic Development in Northern Ireland to exercise those powers, or
(b)
after the revocation by him of any such authority;
and no objection shall be taken to anything done by or in relation to the Secretary of State or the Department on the ground that it should have been done by or in relation to the other.
89 Prosecutions.
Proceedings for an offence under section 85 or 86 shall not be instituted—
(a)
in England and Wales, except by or with the consent of the Secretary of State or the Director of Public Prosecutions;
(b)
in Northern Ireland, except by or with the consent of the Secretary of State or the Director of Public Prosecutions for Northern Ireland.
90 Offences by bodies corporate, partnerships and unincorporated associations.
(1)
Where an offence under section 85 or 86 committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, a director, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity, he as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.
(2)
Where the affairs of a body corporate are managed by its members, subsection (1) applies in relation to the acts and defaults of a member in connection with his functions of management as to a director of a body corporate.
(3)
Where an offence under section 85 or 86 committed by a partnership is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, a partner, he as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.
(4)
Where an offence under section 85 or 86 committed by an unincorporated association (other than a partnership) is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any officer of the association or any member of its governing body, he as well as the association is guilty of the offence and liable to be proceeded against and punished accordingly.
91 Jurisdiction and procedure in respect of offences.
(1)
Summary proceedings for an offence under section 85 may, without prejudice to any jurisdiction exercisable apart from this section, be taken against a body corporate or unincorporated association at any place at which it has a place of business and against an individual at any place where he is for the time being.
(2)
Proceedings for an offence alleged to have been committed under section 85 or 86 by an unincorporated association shall be brought in the name of the association (and not in that of any of its members), and for the purposes of any such proceedings any rules of court relating to the service of documents apply as in relation to a body corporate.
(3)
Section 33 of the M14Criminal Justice Act 1925 and Schedule 3 to the M15Magistrates’ Courts Act 1980 (procedure on charge of offence against a corporation) apply in a case in which an unincorporated association is charged in England and Wales with an offence under section 85 or 86 as they apply in the case of a corporation.
(4)
In relation to proceedings on indictment in Scotland for an offence alleged to have been committed under section 85 or 86 by an unincorporated association, F114section 70 of the M16Criminal Procedure (Scotland) Act 1995 (proceedings on indictment against bodies corporate) applies as if the association were a body corporate.
(5)
Section 18 of the M17Criminal Justice Act (Northern Ireland) 1945 and Schedule 4 to the M18Magistrates’ Courts (Northern Ireland) Order 1981 (procedure on charge of offence against a corporation) apply in a case in which an unincorporated association is charged in Northern Ireland with an offence under section 85 or 86 as they apply in the case of a corporation.
(6)
A fine imposed on an unincorporated association on its conviction of such an offence shall be paid out of the funds of the association.
F115 Part IV Registration of Company Charges
F115 Introduction
F11592 Introduction.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F115 Registration in the companies charges register
F11593 Charges requiring registration.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11594 The companies charges register.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11595 Delivery of particulars for registration.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11596 Delivery of further particulars.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11597 Effect of omissions and errors in registered particulars.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11598 Memorandum of charge ceasing to affect company’s property.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11599 Further provisions with respect to voidness of charges.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F115100 Additional information to be registered.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F115 Copies of instruments and register to be kept by the company
F115101 Copies of instruments and register to be kept by the company
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F115 Supplementary provisions
F115102 Power to make further provision by regulations.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F115103 Other supplementary provisions.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F115104 Interpretation, &c.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F115105 Charges on property of oversea company.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F115106 Application of provisions to unregistered companies.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F115107 Consequential amendments.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part V Other amendments of Company Law
De-regulation of private companies
113 Written resolutions of private companies.
F125. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114 Written resolutions: supplementary provisions.
F126. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F127115 Election by private company to dispense with certain requirements.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116 Elective resolution of private company.
F128(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
“(bb)
an elective resolution or a resolution revoking such a resolution;”.
F129117 Power to make further provision by regulations.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous
F138128 Form and articles for partnership company.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F138129 Membership of holding company.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130 Company contracts and execution of documents by companies.
F139(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F140
(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6)
The Secretary of State may make provision by regulations applying sections 36 to 36C of the Companies Act 1985 (company contracts; execution of documents; F141execution of deeds; pre-incorporation contracts, deeds and obligations) to companies incorporated outside Great Britain, subject to such exceptions, adaptations or modifications as may be specified in the regulations.
Regulations under this subsection shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(7)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F142131 Members’ rights to damages, &c.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F142132 Financial assistance for purposes of employees’ share scheme.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F142133 Issue of redeemable shares.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134 Disclosure of interests in shares.
F143. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
135 Orders imposing restrictions on shares.
(1)
The Secretary of State may by regulations made by statutory instrument make such amendments of the provisions of the M19Companies Act 1985 F144and the Companies Act 2006 relating to orders imposing restrictions on shares as appear to him necessary or expedient—
(a)
for enabling orders to be made in a form protecting the rights of third parties;
(b)
with respect to the circumstances in which restrictions may be relaxed or removed;
(c)
with respect to the making of interim orders by a court.
(2)
(3)
The regulations may make different provision for different cases and may contain such transitional and other supplementary and incidental provisions as appear to the Secretary of State to be appropriate.
(4)
Regulations under this section shall not be made unless a draft of the regulations has been laid before Parliament and approved by resolution of each House of Parliament.
F147136 A company’s registered office.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137 Effecting of insurance for officers and auditors of company.
F148. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138 Increase of limits on certain exemptions.
F149. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139 Annual returns.
F150(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F150(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F150(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
“(f)
section 363 (duty of company to make annual returns);”.
(5)
F151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
140 Floating charges (Scotland).
(1)
In section 463 of the Companies Act 1985 (effect of floating charge on winding up), in subsection (1) for the words “On the commencement of the winding up of a company,” there shall be substituted the words “
Where a company goes into liquidation within the meaning of section 247(2) of the Insolvency Act 1986,
”
.
(2)
Section 464 of the Companies Act 1985 (ranking of floating charges) is amended as follows.
(3)
In subsection (1)(b) at the beginning there shall be inserted the words “
with the consent of the holder of any subsisting floating charge or fixed security which would be adversely affected,
”
.
(4)
“(1A)
Where an instrument creating a floating charge contains any such provision as is mentioned in subsection (1)(a), that provision shall be effective to confer priority on the floating charge over any fixed security or floating charge created after the date of the instrument.”.
(5)
“(3)
The order of ranking of the floating charge with any other subsisting or future floating charges or fixed securities over all or any part of the company’s property is determined in accordance with the provisions of subsections (4) and (5) except where it is determined in accordance with any provision such as is mentioned in paragraph (a) or (b) of subsection (1).”.
(6)
“; and
(e)
(in the case of a floating charge to secure a contingent liability other than a liability arising under any further advances made from time to time) the maximum sum to which that contingent liability is capable of amounting whether or not it is contractually limited.”.
(7)
In subsection (6) after the words “subject to” there shall be inserted the words “
Part XII and to
”
.
(8)
In section 466 of the Companies Act 1985 (alteration of floating charges), subsections (4) and (5) and in subsection (6) the words “falling under subsection (4) of this section” shall cease to have effect.
F152141 Application to declare dissolution of company void.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F152142 Abolition of doctrine of deemed notice.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F152143 Rights of inspection and related matters.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
144“Subsidiary”, “holding company” and “wholly-owned subsidiary”.
F153(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F153(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F153(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
Schedule 18 contains amendments and savings consequential on the amendments made by this section; and the Secretary of State may by regulations make such further amendments or savings as appear to him to be necessary or expedient.
(5)
Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(6)
So much of section 23(3) of the Interpretation Act 1978 as applies section 17(2)(a) of that Act (presumption as to meaning of references to enactments repealed and re-enacted) to deeds or other instruments or documents does not apply in relation to the repeal and re-enactment by this section of section 736 of the Companies Act 1985.
145
The Companies Act 1985 has effect with the further amendments specified in Schedule 19.
Part VI Mergers and Related Matters
146. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F154. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147 Undertakings as alternative to merger reference.
F155. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
148 Enforcement of undertakings.
F156. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149 Temporary restrictions on share dealings.
F157. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150 Obtaining control by stages.
F158. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
151 False or misleading information.
“93B False or misleading information.
(1)
If a person furnishes any information—
(a)
to the Secretary of State, the Director or the Commission in connection with any of their functions under Parts IV, V, VI or this Part of this Act or under the Competition Act 1980, or
(b)
to the Commission in connection with the functions of the Commission under the Telecommunications Act 1984 or the Airports Act 1986,
and either he knows the information to be false or misleading in a material particular, or he furnishes the information recklessly and it is false or misleading in a material particular, he is guilty of an offence.
(2)
A person who—
(a)
furnishes any information to another which he knows to be false or misleading in a material particular, or
(b)
recklessly furnishes any information to another which is false or misleading in a material particular,
knowing that the information is to be used for the purpose of furnishing information as mentioned in subsection (1)(a) or (b) of this section, is guilty of an offence.
(3)
A person guilty of an offence under subsection (1) or (2) of this section is liable—
(a)
on summary conviction, to a fine not exceeding the statutory maximum, and
(b)
on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.
(4)
Section 129(1) of this Act does not apply to an offence under this section.”.
152 Fees.
F159. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
152 Fees.
(1)
The Secretary of State may by regulations made by statutory instrument require the payment to him or to the Director of such fees as may be prescribed by the regulations in connection with the exercise by the Secretary of State, the Director and the Commission of their functions under Part V of the M86Fair Trading Act 1973.
(2)
The regulations may provide for fees to be payable—
(a)
in respect of—
(i)
an application for the consent of the Secretary of State under section 58(1) of the Fair Trading Act 1973 to the transfer of a newspaper or of newspaper assets, and
(ii)
a notice under section 75A(1) of that Act, and
(b)
on the occurrence of any event specified in the regulations.
(3)
The events that may be specified in the regulations by virtue of subsection (2)(b) above include—
(a)
the making by the Secretary of State of a merger reference to the Commission under section 64 or 75 of the Fair Trading Act 1973,
(b)
the announcement by the Secretary of State of his decision not to make a merger reference in any case where, at the time the announcement is made, he would under one of those sections have power to make a such a reference.
(4)
The regulations may also contain provision—
(a)
for ascertaining the persons by whom fees are payable,
(b)
specifying whether any fee is payable to the Secretary of State or to the Director,
(c)
for the amount of any fee to be calculated by reference to matters which may include—
(i)
in a case involving functions of the Secretary of State under sections 57 to 61 of the M87Fair Trading Act 1973, the number of newspapers concerned, the number of separate editions (determined in accordance with the regulations) of each newspaper and the average circulation per day of publication (within the meaning of Part V of that Act) of each newspaper, and
(ii)
in any other case, the value (determined in accordance with the regulations) of any assets concerned,
(d)
as to the time when any fee is to be paid, and
(e)
for the repayment by the Secretary of State or the Director of the whole or part of any fee in specified circumstances.
(5)
The regulations may make different provision for different cases.
(6)
Subsections (2) to (5) above do not prejudice the generality of subsection (1) above.
(7)
In determining the amount of any fees to be prescribed by the regulations, the Secretary of State may take into account all costs incurred by him and by the Director in respect of the exercise by him, by the Commission and by the Director of their respective functions—
(a)
under Part V of the Fair Trading Act 1973, and
(b)
under Parts I, VII and VIII of that Act in relation to merger references or other matters arising under Part V.
(8)
A statutory instrument containing regulations under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(9)
Fees paid to the Secretary of State or the Director under this section shall be paid into the Consolidated Fund.
(10)
In this section—
“the Commission”,
“the Director”, and
“merger reference”,
have the same meaning as in the Fair Trading Act 1973, and “newspaper” has the same meaning as in Part V of that Act.
(11)
References in this section to Part V of the Fair Trading Act 1973 and to merger references under section 64 or 75 of that Act or under that Part [F507include sections 32 to 34 of the Water Industry Act 1991 and any reference under section 32 of that Act].
152 Fees.
(1)
The Secretary of State may by regulations made by statutory instrument require the payment to him or to the Director of such fees as may be prescribed by the regulations in connection with the exercise by the Secretary of State, the Director and the Commission of their functions under Part V of the M88Fair Trading Act 1973.
(2)
The regulations may provide for fees to be payable—
(a)
in respect of—
(i)
an application for the consent of the Secretary of State under section 58(1) of the Fair Trading Act 1973 to the transfer of a newspaper or of newspaper assets, and
(ii)
a notice under section 75A(1) of that Act, and
(b)
on the occurrence of any event specified in the regulations.
(3)
The events that may be specified in the regulations by virtue of subsection (2)(b) above include—
(a)
the making by the Secretary of State of a merger reference to the Commission under section 64 or 75 of the Fair Trading Act 1973,
(b)
the announcement by the Secretary of State of his decision not to make a merger reference in any case where, at the time the announcement is made, he would under one of those sections have power to make a such a reference.
(4)
The regulations may also contain provision—
(a)
for ascertaining the persons by whom fees are payable,
(b)
specifying whether any fee is payable to the Secretary of State or to the Director,
(c)
for the amount of any fee to be calculated by reference to matters which may include—
(i)
in a case involving functions of the Secretary of State under sections 57 to 61 of the M89Fair Trading Act 1973, the number of newspapers concerned, the number of separate editions (determined in accordance with the regulations) of each newspaper and the average circulation per day of publication (within the meaning of Part V of that Act) of each newspaper, and
(ii)
in any other case, the value (determined in accordance with the regulations) of any assets concerned,
(d)
as to the time when any fee is to be paid, and
(e)
for the repayment by the Secretary of State or the Director of the whole or part of any fee in specified circumstances.
(5)
The regulations may make different provision for different cases.
(6)
Subsections (2) to (5) above do not prejudice the generality of subsection (1) above.
(7)
In determining the amount of any fees to be prescribed by the regulations, the Secretary of State may take into account all costs incurred by him and by the Director in respect of the exercise by him, by the Commission and by the Director of their respective functions—
(a)
under Part V of the Fair Trading Act 1973, and
(b)
under Parts I, VII and VIII of that Act in relation to merger references or other matters arising under Part V.
(8)
A statutory instrument containing regulations under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(9)
Fees paid to the Secretary of State or the Director under this section shall be paid into the Consolidated Fund.
(10)
In this section—
“the Commission”,
“the Director”, and
“merger reference”,
have the same meaning as in the Fair Trading Act 1973, and “newspaper” has the same meaning as in Part V of that Act.
(11)
References in this section to Part V of the Fair Trading Act 1973 and to merger references under section 64 or 75 of that Act or under that Part include sections 29 and 30 of the M90Water Act 1989 and any reference under section 29 of that Act.
153 Other amendments about mergers and related matters.
Schedule 20 to this Act has effect.
Part VII Financial Markets and Insolvency
Introduction
154 Introduction.
This Part has effect for the purposes of safeguarding the operation of certain financial markets by provisions with respect to—
(a)
the insolvency, winding up or default of a person party to transactions in the market (sections 155 to 172),
(b)
the effectiveness or enforcement of certain charges given to secure obligations in connection with such transactions (sections 173 to 176), and
(c)
rights and remedies in relation to certain property provided as cover for margin in relation to such transactions F160or as default fund contribution, or subject to such a charge (sections 177 to 181).
Recognised investment exchanges and clearing houses
155 Market contracts.
F161(1)
In this Part—
(a)
“clearing member client contract” means a contract between a recognised central counterparty and one or more of the parties mentioned in subsection (1A) which is recorded in the accounts of the recognised central counterparty as a position held for the account of a client, an indirect client or a group of clients or indirect clients;
(b)
“clearing member house contract” means a contract between a recognised central counterparty and a clearing member recorded in the accounts of the recognised central counterparty as a position held for the account of a clearing member;
(c)
“client trade” means a contract between two or more of the parties mentioned in subsection (1A) which corresponds to a clearing member client contract;
(d)
“market contracts” means the contracts to which this Part applies by virtue of subsections (2) to (3).
F162(1A)
The parties referred to in subsections (1)(a) and (c) are—
(a)
a clearing member;
(b)
a client; and
(c)
an indirect client.
F163(2)
Except as provided in subsection (2A), in relation to a recognised investment exchange this Part applies to—
(a)
contracts entered into by a member or designated non-member of the exchange F164with a person other than the exchangewhich are either
(i)
contracts made on the exchange or on an exchange to whose undertaking the exchange has succeeded whether by amalgamation, merger or otherwise; or
(ii)
contracts in the making of which the member or designated non-member was subject to the rules of the exchange or of an exchange to whose undertaking the exchange has succeeded whether by amalgama- tion, merger or otherwise; F165...
F166(b)
contracts entered into by the exchange, in its capacity as such, with a member of the exchange or with a recognised clearing house or with another recognised investment exchange for the purpose of enabling the rights and liabilities of that member or clearing house or other investment exchange under a transaction to be settled; and
(c)
contracts entered into by the exchange with a member of the exchange or with a recognised clearing house or with another recognised investment exchange for the purpose of providing central counterparty clearing services to that member or clearing house or other investment exchange.
A “designated non-member” means a person in respect of whom action may be taken under the default rules of the exchange but who is not a member of the exchange.
F167(2A)
Where the exchange in question is a recognised overseas investment exchange, this Part does not apply to a contract that falls within paragraph (a) of subsection (2) (unless it also falls within subsection (3)).
F168(2B)
In relation to transactions which are cleared through a recognised central counterparty, this Part applies to—
(a)
clearing member house contracts;
(b)
clearing member client contracts;
(c)
client trades, other than client trades excluded by subsection (2C); and
(d)
contracts entered into by the recognised central counterparty with a recognised investment exchange or a recognised clearing house for the purpose of providing central counterparty clearing services to that exchange or clearing house.
(2C)
A client trade is excluded by this subsection from subsection (2B)(c) if—
(a)
the clearing member which is a party to the clearing member client contract corresponding to the client trade defaults; and
(b)
the clearing member client contract is not transferred to another clearing member within the period specified for this purpose in the default rules of the recognised central counterparty.
F169(3)
In relation to a recognised clearing house F170which is not a recognised central counterparty, this Part applies to—
(a)
contracts entered into by the clearing house, in its capacity as such, with a member of the clearing house or with a recognised investment exchange or with another recognised clearing house for the purpose of enabling the rights and liabilities of that member or investment exchange or other clearing house under a transaction to be settled; and
(b)
contracts entered into by the clearing house with a member of the clearing house or with a recognised investment exchange or with another recognised clearing house for the purpose of providing central counterparty clearing services to that member or investment exchange or other clearing house.
F171(3A)
In this section “central counterparty clearing services” means—
(a)
the services provided by a recognised investment exchange or a recognised clearing house to the parties to a transaction in connection with contracts between each of the parties and the investment exchange or clearing house (in place of, or as an alternative to, a contract directly between the parties),
(b)
the services provided by a recognised clearing house to a recognised investment exchange or to another recognised clearing house in connection with contracts between them, or
(c)
the services provided by a recognised investment exchange to a recognised clearing house or to another recognised investment exchange in connection with contracts between them.
(4)
The Secretary of State may by regulations make further provision as to the contracts to be treated as “market contracts”, for the purposes of this Part, in relation to a recognised investment exchange or recognised clearing house.
(5)
The regulations may add to, amend or repeal the provisions of subsections (2) and (3) above.
F172155A.Qualifying collateral arrangements and qualifying property transfers
(1)
In this Part—
(a)
“qualifying collateral arrangements” means the contracts and contractual obligations to which this Part applies by virtue of subsection (2); and
(b)
“qualifying property transfers” means the property transfers to which this Part applies by virtue of subsection (4).
(2)
In relation to transactions which are cleared through a recognised central counterparty, this Part applies to any contracts or contractual obligations for, or arising out of, the provision of property as margin where—
(a)
the margin is provided to a recognised central counterparty and is recorded in the accounts of the recognised central counterparty as an asset held for the account of a client, an indirect client, or a group of clients or indirect clients; or
(b)
the margin is provided to a client or clearing member for the purpose of providing cover for exposures arising out of present or future client trades.
(3)
In subsection (2)—
(a)
“property” has the meaning given by section 436(1) of the Insolvency Act 1986 and
(b)
the reference to a contract or contractual obligation for, or arising out of, the provision of property as margin in circumstances falling within paragraph (a) or (b) of that subsection includes a reference to a contract or contractual obligation of that kind which has been amended to reflect the transfer of a clearing member client contract or client trade.
(4)
In relation to transactions which are cleared through a recognised central counterparty, this Part applies to—
(a)
transfers of property made in accordance with Article 48(7) of the EMIR Level 1 Regulation;
(b)
transfers of property to the extent that they—
(i)
are made by a recognised central counterparty to a non-defaulting clearing member instead of, or in place of, a defaulting clearing member;
(ii)
represent the termination or close out value of a clearing member client contract which is transferred from a defaulting clearing member to a non-defaulting clearing member; and
(iii)
are determined in accordance with the default rules of the recognised central counterparty.
F173156. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
157
(1)
A recognised UK investment exchange or F174recognised clearing house shall give the F175appropriate regulator at least F176three months notice of any proposal to amend, revoke or add to its default rules; and the F177regulator may within F176three months from receipt of the notice direct the exchange or clearing house not to proceed with the proposal, in whole or in part.
F178(1A)
The appropriate regulator may, if it considers it appropriate to do so, agree a shorter period of notice and, in a case where it does so, any direction under this section must be given by it within that shorter period.
(2)
A direction under this section may be varied or revoked.
(3)
Any amendment or revocation of, or addition to, the default rules of an exchange or clearing house in breach of a direction under this section is ineffective.
F179(4)
The appropriate regulator”—
(a)
in relation to a recognised UK investment exchange, means the FCA, and
(b)
in relation to a F180recognised clearing house, means the Bank of England.
158 Modifications of the law of insolvency.
F181(1)
The general law of insolvency has effect in relation to—
(a)
market contracts,
(b)
action taken under the rules of a recognised investment exchange, or a recognised clearing house which is not a recognised central counterparty, with respect to market contracts,
(c)
action taken under the rules of a recognised central counterparty to transfer clearing member client contracts, or settle clearing member client contracts or clearing member house contracts, in accordance with the default rules of the recognised central counterparty,
(d)
where clearing member client contracts transferred in accordance with the default rules of a recognised central counterparty were entered into by the clearing member as a principal, action taken to transfer the client trades, or groups of client trades, corresponding to those clearing member client contracts,
(e)
action taken to transfer qualifying collateral arrangements in conjunction with a transfer of clearing member client contracts as mentioned in paragraph (c) or a transfer of client trades as mentioned in paragraph (d), and
(f)
qualifying property transfers,
subject to the provisions of sections 159 to 165.
(2)
So far as those provisions relate to insolvency proceedings in respect of a person other than a defaulter, they apply in relation to—
F182(a)
proceedings in respect of a recognised investment exchange or a member or designated non-member of a recognised investment exchange,
(aa)
proceedings in respect of a recognised clearing house or a member of a recognised clearing house, and
(b)
proceedings in respect of a party to a market contract F183other than a client trade which are begun after a recognised investment exchange or recognised clearing house has taken action under its default rules in relation to a person party to the contract as principal,
but not in relation to any other insolvency proceedings, notwithstanding that rights or liabilities arising from market contracts fall to be dealt with in the proceedings.
(3)
The reference in subsection (2)(b) to the beginning of insolvency proceedings is to—
(a)
the presentation of a bankruptcy petition or a petition for sequestration of a person’s estate, or
F184(b)
the application for an administration order or the presentation of a winding-up petition or the passing of a resolution for voluntary winding up,
(c)
the appointment of an administrative receiver.
F185(3A)
In subsection (3)(b) the reference to an application for an administration order shall be taken to include a reference to—
(a)
in a case where an administrator is appointed under paragraph 14 or 22 of Schedule B1 to the Insolvency Act 1986 (appointment by floating charge holder, company or directors) following filing with the court of a copy of a notice of intention to appoint under that paragraph, the filing of the copy of the notice, and
(b)
in a case where an administrator is appointed under either of those paragraphs without a copy of a notice of intention to appoint having been filed with the court, the appointment of the administrator.
(4)
The Secretary of State may make further provision by regulations modifying the law of insolvency in relation to the matters mentioned in F186paragraphs (a) to (d) of subsection (1).
(5)
The regulations may add to, amend or repeal the provisions mentioned in subsection (1), and any other provision of this Part as it applies for the purposes of those provisions, or provide that those provisions have effect subject to such additions, exceptions or adaptations as are specified in the regulations.
159 Proceedings of exchange or clearing house take precedence over insolvency procedures.
(1)
None of the following shall be regarded as to any extent invalid at law on the ground of inconsistency with the law relating to the distribution of the assets of a person on bankruptcy, winding up or sequestration, or F187in the administration of a company or other body or in the administration of an insolvent estate—
(a)
a market contract,
(b)
the default rules of a recognised investment exchange or recognised clearing house,
(c)
F190(d)
the rules of a recognised central counterparty on which the recognised central counterparty relies to give effect to the transfer of a clearing member client contract, or the settlement of a clearing member client contract or clearing member house contract, in accordance with its default rules,
(e)
a transfer of a clearing member client contract, or the settlement of a clearing member client contract or a clearing member house contract, in accordance with the default rules of a recognised central counterparty,
(f)
where a clearing member client contract transferred in accordance with the default rules of a recognised central counterparty was entered into by the clearing member as principal, a transfer of the client trade or group of client trades corresponding to that clearing member client contract,
(g)
a transfer of a qualifying collateral arrangement in conjunction with the transfer of clearing member client contract as mentioned in paragraph (e) or of a client trade as mentioned in paragraph (f), or
(h)
a qualifying property transfer.
(2)
The powers of a relevant office-holder in his capacity as such, and the powers of the court under the M22Insolvency Act 1986F191, the Bankruptcy (Scotland) Act 1985, Part 10 of the Building Societies Act 1986, Parts 2 and 3 of the Banking Act 2009 or under regulations made under section 233 of that Act, shall not be exercised in such a way as to prevent or interfere with—
(a)
(b)
F197(c)
the transfer of a clearing member client contract, or the settlement of a clearing member client contract or a clearing member house contract, in accordance with the default rules of a recognised central counterparty,
(d)
where a clearing member client contract transferred in accordance with the default rules of a recognised central counterparty was entered into by the clearing member as principal, the transfer of the client trade or group of client trades corresponding to that clearing member contract,
(e)
the transfer of a qualifying collateral arrangement in conjunction with a transfer of a clearing member client contract as mentioned in paragraph (c), or a transfer of a client trade as mentioned in paragraph (d),
(f)
any action taken to give effect to any of the matters mentioned in paragraphs (c) to (e), or
(g)
any action taken to give effect to a qualifying property transfer.
This does not prevent a relevant office-holder from afterwards seeking to recover any amount under section 163(4) or 164(4) or prevent the court from afterwards making any such order or decree as is mentioned in section 165(1) or (2) (but subject to subsections (3) and (4) of that section).
(3)
Nothing in the following provisions of this Part shall be construed as affecting the generality of the above provisions.
(4)
A debt or other liability arising out of a market contract which is the subject of default proceedings may not be proved in a winding up or bankruptcy F198or in the administration of a company or other body, or in Scotland claimed in a winding up or sequestration F198or in the administration of a company or other body, until the completion of the default proceedings.
A debt or other liability which by virtue of this subsection may not be proved or claimed shall not be taken into account for the purposes of any set-off until the completion of the default proceedings.
F199(4A)
However, prior to the completion of default proceedings—
(a)
where it appears to the chairman of the meeting of creditors that a sum will be certified under section 162(1) to be payable, subsection (4) shall not prevent any proof or claim including or consisting of an estimate of that sum which has been lodged or, in Scotland, submitted, from being admitted or, in Scotland, accepted, for the purpose only of determining the entitlement of a creditor to vote at a meeting of creditors; and
(b)
a creditor whose claim or proof has been lodged and admitted or, in Scotland, submitted and accepted, for the purpose of determining the entitlement of a creditor to vote at a meeting of creditors and which has not been subsequently wholly withdrawn, disallowed or rejected, is eligible as a creditor to be a member of a liquidation committee or, in bankruptcy proceedings in England and Wales, F200or in the administration of a company or other body a creditors’ committee.
(5)
For the purposes of F201subsections (4) and (4A) the default proceedings shall be taken to be completed in relation to a person when a report is made under section 162 stating the sum (if any) certified to be due to or from him.
160
(1)
It is the duty of—
(a)
any person who has or had control of any assets of a defaulter, and
(b)
any person who has or had control of any documents of or relating to a defaulter,
to give a recognised investment exchange or recognised clearing house such assistance as it may reasonably require for the purposes of its default proceedings.
This applies notwithstanding any duty of that person under the enactments relating to insolvency.
(2)
A person shall not under this section be required to provide any information or produce any document which he would be entitled to refuse to provide or produce on grounds of legal professional priviledge in proceedings in the High Court or on grounds of confidentiality as between client and professional legal adviser in proceedings in the Court of Session.
(3)
Where original documents are supplied in pursuance of this section, the exchange or clearing house shall return them forthwith after the completion of the relevant default proceedings, and shall in the meantime allow reasonable access to them to the person by whom they were supplied and to any person who would be entitled to have access to them if they were still in the control of the person by whom they were supplied.
(4)
The expenses of a relevant office-holder in giving assistance under this section are recoverable as part of the expenses incurred by him in the discharge of his duties; and he shall not be required under this section to take any action which involves expenses which cannot be so recovered, unless the exchange or clearing house undertakes to meet them.
There shall be treated as expenses of his such reasonable sums as he may determine in respect of time spent in giving the assistance F202and for the purpose of determining the priority in which his expenses are payable out of the assets, sums in respect of time spent shall be treated as his remuneration and other sums shall be treated as his disbursements or, in Scotland, outlays.
(5)
The Secretary of State may by regulations make further provision as to the duties of persons to give assistance to a recognised investment exchange or recognised clearing house for the purposes of its default proceedings, and the duties of the exchange or clearing house with respect to information supplied to it.
The regulations may add to, amend or repeal the provisions of subsections (1) to (4) above.
(6)
In this section “document” includes information recorded in any form.
161 Supplementary provisions as to default proceedings.
(1)
If the court is satisfied on an application by a relevant office-holder that a party to a market contract with a defaulter intends to dissipate or apply his assets so as to prevent the office-holder recovering such sums as may become due upon the completion of the default proceedings, the court may grant such interlocutory relief (in Scotland, such interim order) as it thinks fit.
(2)
A liquidatorF203, administrator or trustee of a defaulter or, in Scotland, a permanent trustee on the sequestrated estate of the defaulter shall not—
(a)
declare or pay any dividend to the creditors, or
(b)
return any capital to contributories,
unless he has retained what he reasonably considers to be an adequate reserve in respect of any claims arising as a result of the default proceedings of the exchange or clearing house concerned.
(3)
The court may on an application by a relevant office-holder make such order as it thinks fit altering or dispensing from compliance with such of the duties of his office as are affected by the fact that default proceedings are pending or could be taken, or have been or could have been taken.
(4)
Nothing in F204section 126, 128, 130, 185 or 285 of, or paragraph F20540, 41, 42 or 43 (F206including those paragraphs as applied by paragraph 44) of Schedule B1 to, the Insolvency Act 1986 (which restrict the taking of certain legal proceedings and other steps), and nothing in any rule of law in Scotland to the like effect as the said section 285, in the Bankruptcy (Scotland) Act M231985 or in the Debtors (Scotland) Act M24 as to the effect of sequestration, shall affect any action taken by an exchange or clearing house for the purpose of its default proceedings.
162 Duty to report on completion of default procedings.
(1)
F207Subject to subsection (1A),a recognised investment exchange or recognised clearing house shall, on the completion of proceedings under its default rules, report to the F208appropriate regulator on its proceedings stating in respect of each creditor or debtor the sum F209or sums certified by them to be payable from or to the defaulter or, as the case may be, the fact that no sum is payable.
F210(1A)
A recognised overseas investment exchange or recognised overseas clearing house shall not be subject to the obligation under subsection (1) unless it has been notified by the F211appropriate regulator that a report is required for the purpose of insolvency proceedings in any part of the United Kingdom.
F212(1B)
The report under subsection (1) need not deal with a clearing member client contract which has been transferred in accordance with the default rules of a recognised central counterparty.
(2)
The exchange or clearing house may make a single report or may make reports from time to time as proceedings are completed with respect to the transactions affecting particular persons.
(3)
The exchange or clearing house shall apply a copy of every report under this section to the defaulter and to any relevant office-holder acting in relation to him or to his estate.
(4)
(5)
An exchange or clearing house shall make available for inspection by a creditor or debtor of the defaulter so much of any report by it under this section as relates to the sum (if any) certified to be due or from him or to the method by which that sum was determined.
(6)
Any such person may require the exchange or clearing house, on payment of such reasonable fee as the exchange or clearing house may determine, to provide him with a copy of any part of a report which he is entitled to inspect.
F217(7)
“The appropriate regulator”—
(a)
in relation to a recognised investment exchange or a recognised overseas investment exchange, means the FCA, and
(b)
in relation to a recognised clearing house or a recognised overseas clearing house, means the Bank of England.
163 Net sum payable on completion of default proceedings.
F218(1)
The following provisions apply with respect to a net sum certified by a recognised investment exchange or recognised clearing house under its default rules to be payable by or to a defaulter.
(2)
If, in England and Wales, a bankruptcyF219, winding-up or administration order has been made, or a resolution for voluntary winding-up has been passed, the debt—
(a)
is provable in the bankruptcyF220, winding up or administration or, as the case may be, is payable to the relevant office-holder, and
(b)
shall be taken into account, where appropriate, under section 323 of the Insolvency Act M251986 (mutual dealings and set-off) or the corresponding provision applicable in the case of winding up F221or administration,
in the same way as a debt before the commencement of the bankruptcy, the date on which the body corporate goes into liquidation (within the meaning of section 247 of the Insolvency Act 1986)F222, or enters administration or, in the case of a partnership, the date of the winding-up order F223or the date on which the partnership enters administration.
(3)
If, in Scotland, an award of sequestration or a winding-up F224or administration order has been made, or a resolution for voluntary winding up has been passed, the debt—
(a)
may be claimed in the sequestrationF225, winding up or administration or, as the case may be, is payable to the relevant office-holder, and
(b)
shall be taken into account for the purposes of any rule of law relating to set-off applicable in sequestrationF226, winding up or administration,
in the same way as a debt due before the date of sequestration (within the meaning of section 73(1) of the M26Bankruptcy (Scotland) Act 1985) or the commencement of the winding up (within the meaning of section 129 of the Insolvency Act 1986) F227or the date on which the body corporate enters administration.
F228(3A)
In subsections (2) and (3), a reference to the making of an administration order shall be taken to include a reference to the appointment of an administrator under—
(a)
paragraph 14 of Schedule B1 to the Insolvency Act 1986 (appointment by holder of qualifying floating charge); or
(b)
paragraph 22 of that Schedule (appointment by company or directors).
(4)
However, where (or to the extent that) a sum is taken into account by virtue of subsection (2)(b) or (3)(b) which arises from a contract entered into at a time when the creditor had notice—
(a)
that a bankruptcy petition or, in Scotland, a petition for sequestration was pending, F229...
(b)
that a meeting of creditors had been summoned under section 98 of the Insolvency Act M271986 or that a winding-up petition was pending, F230or
F231(c)
that an application for an administration order was pending or that any person had given notice of intention to appoint an administrator,
the value of any profit to him arising from the sum being so taken into account (or being so taken into account to that extent) is recoverable from him by the relevant office-holder unless the court directs otherwise.
(5)
Subsection (4) does not apply in relation to a sum arising from a contract effected under the default rules of a recognised investment exchange or recognised clearing house.
(6)
Any sum recoverable by virtue of subsection (4) ranks for priority, in the event of the insolvency of the person from whom it is due, immediately before preferential or, in Scotland, preferred debts.
164 Disclaimer of property, rescission of contracts, &c.
(1)
Sections 178, 186, 315 and 345 of the Insolvency Act 1986 (power to disclaim onerous property and court’s power to order rescission of contracts, &c.) do not apply in relation to—
(a)
a market contract, F232...
F233(aa)
a qualifying collateral arrangement,
(ab)
a transfer of a clearing member client contract, a client trade or a qualifying collateral arrangement, as mentioned in paragraphs (c) to (e) of section 158(1),
(ac)
a qualifying property transfer, or
(b)
a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to market contracts F234or as default fund contribution.
In the application of this subsection in Scotland, the reference to sections 178, 315 and 345 shall be construed as a reference to any rule of law having the like effect as those sections.
(2)
In Scotland, a permanent trustee on the sequestrated estate of a defaulter or a liquidator is bound by any market contract to which that defaulter is a party and by any contract as is mentioned in subsection (1)(b) above notwithstanding section 42 of the M28Bankruptcy (Scotland) Act 1985 or any rule of law to the like effect applying in liquidations.
(3)
Sections 127 and 284 of the Insolvency Act 1986 (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition), and section 32(8) of the Bankruptcy (Scotland) Act 1985 (effect of dealing with debtor relating to estate vested in permanent trustee), do not apply to—
(a)
a market contract, or any disposition of property in pursuance of such a contract,
(b)
the provision of margin in relation to market contracts,
F235(ba)
the provision of default fund contribution to the exchange or clearing house,
F236(bb)
a qualifying collateral arrangement,
(bc)
a transfer of a clearing member client contract, a client trade or a qualifying collateral arrangement, as mentioned in paragraphs (c) to (e) of section 158(1),
(bd)
a qualifying property transfer
(c)
a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to a market contract F237or as default fund contribution, or any disposition of property in pursuance of such a contract, or
(d)
any disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as margin F238or as default fund contribution.
(4)
However, where—
(a)
a market contract is entered into by a person who has notice that a petition has been presented for the winding up or bankruptcy or sequestration of the estate of the other party to the contract, or
(b)
the value of any profit to him arising from the contract or, as the case may be, the amount or value of the margin F240or default fund contribution is recoverable from him by the relevant office-holder unless the court directs otherwise.
F241(5)
Subsection (4)(a) does not apply where the person entering into the contract is a recognised investment exchange or recognised clearing house acting in accordance with its rules, or where the contract is effected under the default rules of such an exchange or clearing house; but subsection (4)(b) applies in relation to the provision of—
(a)
margin in relation to any such contract, unless the contract has been transferred in accordance with the default rules of the central counterparty, or
(b)
default fund contribution.
(6)
Any sum recoverable by virtue of subsection (4) ranks for priority, in the event of the insolvency of the person from whom it is due, immediately before preferential or, in Scotland, preferred debts.
165 Adjustment of prior transactions.
(1)
No order shall be made in relation to a transaction to which this section applies under—
(a)
section 238 or 339 of the Insolvency Act 1986 (transactions at an under-value),
(b)
section 239 or 340 of that Act (preferences), or
(c)
section 423 of that Act (transactions defrauding creditors).
(2)
As respects Scotland, no decree shall be granted in relation to any such transaction—
(a)
under section 34 or 36 of the M29Bankruptcy (Scotland) Act 1985 or section 242 or 243 of the Insolvency Act 1986 (gratuitous alienations and unfair preferences), or
(b)
at common law on grounds of gratuitous alienations or fraudulent preferences.
(3)
This section applies to—
(a)
a market contract to which a recognised investment exchange or recognised clearing house is a party or which is entered into under its default rules, F242...
F243(ab)
a market contract to which this Part applies by virtue of section 155(2B), and
(b)
a disposition of property in pursuance of a market contract referred to in paragraph (a) or (ab).
(4)
Where margin is provided in relation to a market contract and (by virtue of subsection (3)(a)F244, (3)(ab) or otherwise) no such order or decree as is mentioned in subsection (1) or (2) has been, or could be, made in relation to that contract, this section applies to—
(a)
the provision of the margin,
F245(ab)
a qualifying collateral arrangement,
(b)
any contract effected by the exchange or clearing house in question for the purpose of realising the property provided as margin, and
(c)
any disposition of property in accordance with the rules of the exchange or clearing house F246in question as to the application of property provided as margin.
F247(5)
This section also applies to—
(a)
the provision of default fund contribution to a recognised investment exchange or recognised clearing house,
(b)
any contract effected by a recognised investment exchange or recognised clearing house for the purpose of realising the property provided as default fund contribution, F248...
(c)
any disposition of property in accordance with the rules of the recognised investment exchange or recognised clearing house as to the application of property provided as default fund F249contribution,
F250(d)
a transfer of a clearing member client contract, a client trade or a qualifying collateral arrangement as mentioned in paragraphs (c) to (e) of section 158(1), and
(e)
a qualifying property transfer.
166 Powers F251... to give directions.
(1)
The powers conferred by this section are exercisable in relation to a recognised UK investment exchange or F252recognised clearing house.
(2)
Where in any case an exchange or clearing house has not taken action under its default rules—
(a)
(3)
Before giving such a direction the F258appropriate regulator shall consult the exchange or clearing house in question; and F259it shall not give a direction unless F259it is satisfied, in the light of that consultation—
(a)
in the case of a direction to take action, that failure to take action would involve undue risk to investors or other participants in the market, F260...
(b)
in the case of a direction not to take action, that the taking of action would be premature or otherwise undesirable in the interests of investors or other participants in the market,
F261(c)
in either case, that the direction is necessary having regard to the public interest in the stability of the financial system of the United Kingdom, or
(d)
in either case, that the direction is necessary—
(i)
to facilitate a proposed or possible use of a power under Part 1 of the Banking Act 2009 (special resolution regime), or
(ii)
in connection with a particular exercise of a power under that Part.
F262(3A)
The appropriate regulator may give a direction to a relevant office-holder appointed in respect of a defaulting clearing member to take any action, or refrain from taking any action, if the direction is given for the purposes of facilitating—
(a)
the transfer of a clearing member client contract, a client trade or a qualifying collateral arrangement, or
(b)
a qualifying property transfer.
(3B)
The relevant office-holder to whom a direction is given under subsection (3A)—
(a)
must comply with the direction notwithstanding any duty on the relevant office-holder under any enactment relating to insolvency, but
(b)
is not required to comply with the direction given if the value of the clearing member’s estate is unlikely to be sufficient to meet the office-holder’s reasonable expenses of complying.
(3C)
The expenses of the relevant office-holder in complying with a direction of the regulator under subsection (3A) are recoverable as part of the expenses incurred in the discharge of the office-holder’s duties.
(4)
A direction shall specify the grounds on which it is given.
(5)
A direction not to take action may be expressed to have effect until the giving of a further direction (which may be a direction to take action or simply revoking the earlier direction).
(6)
No direction shall be given not to take action if, in relation to the person in question—
(a)
a bankruptcy order or an award of sequestration of his estate has been made, or an interim receiver or interim trustee has been appointed, or
(b)
a winding up order has been made, a resolution for voluntary winding up has been passed or an administrator, administrative receiver or provisional liquidator has been appointed;
and any previous direction not to take action shall cease to have effect on the making or passing of any such order, award or appointment.
(7)
Where an exchange or clearing house has taken or been directed to take action under its default rules, the F263appropriate regulator may direct it to do or not to do such things (being things which it has power to do under its default rules) as are specified in the direction.
F264. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F265(7A)
Where the exchange or clearing house is acting in accordance with a direction under subsection (2)(a) that was given only by virtue of paragraph (a) of subsection (3), the appropriate regulator shall not give a direction under subsection (7) unless it is satisfied that the direction under that subsection will not impede or frustrate the proper and efficient conduct of the default proceedings.
(7B)
Where the exchange or clearing house has taken action under its default rules without being directed to do so, the appropriate regulator shall not give a direction under subsection (7) unless—
(a)
it is satisfied that the direction under that subsection will not impede or frustrate the proper and efficient conduct of the default proceedings, or
(b)
it is satisfied that the direction is necessary—
(i)
having regard to the public interest in the stability of the financial system of the United Kingdom,
(ii)
to facilitate a proposed or possible use of a power under Part 1 of the Banking Act 2009 (special resolution regime), or
(iii)
in connection with a particular exercise of a power under that Part.
(8)
A direction under this section is enforceable, on the application of the F266regulator which gave the direction, by injunction or, in Scotland, by an order under section 45 of the M30Court of Session Act 1988; and where an exchangeF267, a clearing house or a relevant office-holder has not complied with a direction, the court may make such order as it thinks fit for restoring the position to what it would have been if the direction had been complied with.
F268(9)
“The appropriate regulator”—
(a)
in relation to a recognised UK investment exchange, means the FCA, and
(b)
in relation to a F269recognised clearing house, means the Bank of England.
167 Application to determine whether default proceedings to be taken.
F270(1)
This section applies where a relevant insolvency event has occurred in the case of—
(a)
a recognised investment exchange or a member or designated non-member of a recognised investment exchange, or
(b)
a recognised clearing house or a member of a recognised clearing house.
The investment exchange, member, designated non-member or clearing house in whose case a relevant insolvency event has occurred is referred to below as “the person in default”.
(1A)
For the purposes of this section a “relevant insolvency event” occurs where—
(a)
a bankruptcy order is made,
(b)
an award of sequestration is made,
(c)
an order appointing an interim receiver is made,
(d)
an administration or winding up order is made,
(e)
an administrator is appointed under paragraph 14 of Schedule B1 to the Insolvency Act 1986 (appointment by holder of qualifying floating charge) or under paragraph 22 of that Schedule (appointment by company or directors),
(f)
a resolution for voluntary winding up is passed, or
(g)
an order appointing a provisional liquidator is made.
(1B)
Where in relation to a person in default a recognised investment exchange or a recognised clearing house (“the responsible exchange or clearing house”)—
(a)
has power under its default rules to take action in consequence of the relevant insolvency event or the matters giving rise to it, but
(b)
has not done so,
a relevant office-holder appointed in connection with or in consequence of the relevant insolvency event may apply to the F271appropriate regulator.
(2)
The application shall specify F272the responsible exchange or clearing house and the grounds on which it is made.
(3)
On receipt of the application the F273appropriate regulator shall notify F274the responsible exchange or clearing house, and unless within three business days after the day on which the notice is received F274the responsible exchange or clearing house—
(a)
takes action under its default rules, or
(b)
notifies the F273appropriate regulator that it proposes to do so forthwith,
then, subject as follows, the provisions of sections 158 to 165 above do not apply in relation to market contracts to which F275the person in default is a party or to anything done by F274the responsible exchange or clearing house for the purposes of, or in connection with, the settlement of any such contract.
For this purpose a “business day” means any day which is not a Saturday or Sunday, Christmas Day, Good Friday or a bank holiday in any part of the United Kingdom under the M31Banking and Financial Dealings Act 1971.
(4)
The provisions of sections 158 to 165 are not disapplied if before the end of the period mentioned in subsection (3) the F276appropriate regulator gives F277the responsible exchange or clearing house a direction under section 166(2)(a) (direction to take action under default rules).
No such direction may be given after the end of that period.
(5)
If F278the responsible exchange or clearing house notifies the F279appropriate regulator that it proposes to take action under its default rules forthwith, it shall do so; and that duty is enforceable, on the application of the F279appropriate regulator, by injunction or, in Scotland, by an order under section 45 of the M32Court of Session Act 1988.
F280(6)
“The appropriate regulator”—
(a)
in relation to a responsible investment exchange, means the FCA, and
(b)
in relation to a responsible clearing house, means the Bank of England.
F281168. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
169 Supplementary provisions.
F282(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
F283Sections 296 and 297 of the Financial Services and Markets Act 2000 apply in relation to a failure by a recognised investment exchange or recognised clearing house to comply with an obligation under this Part as to a failure to comply with an obligation under that Act.
(3)
Where the recognition of an investment exchange or clearing house is revoked under the F284Financial Services and Markets Act 2000, the appropriate authority may, before or after the revocation order, give such directions as F285it thinks fit with respect to the continued application of the provisions of this Part, with such exceptions, additions and adaptations as may be specified in the direction, in relation to cases where a relevant event of any description specified in the directions occurred before the revocation order takes effect.
F286(3A)
“The appropriate authority” means—
(a)
in the case of an overseas investment exchange or clearing house, the Treasury;
F287(b)
in the case of a UK investment exchange, the FCA, and
(c)
in the case of a UK clearing house, the Bank of England.
F282(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
F288Regulations under section 414 of the Financial Services and Markets Act 2000 (service of notices) may make provision in relation to a notice, direction or other document required or authorised by or under this Part to be given to or served on any person other than the F289TreasuryF290, the FCA or the Bank of England.
Other exchanges and clearing houses
170 Certain overseas exchanges and clearing houses.
F291(1)
The Secretary of State and the Treasury may by regulations provide that this Part applies in relation to contracts connected with an overseas investment exchange or overseas clearing house which—
(a)
is not a recognised investment exchange or recognised clearing house, but
(b)
is approved by the Treasury in accordance with such requirements as may be so specified,
as it applies in relation to contracts connected with a recognised investment exchange or recognised clearing house.
(2)
The F292Treasury shall not approve an overseas investment exchange or clearing house unless F293they are satisfied—
(a)
that the rules and practices of the body, together with the law of the country in which the body’s head office is situated, provide adequate procedures for dealing with the default of persons party to contracts connected with the body, and
(b)
that it is otherwise appropriate to approve the body.
(3)
The reference in subsection (2)(a) to default is to a person being unable to meet his obligations.
(4)
The regulations may apply in relation to the approval of a body under this section such of the provisions of the F294Financial Services and Markets Act 2000 as the Secretary of State considers appropriate.
(5)
The Secretary of State may make regulations which, in relation to a body which is so approved—
(a)
apply such of the provisions of the F294Financial Services and Markets Act 2000 as the Secretary of State considers appropriate, and
(b)
provide that the provisions of this Part apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient;
and different provision may be made with respect to different bodies or descriptions of body.
(6)
Where the regulations apply any provisions of the F294Financial Services and Markets Act 2000, they may provide that those provisions apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.
F295170A.EEA central counterparties and third country central counterparties
(1)
In this section and section 170B—
(a)
“assets” has the meaning given by Article 39(10) of the EMIR Level 1 Regulation;
(b)
“EBA” means the European Banking Authority established by Regulation 1093/2010/EU of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority);
(c)
“ESMA” means the European Securities and Markets Authority established by Regulation 1095/2010/EU of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority);
(d)
“overseas competent authority” means a competent authority responsible for the authorisation or supervision of clearing houses or central counterparties in a country or territory other than the United Kingdom;
(e)
“relevant provisions” means any provisions of the default rules of an EEA central counterparty or third country central counterparty which—
(i)
provide for the transfer of the positions or assets of a defaulting clearing member;
(ii)
are not necessary for the purposes of complying with the minimum requirements of Articles 48(5) and (6) of the EMIR Level 1 Regulation; and
(iii)
may be relevant to a question falling to be determined in accordance with the law of a part of the United Kingdom;
(f)
“relevant requirements” means the requirements specified in paragraph 34(2) (portability of accounts: default rules going beyond requirements of EMIR) of Part 6 of the Schedule to the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001;
(g)
“UK clearing member” means a clearing member to which the law of a part of the United Kingdom will apply for the purposes of an insolvent reorganisation or winding up.
(2)
This Part applies to transactions cleared through an EEA central counterparty or a third country central counterparty by a UK clearing member as it applies to transactions cleared through a recognised central counterparty, but subject to the modifications in subsections (3) to (5).
(3)
“Change in default rules157.
(1)
An EEA central counterparty or a third country central counterparty in respect of which an order under section 170B(4) has been made and not revoked must give the Bank of England at least three months’ notice of any proposal to amend, revoke or add to its default rules.
(2)
The Bank of England may, if it considers it appropriate to do so, agree a shorter period of notice.
(3)
Where notice is given to the Bank of England under subsection (1) an EEA central counterparty or third country central counterparty must provide the Bank of England with such information, documents and reports as the Bank of England may require.
(4)
Information, documents and reports required under subsection (3) must be provided in English and be given at such times, in such form and at such place, and verified in such a manner, as the Bank of England may direct.”.
(4)
Section 162 does not apply to an EEA central counterparty or a third country central counterparty unless it has been notified by the Bank of England that a report under that section is required for the purposes of insolvency proceedings in any part of the United Kingdom.
(5)
In relation to an EEA central counterparty or third country central counterparty, references in this Part to the “rules” or “default rules” of the central counterparty are to be taken not to include references to any relevant provisions unless—
(a)
the relevant provisions satisfy the relevant requirements; or
(b)
the Bank of England has made an order under section 170B(4) recognising that the relevant provisions of its default rules satisfy the relevant requirements and the order has not been revoked.
170B.EEA central counterparties and third country central counterparties: procedure
(1)
An EEA central counterparty or third country central counterparty may apply to the Bank of England for an order recognising that the relevant provisions of its default rules satisfy the relevant requirements.
(2)
The application must be made in such manner, and must be accompanied by such information, documents and reports, as the Bank of England may direct.
(3)
Information, documents and reports required under subsection (2) must be provided in English and be given at such times, in such form and at such place, and verified in such manner, as the Bank of England may direct.
(4)
The Bank of England may make an order recognising that the relevant provisions of the default rules satisfy the relevant requirements.
(5)
The Bank of England may by order revoke an order made under subsection (4) if—
(a)
the EEA central counterparty or third country central counterparty consents;
(b)
the EEA central counterparty or third country central counterparty has failed to pay a fee which is owing to the Bank of England under paragraph 36 of Schedule 17A to the Financial Services and Markets Act 2000;
(c)
the EEA central counterparty or third country central counterparty is failing or has failed to comply with a requirement of or imposed under section 157 (as modified by section 170A(3)); or
(d)
it appears to the Bank of England that the relevant provisions no longer satisfy the relevant requirements.
(6)
An order made under subsection (4) or (5) must state the time and date when it is to have effect.
(7)
An order made under subsection (5) may contain such transitional provision as the Bank of England considers appropriate.
(8)
The Bank of England must—
(a)
maintain a register of orders made under subsection (4) which are in force; and
(b)
publish the register in such manner as it appears to the Bank of England to be appropriate.
(9)
Section 298 of the Financial Services and Markets Act 2000 applies to a refusal to make an order under subsection (4) or the making of a revocation order under subsection (5)(b), (c) or (d) as it applies to the making of a revocation order under section 297(2) of the Financial Services and Markets Act 2000, but with the following modifications—
(a)
for “appropriate regulator” substitute “the Bank of England”;
(b)
for “recognised body” substitute “EEA central counterparty or third country central counterparty”; and
(c)
in subsection (7), for “give a direction under section 296” substitute “make an order under paragraph (b), (c) or (d) of section 170B(5) of the Companies Act 1989”.
(10)
If the Bank of England refuses to make an order under subsection (4) or makes an order under subsection (5)(b), (c) or (d), the EEA central counterparty or third country central counterparty may refer the matter to the Upper Tribunal.
(11)
The Bank of England may rely on information or advice from an overseas competent authority, the EBA or ESMA in its determination of an application under subsection (1) or the making of a revocation order under subsection (5)(d).
F296171. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
172 Settlement arrangements provided by the Bank of England.
(1)
The Secretary of State may by regulations provide that this Part applies to contracts of any specified description in relation to which settlement arrangements are provided by the Bank of England, as it applies to contracts connected with a recognised investment exchange or recognised clearing house.
(2)
Regulations under this section may provide that the provisions of this Part apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.
(3)
Before making any regulations under this section, the Secretary of State F297and the Treasury shall consult the Bank of England.
Market charges
173 Market charges.
(1)
In this Part “market charge” means a charge, whether fixed or floating, granted—
(a)
in favour of a recognised investment exchange, for the purpose of securing debts or liabilities arising in connection with the settlement of market contracts,
F298(aa)
in favour of The Stock Exchange, for the purpose of securing debts or liabilities arising in connection with short term certificates;
(b)
in favour of a recognised clearing house, for the purpose of securing debts or liabilities arising in connection with their ensuring the performance of market contracts, or
(c)
in favour of a person who agrees to make payments as a result of the transfer F299or allotment of specified securities made through the medium of a computer-based system established by the Bank of England and The Stock Exchange, for the purpose of securing debts or liabilities of the transferee F299or allottee arising in connection therewith.
(2)
Where a charge is granted partly for purposes specified in subsection (1)(a), F300(aa), (b) or (c) and partly for other purposes, it is a “market charge” so far as it has effect for the specified purposes.
(3)
F301In subsection (1)—
“short term certificate” means an instrument issued by The Stock Exchange undertaking to procure the transfer of property of a value and description specified in the instrument to or to the order of the person to whom the instrument is issued or his endorsee or to a person acting on behalf of either of them and also undertaking to make appropriate payments in cash, in the event that the obligation to procure the transfer of property cannot be discharged in whole or in part;
“specified securities” means securities for the time being specified in the list in Schedule 1 to the M33Stock Transfer Act 1982, and includes any right to such securities; and
“transfer”, in relation to any such securities or right, means a transfer of the beneficial interest.
(4)
The Secretary of State may by regulations make further provision as to the charges granted in favour of any such person as is mentioned in subsection (1)(a), (b) or (c) which are to be treated as “market charges” for the purposes of this Part; and the regulations may add to, amend or repeal the provisions of subsections (1) to (3) above.
(5)
The regulations may provide that a charge shall or shall not be treated as a market charge if or to the extent that it secures obligations of a specified description, is a charge over property of a specified description or contains provisions of a specified description.
(6)
Before making regulations under this section in relation to charges granted in favour of a person within subsection (1)(c), the Secretary of State F302and the Treasury shall consult the Bank of England.
174 Modifications of the law of insolvency.
(1)
The general law of insolvency has effect in relation to market charges and action taken in enforcing them subject to the provisions of section 175.
(2)
The Secretary of State may by regulations make further provision modifying the law of insolvency in relation to the matters mentioned in subsection (1).
(3)
The regulations may add to, amend or repeal the provisions mentioned in subsection (1), and any other provision of this Part as it applies for the purposes of those provisions, or provide that those provisions have effect with such exceptions, additions or adaptations as are specified in the regulations.
(4)
The regulations may make different provision for cases defined by reference to the nature of the charge, the nature of the property subject to it, the circumstances, nature or extent of the obligations secured by it or any other relevant factor.
(5)
Before making regulations under this section in relation to charges granted in favour of a person within section 173(1)(c), the Secretary of State F303and the Treasury shall consult the Bank of England.
175 Administration orders, &c.
F304(1)
The following provisions of Schedule B1 to the Insolvency Act 1986 (administration) do not apply in relation to a market charge—
(a)
paragraph 43(2) and (3) (restriction on enforcement of security or repossession of goods) (including that provision as applied by paragraph 44 (interim moratorium)), and
(b)
paragraphs 70, 71 and 72 (power of administrator to deal with charged or hire-purchase property).
(1A)
Paragraph 41(2) of that Schedule (receiver to vacate office at request of administrator) does not apply to a receiver appointed under a market charge.
(2)
However, where a market charge falls to be enforced after F305the occurrence of an event to which subsection (2A) applies, and there exists another charge over some or all of the same property ranking in priority to or pari passu with the market charge, F306on the application of any person interested the court may order that there shall be taken after enforcement of the market charge such steps as the court may direct for the purpose of ensuring that the chargee under the other charge is not prejudiced by the enforcement of the market charge.
F307(2A)
This subsection applies to—
(a)
making an administration application under paragraph 12 of Schedule B1 to the Insolvency Act 1986,
(b)
appointing an administrator under paragraph 14 or 22 of that Schedule (appointment by floating charge holder, company or directors),
(c)
filing with the court a copy of notice of intention to appoint an administrator under either of those paragraphs.
(3)
The following provisions of the Insolvency Act 1986 (which relate to the powers of receivers) do not apply in relation to a market charge—
(a)
section 43 (power of administrative receiver to dispose of charged property), and
(b)
section 61 (power of receiver in Scotland to dispose of an interest in property).
(4)
Sections 127 and 284 of the Insolvency Act 1986 (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition), and section 32(8) of the M34Bankruptcy (Scotland) Act 1985 (effect of dealing with debtor relating to estate vested in permanent trustee), do not apply to a disposition of property as a result of which the property becomes subject to a market charge or any transaction pursuant to which that disposition is made.
F308(5)
However, if a person who is party to a disposition mentioned in subsection (4) has notice at the time of the disposition that a petition has been presented for the winding up or bankruptcy or sequestration of the estate of the party making the disposition, the value of any profit to him arising from the disposition is recoverable from him by the relevant office-holder unless—
(a)
the person is a chargee under the market charge,
(b)
the disposition is made in accordance with the default rules of a recognised central counterparty for the purposes of transferring a position or asset of a clearing member in default, or
(c)
the court directs otherwise.
F309(5A)
In subsection (5)(b), “asset” has the meaning given by Article 39(10) of the EMIR Level 1 Regulation.
(6)
Any sum recoverable by virtue of subsection (5) ranks for priority, in the event of the insolvency of the person from whom it is due, immediately before preferential or, in Scotland, preferred debts.
(7)
In a case falling within both subsection (4) above (as a disposition of property as a result of which the property becomes subject to a market charge) and section 164(3) (as the provision of margin in relation to a market contract), section 164(4) applies with respect to the recovery of the amount or value of the margin and subsection (5) above does not apply.
176 Power to make provision about certain other charges.
(1)
The Secretary of State may by regulations provide that the general law of insolvency has effect in relation to charges of such descriptions as may be specified in the regulations, and action taken in enforcing them, subject to such provisions as may be specified in the regulations.
(2)
The regulations may specify any description of charge granted in favour of—
(a)
a body approved under section 170 (certain overseas exchanges and clearing houses),
(b)
(c)
the Bank of England,
F312(d)
a person who has permission under F313Part 4A of the Financial Services and Markets Act 2000 to carry on a relevant regulated activity, or
(e)
an international securities self-regulating organisation approved for the purposes of an order made under section 22 of the Financial Services and Markets Act 2000,
for the purpose of securing debts or liabilities arising in connection with or as a result of the settlement of contracts or the transfer of assets, rights or interests on a financial market.
(3)
The regulations may specify any description of charge granted for that purpose in favour of any other person in connection with exchange facilities or clearing services provided by a recognised investment exchange or recognised clearing house or by any such body, person, authority or organisation as is mentioned in subsection (2).
(4)
Where a charge is granted partly for the purpose specified in subsection (2) and partly for other purposes, the power conferred by this section is exercisable in relation to the charge so far as it has effect for that purpose.
(5)
The regulations may—
(a)
make the same or similar provision in relation to the charges to which they apply as is made by or under sections 174 and 175 in relation to market charges, or
(b)
apply any of those provisions with such exceptions, additions or adaptations as are specified in the regulations.
F314(6)
Before making regulations under this section relating to a description of charges defined by reference to their being granted in favour of a person included in the list maintained by the F315. . . F316Bank of England for the purposes of F317section 301 of the Financial Services and Markets Act 2000, or in connection with exchange facilities or clearing services provided by a person included in that list, the Secretary of State and the Treasury shall consult the F318FCA and the Bank of England.
(6A)
Before making regulations under this section relating to a description of charges defined by reference to their being granted in favour of the Bank of England, or in connection with settlement arrangements provided by the Bank, the Secretary of State and the Treasury shall consult the Bank.
(7)
Regulations under this section may provide that they apply or do not apply to a charge if or to the extent that it secures obligations of a specified description, is a charge over property of a specified description or contains provisions of a specified description.
F319(8)
For the purposes of subsection (2)(d), “relevant regulated activity” means—
(a)
dealing in investments as principal or as agent;
(b)
arranging deals in investments;
F320(ba)
operating a multilateral trading facility;
(c)
managing investments;
(d)
safeguarding and administering investments;
(e)
sending dematerialised instructions; F321...
F322(ea)
managing a UCITS;
(eb)
acting as trustee or depositary of a UCITS;
(ec)
managing an AIF;
(ed)
acting as trustee or depositary of an AIF; or
(f)
establishing etc. a collective investment scheme.
(9)
Subsection (8) must be read with—
(a)
section 22 of the Financial Services and Markets Act 2000;
(b)
any relevant order under that section; and
(c)
Schedule 2 to that Act.
Market property
177 Application of margin F323or default fund contribution not affected by certain other interests.
(1)
The following provisions have effect with respect to the application by a recognised investment exchange or recognised clearing house of property (other than land) held by the exchange or clearing house as margin in relation to a market contract F324or as default fund contribution.
(2)
So far as necessary to enable the property to be applied in accordance with the rules of the exchange or clearing house, it may be so applied notwithstanding any prior equitable interest or right, or any right or remedy arising from a breach of fiduciary duty, unless the exchange or clearing house had notice of the interest, right or breach of duty at the time the property was provided as margin F325or as default fund contribution.
(3)
No right or remedy arising subsequently to the property being provided as margin F326or as default fund contribution may be enforced so as to prevent or interfere with the application of the property by the exchange or clearing house in accordance with its rules.
(4)
Where an exchange or clearing house has power by virtue of the above provisions to apply property notwithstanding an interest, right or remedy, a person to whom the exchange or clearing house disposes of the property in accordance with its rules takes free from that interest, right or remedy.
178 Priority of floating market charge over subsequent charges.
(1)
The Secretary of State may by regulations provide that a market charge which is a floating charge has priority over a charge subsequently created or arising, including a fixed charge.
(2)
The regulations may make different provision for cases defined, as regards the market charge or the subsequent charge, by reference to the description of charge, its terms, the circumstances in which it is created or arises, the nature of the charge, the person in favour of whom it is granted or arises or any other relevant factor.
179 Priority of market charge over unpaid vendor’s lien.
Where property subject to an unpaid vendor’s lien becomes subject to a market charge, the charge has priority over the lien unless the chargee had actual notice of the lien at the time the property became subject to the charge.
180 Proceedings against market property by unsecured creditors.
(1)
Where property (other than land) is held by a recognised investment exchange or recognised clearing house as margin in relation to market contracts F327or as default fund contribution, or is subject to a market charge, no execution or other legal process for the enforcement of a judgment or order may be commenced or continued, and no distress may be levied, against the property by a person not seeking to enforce any interest in or security over the property, except with the consent of—
(a)
in the case of property provided as cover for margin F328or as default fund contribution, the investment exchange or clearing house in question, or
(b)
in the case of property subject to a market charge, the person in whose favour the charge was granted.
(2)
Where consent is given the proceedings may be commenced or continued notwithstanding any provision of the M35Insolvency Act 1986 or the M36Bankruptcy (Scotland) Act 1985.
(3)
Where by virtue of this section a person would not be entitled to enforce a judgment or order against any property, any injunction or other remedy granted with a view to facilitating the enforcement of any such judgment or order shall not extend to that property.
(4)
In the application of this section to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied shall be omitted.
181 Power to apply provisions to other cases.
(1)
F329A power to which this subsection applies includes the power to apply sections 177 to 180 to any description of property provided as cover for margin in relation to contracts in relation to which the power is exercised or, as the case may be, property subject to charges in relation to which the power is exercised.
(2)
The regulations may provide that those sections apply with such exceptions, additions and adaptations as may be specified in the regulations.
F330(3)
Subsection (1) applies to the powers of the Secretary of State and the Treasury to act jointly under—
(a)
sections 170, 172 and 176 of this Act; and
(b)
section 301 of the Financial Services and Markets Act 2000 (supervision of certain contracts).
Supplementary provisions
182 Powers of court in relation to certain proceedings begun before commencement.
(1)
The powers conferred by this section are exercisable by the court where insolvency proceedings in respect of—
(a)
a member of a recognised investment exchange or a recognised clearing house, or
(b)
a person by whom a market charge has been granted,
are begun on or after 22nd December 1988 and before the commencement of this section.
That person is referred to in this section as “the relevant person”.
(2)
For the purposes of this section “insolvency proceedings” means proceedings under Part II, IV, V or IX of the M37Insolvency Act 1986 (administration, winding up and bankruptcy) or under the M38Bankruptcy (Scotland) Act 1985; and references in this section to the beginning of such proceedings are to—
(a)
the presentation of a petition on which an administration order, winding-up order, bankruptcy order or award of sequestration is made, or
(b)
the passing of a resolution for voluntary winding up.
(3)
This section applies in relation to—
(a)
in England and Wales, the administration of the insolvent estate of a deceased person, and
(b)
in Scotland, the administration by a judicial factor appointed under section 11A of the M39Judicial Factors (Scotland) Act 1889 of the insolvent estate of a deceased person,
as it applies in relation to insolvency proceedings.
In such a case references to the beginning of the proceedings shall be construed as references to the death of the relevant person.
(4)
The court may on an application made, within three months after the commencement of this section, by—
(a)
a recognised investment exchange or recognised clearing house, or
(b)
a person in whose favour a market charge has been granted,
make such order as it thinks fit for achieving, except so far as assets of the relevant person have been distributed before the making of the application, the same result as if the provisions of Schedule 22 had come into force on 22nd December 1988.
(5)
The provisions of that Schedule (“the relevant provisions”) reproduce the effect of certain provisions of this Part as they appeared in the Bill for this Act as introduced into the House of Lords and published on that date.
(6)
The court may in particular—
(a)
require the relevant person or a relevant office-holder—
(i)
to return property provided as cover for margin or which was subject to a market charge, or to pay to the applicant or any other person the proceeds of realisation of such property, or
(ii)
to pay to the applicant or any other person such amount as the court estimates would have been payable to that person if the relevant provisions had come into force on 22nd December 1988 and market contracts had been settled in accordance with the rules of the recognised investment exchange or recognised clearing house, or a proportion of that amount if the property of the relevant person or relevant office-holder is not sufficient to meet the amount in full;
(b)
provide that contracts, rules and dispositions shall be treated as not having been void;
(c)
modify the functions of a relevant office-holder, or the duties of the applicant or any other person, in relation to the insolvency proceedings, or indemnify any such person in respect of acts or omissions which would have been proper if the relevant provisions had been in force;
(d)
provide that conduct which constituted an offence be treated as not having done so;
(e)
dismiss proceedings which could not have been brought if the relevant provisions had come into force on 22nd December 1988, and reverse the effect of any order of a court which could not, or would not, have been made if those provisions had come into force on that date.
(7)
An order under this section shall not be made against a relevant office-holder if the effect would be that his remuneration, costs and expenses could not be met.
F331182A.Recognised central counterparties: disapplication of provisions on mutual credit and set-off
(1)
Nothing in the law of insolvency shall enable the setting off against each other of—
(a)
positions and assets recorded in an account at a recognised central counterparty and held for the account of a client, an indirect client or a group of clients or indirect clients in accordance with Article 39 of the EMIR Level 1 Regulation or Article 3(1) of the EMIR Level 2 Regulation; and
(b)
positions and assets recorded in any other account at the recognised central counterparty.
183 Insolvency proceedings in other jurisdictions.
(1)
The references to insolvency law in section 426 of the M40Insolvency Act 1986 (co-operation with courts exercising insolvency jurisdiction in other jurisdictions) include, in relation to a part of the United Kingdom, the provisions made by or under this Part and, in relation to a relevant country or territory within the meaning of that section, so much of the law of that country or territory as corresponds to any provisions made by or under this Part.
(2)
A court shall not, in pursuance of that section or any other enactment or rule of law, recognise or give effect to—
(a)
any order of a court exercising jurisdiction in relation to insolvency law in a country or territory outside the United Kingdom, or
(b)
any act of a person appointed in such a country or territory to discharge any functions under insolvency law,
in so far as the making of the order or the doing of the act would be prohibited in the case of a court in the United Kingdom or a relevant office-holder by provisions made by or under this Part.
(3)
Subsection (2) does not affect the recognition or enforcement of a judgment required to be recognised or enforced under or by virtue of the M41Civil Jurisdiction and Judgments Act 1982 F332or Council Regulation (EC) No. 44/2001 of 22nd December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial mattersF333, as amended from time to time and as applied by the Agreement made on 19th October 2005 between the F334European Union and the Kingdom of Denmark on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJNo. L 299 16.11.2005 at p62) .
184 Indemnity for certain acts, &c.
(1)
Where a relevant office-holder takes any action in relation to property of a defaulter which is liable to be dealt with in accordance with the default rules of a recognised investment exchange or recognised clearing house, and believes and has reasonable grounds for believing that he is entitled to take that action, he is not liable to any person in respect of any loss or damage resulting from his action except in so far as the loss or damage is caused by the office-holder’s own negligence.
(2)
Any failure by a recognised investment exchange or recognised clearing house to comply with its own rules in respect of any matter shall not prevent that matter being treated for the purposes of this Part as done in accordance with those rules so long as the failure does not substantially affect the rights of any person entitled to require compliance with the rules.
(3)
No recognised investment exchange or recognised clearing house, nor any officer or servant or member of the governing body of a recognised investment exchange or recognised clearing house, shall be liable in damages for anything done or omitted in the discharge or purported discharge of any functions to which this subsection applies unless the act or omission is shown to have been in bad faith.
(4)
The functions to which subsection (3) applies are the functions of the exchange or clearing house so far as relating to, or to matters arising out of—
(a)
its default rules, or
(b)
any obligations to which it is subject by virtue of this Part.
(5)
No person F335to whom the exercise of any function of a recognised investment exchange or recognised clearing house is delegated under its default rules, nor any officer or servant of such a person, shall be liable in damages for anything done or omitted in the discharge or purported discharge of those functions unless the act or omission is shown to have been in bad faith.
185 Power to make further provision by regulations.
(1)
The Secretary of State may by regulations make such further provision as appears to him necessary or expedient for the purposes of this Part.
(2)
Provision may, in particular, be made—
(a)
for integrating the provisions of this Part with the general law of insolvency, and
(b)
for adapting the provisions of this Part in their application to overseas investment exchanges and clearing houses.
(3)
Regulations under this section may add to, amend or repeal any of the provisions of this Part or provide that those provisions have effect subject to such additions, exceptions or adaptations as are specified in the regulations.
F336(4)
References in this section to the provisions of this Part include any provision made under section 301 of the Financial Services and Markets Act 2000.
186 Supplementary provisions as to regulations.
(1)
Regulations under this Part may make different provision for different cases and may contain such incidental, transitional and other supplementary provisions as appear to the Secretary of State to be necessary or expedient.
(2)
Regulations under this Part shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
187 Construction of references to parties to market contracts.
(1)
Where a person enters into market contracts in more than one capacity, the provisions of this Part apply (subject as follows) as if the contracts entered into in each different capacity were entered into by different persons.
(2)
References in this Part to a market contract to which a person is a party include (subject as follows, and unless the context otherwise requires) contracts to which he is party as agent.
F337(2A)
Subsections (1) and (2) do not apply to market contracts to which this Part applies by virtue of section 155(2B).
(3)
The Secretary of State may by regulations—
(a)
modify or exclude the operation of subsections (1) and (2), and
(b)
make provision as to the circumstances in which a person is to be regarded for the purposes of those provisions as acting in different capacities.
188 Meaning of “default rules” and related expressions.
(1)
In this Part “default rules” means rules of a recognised investment exchange or recognised clearing house which provide for the taking of action in the event of a person F338(including another recognised investment exchange or recognised clearing house) appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts F339connected with the exchange or clearing house, and in the case of a recognised central counterparty, “default rules” includes the default procedures referred to in Article 48 of the EMIR Level 1 Regulation.
(2)
References in this Part to a “defaulter” are to a person in respect of whom action has been taken by a recognised investment exchange or recognised clearing house under its default rules, whether by declaring him to be a defaulter or otherwise; and references in this Part to “default”F340, “defaulting” and “non-defaulting” shall be construed accordingly.
(3)
In this Part “default proceedings” means proceedings taken by a recognised investment exchange or recognised clearing house under its default rules.
F341(3A)
In this Part “default fund contribution” means—
(a)
contribution by a member or designated non-member of a recognised investment exchange to a fund which—
(i)
is maintained by that exchange for the purpose of covering losses arising in connection with defaults by any of the members of the exchange, or defaults by any of the members or designated non-members of the exchange, and
(ii)
may be applied for that purpose under the default rules of the exchange;
(b)
contribution by a member of a recognised clearing house to a fund which—
(i)
is maintained by that clearing house for the purpose of covering losses arising in connection with defaults by any of the members of the clearing house, and
(ii)
may be applied for that purpose under the default rules of the clearing house;
(c)
contribution by a recognised clearing house to a fund which—
(i)
is maintained by a recognised investment exchange or another recognised clearing house (A) for the purpose of covering losses arising in connection with defaults by recognised clearing houses or recognised investment exchanges other than A or by any of their members, and
(ii)
may be applied for that purpose under A’s default rules; or
(d)
contribution by a recognised investment exchange to a fund which—
(i)
is maintained by a recognised clearing house or another recognised investment exchange (A) for the purpose of covering losses arising in connection with defaults by recognised investment exchanges or recognised clearing houses other than A or by any of their members, and
(ii)
may be applied for that purpose under A’s default rules.
(4)
If an exchange or clearing house takes action under its default rules in respect of a person, all subsequent proceedings under its rules for the purposes of or in connection with the settlement of market contracts to which the defaulter is a party shall be treated as done under its default rules.
189 Meaning of “relevant office-holder”.
(1)
The following are relevant office-holders for the purposes of this Part—
(a)
the official receiver,
(b)
any person acting in relation to a company as its liquidator, provisional liquidator, administrator or administrative receiver,
(c)
any person acting in relation to an individual (or, in Scotland, any debtor within the meaning of the M42Bankruptcy (Scotland) Act 1985) as his trustee in bankruptcy or interim receiver of his property or as permanent or interim trustee in the sequestration of his estate,
(d)
any person acting as administrator of an insolvent estate of a deceased person.
(2)
In subsection (1)(b) “company” means any company, society, association, partnership or other body which may be wound up under the M43Insolvency Act 1986.
190 Minor definitions.
(1)
In this Part—
“administrative receiver” has the meaning given by section 251 of the Insolvency Act 1986;
F342. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“charge” means any form of security, including a mortgage and, in Scotland, a heritable security;
F343. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F344“clearing member” , in relation to a recognised central counterparty, has the meaning given by Article 2(14) of the EMIR Level 1 Regulation;
F344“client” has the meaning given by Article 2(15) of the EMIR Level 1 Regulation;
F344“EMIR Level 1 Regulation” means Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories;
F344“EMIR Level 2 Regulation” means Commission Delegated Regulation (EU) No 149/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 with regard to regulatory technical standards on indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, risk mitigation for OTC derivatives contracts not cleared by a CCP;
F345“the FCA” means the Financial Conduct Authority;
F344“indirect client” has the meaning given by Article 1(a) of the EMIR Level 2 Regulation;
“interim trustee” and “permanent trustee” have the same meaning as in the Bankruptcy (Scotland) Act 1985;
F343. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F344“member of a clearing house” includes a clearing member of a recognised central counterparty;
“overseas”, in relation to an investment exchange or clearing house, means having its head office outside the United Kingdom;
F344“position” has the same meaning as in the EMIR Level 1 Regulation;
F346“the PRA” means the Prudential Regulation Authority;
F347“recognised central counterparty”, “recognised clearing house” and “recognised investment exchange” have the same meaning as in the Financial Services and Markets Act 2000;
F343. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“set-off”, in relation to Scotland, includes compensation;
F348“The Stock Exchange” means the London Stock Exchange Limited;
F349“UK”, in relation to an investment exchange, means having its head office in the United Kingdom.
F350(2)
References in this Part to settlement—
(a)
mean, in relation to a market contract, the discharge of the rights and liabilities of the parties to the contract, whether by performance, compromise or otherwise;
(b)
include, in relation to a clearing member client contract or a clearing member house contract, a reference to its liquidation for the purposes of Article 48 of the EMIR Level 1 Regulation.
(3)
In this Part the expressions “margin” and “cover for margin” have the same meaning.
F351(3A)
In this Part, a reference to a transfer of a clearing member client contract or a client trade includes—
(a)
an assignment;
(b)
a novation; and
(c)
closing out or terminating the clearing member client contract or client trade and establishing an equivalent position between different parties;
and a reference to a transfer of a qualifying collateral arrangement includes an assignment or a novation.
F352(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
For the purposes of this Part a person shall be taken to have notice of a matter if he deliberately failed to make enquiries as to that matter in circumstances in which a reasonable and honest person would have done so.
This does not apply for the purposes of a provision requiring “actual notice”.
F353(6)
References in this Part to the law of insolvency—
(a)
include references to every provision made by or under the Insolvency Act 1986 or the Bankruptcy (Scotland) Act 1985; and in relation to a building society references to insolvency law or to any provision of the Insolvency Act 1986 are to that law or provision as modified by the Building Societies Act 1986;
(b)
are also to be interpreted in accordance with the modifications made by the enactments mentioned in subsection (6B).
(6A)
For the avoidance of doubt, references in this Part to administration, administrator, liquidator and winding up are to be interpreted in accordance with the modifications made by the enactments mentioned in subsection (6B).
(6B)
The enactments referred to in subsections (6)(b) and (6A) are—
(a)
article 3 of, and the Schedule to, the Banking Act 2009 (Parts 2 and 3 Consequential Amendments) Order 2009;
(b)
article 18 of, and paragraphs 1(a), (2) and (3) of Schedule 2 to, the Building Societies (Insolvency and Special Administration) Order 2009; and
(c)
regulation 27 of, and Schedule 6 to, the Investment Bank Special Administration Regulations 2011.
(7)
In relation to Scotland, references in this Part—
(a)
to sequestration include references to the administration by a judicial factor of the insolvent estate of a deceased person, and
(b)
to an interim or permanent trustee include references to a judicial factor on the insolvent estate of a deceased person,
unless the context otherwise requires.
191 Index of defined expressions.
The following Table shows provisions defining or otherwise explaining expressions used in this Part (other than provisions defining or explaining an expression used only in the same section or paragraph)—
F354Defined Expression | Section |
|---|---|
administration | Sections 190(6A) and (6B) |
administrator | Sections 190(6A) and (6B) |
administrative receiver | Section 190(1) |
charge | Section 190(1) |
clearing member | Section 190(1) |
clearing member client contract | Section 155(1)(a) |
clearing member house contract | Section 155(1)(b) |
client | Section 190(1) |
client trade | Section 155(1)(c) |
cover for margin | Section 190(3) |
default fund contribution | Section 188(3A) |
default rules (and related expressions) | Section 188 |
designated non-member | Section 155(2) |
EMIR Level 1 Regulation | Section 190(1) |
EMIR Level 2 Regulation | Section 190(1) |
the FCA | Section 190(1) |
indirect client | Section 190(1) |
insolvency law (and similar expressions) | Sections 190(6) and (6B) |
interim trustee | Sections 190(1) and 190(7)(b) |
liquidator | Sections 190(6A) and (6B) |
margin | Section 190(3) |
market charge | Section 173 |
market contract | Section 155 |
member of a clearing house | Section 190(1) |
notice | Section 190(5) |
overseas (in relation to investment exchanges and clearing houses) | Section 190(1) |
party (in relation to a market contract) | Section 187 |
permanent trustee | Sections 190(1) and 190(7)(b) |
the PRA | Section 190(1) |
qualifying collateral arrangement | Section 155A(1)(a) |
qualifying property transfers | Section 155A(1)(b) |
recognised central counterparty | Section 190(1) |
recognised clearing house | Section 190(1) |
recognised investment exchange | Section 190(1) |
relevant office-holder | Section 189 |
sequestration | Section 190(7)(a) |
set off (in relation to Scotland) | Section 190(1) |
settlement and related expressions (in relation to a market contract) | Section 190 (2) |
The Stock Exchange | Section 190(1) |
trustee, interim or permanent (in relation to Scotland) | Section 190(7)(b) |
UK (in relation to investment exchanges) | Section 190(1) |
winding up | Sections 190(6A) and (6B) |
Part VIII Amendments of the Financial Services Act 1986
F355192. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F356193. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F357194. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F358195. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F359196. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F360197. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F361198. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F362199. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
200 Jurisdiction of High Court and Court of Session.
F363(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
“ Financial Services Act 1986
10
Proceedings such as are mentioned in section 188 of the Financial Services Act 1986.”.
F364201. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F365202. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F366203. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F367204. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F368205. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F369206. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IX Transfer of Securities
207 Transfer of securities.
F370. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part X Miscellaneous and General Provisions
Miscellaneous
208 Summary proceedings in Scotland for offences in connection with disqualification of directors.
“(4)
For the purposes of summary proceedings in Scotland, section 431 of that Act applies to summary proceedings for an offence under section 11 or 13 of this Act as it applies to summary proceedings for an offence under Parts I to VII of that Act.”.
F371209. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
210 Restriction of duty to supply statements of premium income.
(1)
Schedule 3 to the M47Policyholders Protection Act 1975 (provisions with respect to levies on authorised insurance companies) is amended as follows.
(2)
“4
(1)
The Secretary of State may by notice in writing require an authorised insurance company to send him a statement of—
(a)
any income of the company for the year preceding that in which the notice is received by the company which is income liable to the general business levy, and
(b)
any income of the company for that year which is income liable to the long term business levy.
(2)
An authorised insurance company which receives a notice under this paragraph shall send the statement required by the notice to the Secretary of State within three months of receiving the notice.
(3)
Where an authorised insurance company is required under this paragraph to send a statement to the Secretary of State in respect of income of both descriptions mentioned in sub-paragraph (1)(a) and (b) above it shall send a separate statement in respect of income of each description.”.
(3)
In paragraph 5(3) (application of provisions of the M48Insurance Companies Act 1982 to failure to meet obligation imposed by paragraph 4) for “the obligation imposed on an insurance company by paragraph 4” substitute “an obligation imposed on an insurance company under paragraph 4”.
(4)
In paragraph 6 (declaration and enforcement of levies) omitsub-paragraph (4) (provision about notices).
(5)
“8 Notices under paragraphs 4 and 6
A notice under paragraph 4 or 6 above may be sent by post, and a letter containing such a notice shall be deemed to be properly addressed if it is addressed to the insurance company to which it is sent at its last known place of business in the United Kingdom.”.
211 Building societies: miscellaneous amendments.
(1)
“; and
(e)
section 110 (provisions exempting officers and auditors from liability).”.
(2)
In Schedule 15 to the Building Societies Act 1986 (application of companies winding-up legislation)—
(a)
in paragraph 1(a)
(provisions of M50Insolvency Act 1986 applied) for “and XII” substitute “
, XII and XIII
”
;
(b)
in paragraph 3(2)(b) (adaptations: references to be omitted), omit “, a shadow director”.
(3)
“22A Application of Act to building societies.
(1)
This Act applies to building societies as it applies to companies.
(2)
References in this Act to a company, or to a director or an officer of a company include, respectively, references to a building society within the meaning of the Building Societies Act 1986 or to a director or officer, within the meaning of that Act, of a building society.
(3)
In relation to a building society the definition of “shadow director” in section 22(5) applies with the substitution of “building society” for “company”.
(4)
In the application of Schedule 1 to the directors of a building society, references to provisions of the Insolvency Act or the Companies Act include references to the corresponding provisions of the Building Societies Act 1986.”.
General
212 Repeals.
The enactments mentioned in Schedule 24 are repealed to the extent specified there.
212 Repeals.
The enactments mentioned in Schedule 24 are repealed to the extent specified there.
213 Provisions extending to Northern Ireland.
(1)
The provisions of this Act extend to Northern Ireland so far as they amend, or provide for the amendment of, an enactment which so extends.
(2)
(3)
In Part III (investigations and powers to obtain information), sections 82 to 91, (powers exercisable to assist overseas regulatory authorities) extend to Northern Ireland.
(4)
Part VI (mergers and related matters) extends to Northern Ireland.
(5)
In Part VII (financial markets and insolvency) the following provisions extend to Northern Ireland—
(a)
sections 154 and 155 (introductory provisions and definition of “market contract”),
F373(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)
sections 157, 160, 162, and 166 to 169 (provisions relating to recognised investment exchanges and clearing houses),
(d)
F374sections 170 and 172 (power to extend provisions to other financial markets),
(e)
section 184 (indemnity for certain acts), and
(f)
sections 185 to 191 (supplementary provisions).
F373(6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)
Part IX (transfer of securities) extends to Northern Ireland.
F375. . .
(8)
In Part X (miscellaneous and general provisions), this section and sections 214 to 216 (general provisions) extend to Northern Ireland.
(9)
Except as mentioned above, the provisions of this Act do not extend to Northern Ireland.
F376214. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
215 Commencement and transitional provisions.
(1)
The following provisions of this Act come into force on Royal Assent—
(a)
in Part V (amendments of company law), section 141 (application to declare dissolution of company void);
(b)
in Part VI (mergers)—
(i)
sections 147 to 150, and
(ii)
paragraphs 2 to 12, 14 to 16, 18 to 20, 22 to 25 of Schedule 20, and section 153 so far as relating to those paragraphs;
(c)
in Part VIII (amendments of the M53Financial Services Act 1986), section 202 (offers of short-dated debentures);
(d)
in Part X (miscellaneous and general provisions), the repeals made by Schedule 24 in sections 71, 74, 88 and 89 of, and Schedule 9 to, the M54Fair Trading Act 1973, and section 212 so far as relating to those repeals.
(2)
The other provisions of this Act come into force on such day as the Secretary of State may appoint by order made by statutory instrument; and different days may be appointed for different provisions and different purposes.
(3)
An order bringing into force any provision may contain such transitional provisions and savings as appear to the Secretary of State to be necessary or expedient.
(4)
The Secretary of State may also by order under this section amend any enactment which refers to the commencement of a provision brought into force by the order so as to substitute a reference to the actual date on which it comes into force.
216 Short title.
This Act may be cited as the Companies Act 1989.
F377F377SCHEDULE 1
1
Schedule 4 to the M55Companies Act 1985 (form and content of company accounts) is amended as follows.
Group undertakings
2
(1)
For “group companies”, wherever occurring, substitute “
group undertakings
”
.
(2)
That expression occurs—
(a)
in Balance Sheet Format 1, in Items B.III.1 and 2, C.II.2, C.III.1, E.6 and H.6;
(b)
in Balance Sheet Format 2—
(i)
under the heading “ASSETS”, in Items B.III.1 and 2, C.II.2 and C.III.1;
(ii)
under the heading “LIABILITIES”, in Item C.6;
(c)
in the Profit and Loss Accounts Formats—
(i)
in Format 1, Item 7;
(ii)
in Format 2, Item 9;
(iii)
in Format 3, Item B.3;
(iv)
in Format 4, Item B.5;
(d)
in Notes (15) and (16) to the profit and loss account formats; and
(e)
in the second sentence of paragraph 53(2) (exclusion from requirement to state separately certain loans).
Participating interests
3
(1)
For “shares in related companies”, wherever occurring, substitute “
participating interests
”
.
(2)
That expression occurs—
(a)
in Balance Sheet Format 1, Item B.III.3;
(b)
in Balance Sheet Format 2, under the heading “ASSETS”, in Item B.III.3;
(c)
in the Profit and Loss Accounts Formats—
(i)
in Format 1, Item 8;
(ii)
in Format 2, Item 10;
(iii)
in Format 3, Item B.4;
(iv)
in Format 4, Item B.6.
4
(1)
For “related companies”, wherever occurring in any other context, substitute “
undertakings in which the company has a participating interest
”
.
(2)
Those contexts are—
(a)
in Balance Sheet Format 1, in Items B.III.4, C.II.3, E.7 and H.7;
(b)
in Balance Sheet Format 2—
(i)
under the heading “ASSETS”, in Items B.III.4 and C.II.3;
(ii)
under the heading “LIABILITIES”, in Item C.7.
Consistency of accounting policies
5
“11
Accounting policies shall be applied consistently within the same accounts and from one financial year to the next.”.
Revaluation reserve
6
“(3)
An amount may be transferred from the revaluation reserve—
(a)
to the profit and loss account, if the amount was previously charged to that account or represents realised profit, or
(b)
on capitalisation;
and the revaluation reserve shall be reduced to the extent that the amounts transferred to it are no longer necessary for the purposes of the valuation method used.
(3A)
In sub-paragraph (3)(b) “capitalisation”, in relation to an amount standing to the credit of the revaluation reserve, means applying it in wholly or partly paying up unissued shares in the company to be allotted to members of the company as fully or partly paid shares.
(3B)
The revaluation reserve shall not be reduced except as mentioned in this paragraph.”.
Compliance with accounting standards
7
“36A
It shall be stated whether the accounts have been prepared in accordance with applicable accounting standards and particulars of any material departure from those standards and the reasons for it shall be given.”.
Provision for taxation
8
“47
The amount of any provision for deferred taxation shall be stated separately from the amount of any provision for other taxation.”.
Obligation to show corresponding amounts for previous financial year
10
“(a)
paragraph 13 of Schedule 4A (details of accounting treatment of acquisitions),
(b)
paragraphs 2, 8(3), 16, 21(1)(d), 22(4) and (5), 24(3) and (4) and 27(3) and (4) of Schedule 5 (shareholdings in other undertakings),
(c)
Parts II and III of Schedule 6 (loans and other dealings in favour of directors and others), and
(d)
paragraphs 42 and 46 above (fixed assets and reserves and provisions).”.
Special provisions where company is parent company or subsidiary undertaking
11
(1)
“Part IV Special Provisions Where Company is a Parent Company or Subsidiary Undertaking”.
(2)
“59 Dealings with or interests in group undertakings
Where a company is a parent company or a subsidiary undertaking and any item required by Part I of this Schedule to be shown in the company’s balance sheet in relation to group undertakings includes—
(a)
amounts attributable to dealings with or interests in any parent undertaking or fellow subsidiary undertaking, or
(b)
amounts attributable to dealings with or interests in any subsidiary undertaking of the company,
the aggregate amounts within paragraphs (a) and (b) respectively shall be shown as separate items, either by way of subdivision of the relevant item in the balance sheet or in a note to the company’s accounts.”.
(3)
“59A Guarantees and other financial commitments in favour of group undertakings
Commitments within any of sub-paragraphs (1) to (5) of paragraph 50 (guarantees and other financial commitments) which are undertaken on behalf of or for the benefit of—
(a)
any parent undertaking or fellow subsidiary undertaking, or
(b)
any subsidiary undertaking of the company,
shall be stated separately from the other commitments within that sub-paragraph, and commitments within paragraph (a) shall also be stated separately from those within paragraph (b).”.
F378F378SCHEDULE 2
General rules
1
(1)
Group accounts shall comply so far as practicable with the provisions of Schedule 4 as if the undertakings included in the consolidation (“the group”) were a single company.
(2)
In particular, for the purposes of paragraph 59 of that Schedule (dealings with or interests in group undertakings) as it applies to group accounts—
(a)
any subsidiary undertakings of the parent company not included in the consolidation shall be treated as subsidiary undertakings of the group, and
(b)
if the parent company is itself a subsidiary undertaking, the group shall be treated as a subsidiary undertaking of any parent undertaking of that company, and the reference to fellow-subsidiary undertakings shall be construed accordingly.
(3)
Where the parent company is treated as an investment company for the purposes of Part V of that Schedule (special provisions for investment companies) the group shall be similarly treated.
2
(1)
The consolidated balance sheet and profit and loss account shall incorporate in full the information contained in the individual accounts of the undertakings included in the consolidation, subject to the adjustments authorised or required by the following provisions of this Schedule and to such other adjustments (if any) as may be appropriate in accordance with generally accepted accounting principles or practice.
(2)
If the financial year of a subsidiary undertaking included in the consolidation differs from that of the parent company, the group accounts shall be made up—
(a)
from the accounts of the subsidiary undertaking for its financial year last ending before the end of the parent company’s financial year, provided that year ended no more than three months before that of the parent company, or
(b)
from interim accounts prepared by the subsidiary undertaking as at the end of the parent company’s financial year.
3
(1)
Where assets and liabilities to be included in the group accounts have been valued or otherwise determined by undertakings according to accounting rules differing from those used for the group accounts, the values or amounts shall be adjusted so as to accord with the rules used for the group accounts.
(2)
If it appears to the directors of the parent company that there are special reasons for departing from sub-paragraph (1) they may do so, but particulars of any such departure, the reasons for it and its effect shall be given in a note to the accounts.
(3)
The adjustments referred to in this paragraph need not be made if they are not material for the purpose of giving a true and fair view.
4
Any differences of accounting rules as between a parent company’s individual accounts for a financial year and its group accounts shall be disclosed in a note to the latter accounts and the reasons for the difference given.
5
Amounts which in the particular context of any provision of this Schedule are not material may be disregarded for the purposes of that provision.
Elimination of group transactions
6
(1)
Debts and claims between undertakings included in the consolidation, and income and expenditure relating to transactions between such undertakings, shall be eliminated in preparing the group accounts.
(2)
Where profits and losses resulting from transactions between undertakings included in the consolidation are included in the book value of assets, they shall be eliminated in preparing the group accounts.
(3)
The elimination required by sub-paragraph (2) may be effected in proportion to the group’s interest in the shares of the undertakings.
(4)
Sub-paragraphs (1) and (2) need not be complied with if the amounts concerned are not material for the purpose of giving a true and fair view.
Acquisition and merger accounting
7
(1)
The following provisions apply where an undertaking becomes a subsidiary undertaking of the parent company.
(2)
That event is referred to in those provisions as an “acquisition”, and references to the “undertaking acquired” shall be construed accordingly.
8
An acquisition shall be accounted for by the acquisition method of accounting unless the conditions for accounting for it as a merger are met and the merger method of accounting is adopted.
9
(1)
The acquisition method of accounting is as follows.
(2)
The identifiable assets and liabilities of the undertaking acquired shall be included in the consolidated balance sheet at their fair values as at the date of acquisition.
In this paragraph the “identifiable” assets or liabilities of the undertaking acquired means the assets or liabilities which are capable of being disposed of or discharged separately, without disposing of a business of the undertaking.
(3)
The income and expenditure of the undertaking acquired shall be brought into the group accounts only as from the date of the acquisition.
(4)
There shall be set off against the acquisition cost of the interest in the shares of the undertaking held by the parent company and its subsidiary undertakings the interest of the parent company and its subsidiary undertakings in the adjusted capital and reserves of the undertaking acquired.
For this purpose—
“the acquisition cost” means the amount of any cash consideration and the fair value of any other consideration, together with such amount (if any) in respect of fees and other expenses of the acquisition as the company may determine, and
“the adjusted capital and reserves” of the undertaking acquired means its capital and reserves at the date of the acquisition after adjusting the identifiable assets and liabilities of the undertaking to fair values as at that date.
(5)
The resulting amount if positive shall be treated as goodwill, and if negative as a negative consolidation difference.
10
(1)
The conditions for accounting for an acquisition as a merger are—
(a)
that at least 90 per cent. of the nominal value of the relevant shares in the undertaking acquired is held by or on behalf of the parent company and its subsidiary undertakings,
(b)
that the proportion referred to in paragraph (a) was attained pursuant to an arrangement providing for the issue of equity shares by the parent company or one or more of its subsidiary undertakings,
(c)
that the fair value of any consideration other than the issue of equity shares given pursuant to the arrangement by the parent company and its subsidiary undertakings did not exceed 10 per cent. of the nominal value of the equity shares issued, and
(d)
that adoption of the merger method of accounting accords with generally accepted accounting principles or practice.
(2)
The reference in sub-paragraph (1)(a) to the “relevant shares” in an undertaking acquired is to those carrying unrestricted rights to participate both in distributions and in the assets of the undertaking upon liquidation.
11
(1)
The merger method of accounting is as follows.
(2)
The assets and liabilities of the undertaking acquired shall be brought into the group accounts at the figures at which they stand in the undertaking’s accounts, subject to any adjustment authorised or required by this Schedule.
(3)
The income and expenditure of the undertaking acquired shall be included in the group accounts for the entire financial year, including the period before the acquisition.
(4)
The group accounts shall show corresponding amounts relating to the previous financial year as if the undertaking acquired had been included in the consolidation throughout that year.
(5)
There shall be set off against the aggregate of—
(a)
the appropriate amount in respect of qualifying shares issued by the parent company or its subsidiary undertakings in consideration for the acquisition of shares in the undertaking acquired, and
(b)
the fair value of any other consideration for the acquisition of shares in the undertaking acquired, determined as at the date when those shares were acquired,
the nominal value of the issued share capital of the undertaking acquired held by the parent company and its subsidiary undertakings.
(6)
The resulting amount shall be shown as an adjustment to the consolidated reserves.
(7)
In sub-paragraph (5)(a) “” means—
(a)
shares in relation to which section 131 (merger relief) applies, in respect of which the appropriate amount is the nominal value; or
(b)
shares in relation to which section 132 (relief in respect of group reconstructions) applies, in respect of which the appropriate amount is the nominal value together with any minimum premium value within the meaning of that section.
12
(1)
Where a group is acquired, paragraphs 9 to 11 apply with the following adaptations.
(2)
References to shares of the undertaking acquired shall be construed as references to shares of the parent undertaking of the group.
(3)
Other references to the undertaking acquired shall be construed as references to the group; and references to the assets and liabilities, income and expenditure and capital and reserves of the undertaking acquired shall be construed as references to the assets and liabilities, income and expenditure and capital and reserves of the group after making the set-offs and other adjustments required by this Schedule in the case of group accounts.
13
(1)
The following information with respect to acquisitions taking place in the financial year shall be given in a note to the accounts.
(2)
There shall be stated—
(a)
the name of the undertaking acquired or, where a group was acquired, the name of the parent undertaking of that group, and
(b)
whether the acquisition has been accounted for by the acquisition or the merger method of accounting;
and in relation to an acquisition which significantly affects the figures shown in the group accounts, the following further information shall be given.
(3)
The composition and fair value of the consideration for the acquisition given by the parent company and its subsidiary undertakings shall be stated.
(4)
The profit or loss of the undertaking or group acquired shall be stated—
(a)
for the period from the beginning of the financial year of the undertaking or, as the case may be, of the parent undertaking of the group, up to the date of the acquisition, and
(b)
for the previous financial year of that undertaking or parent undertaking;
and there shall also be stated the date on which the financial year referred to in paragraph (a) began.
(5)
Where the acquisition method of accounting has been adopted, the book values immediately prior to the acquisition, and the fair values at the date of acquisition, of each class of assets and liabilities of the undertaking or group acquired shall be stated in tabular form, including a statement of the amount of any goodwill or negative consolidation difference arising on the acquisition, together with an explanation of any significant adjustments made.
(6)
Where the merger method of accounting has been adopted, an explanation shall be given of any significant adjustments made in relation to the amounts of the assets and liabilities of the undertaking or group acquired, together with a statement of any resulting adjustment to the consolidated reserves (including the re-statement of opening consolidated reserves).
(7)
In ascertaining for the purposes of sub-paragraph (4), (5) or (6) the profit or loss of a group, the book values and fair values of assets and liabilities of a group or the amount of the assets and liabilities of a group, the set-offs and other adjustments required by this Schedule in the case of group accounts shall be made.
14
(1)
There shall also be stated in a note to the accounts the cumulative amount of goodwill resulting from acquisitions in that and earlier financial years which has been written off.
(2)
That figure shall be shown net of any goodwill attributable to subsidiary undertakings or businesses disposed of prior to the balance sheet date.
15
Where during the financial year there has been a disposal of an undertaking or group which significantly affects the figures shown in the group accounts, there shall be stated in a note to the accounts—
(a)
the name of that undertaking or, as the case may be, of the parent undertaking of that group, and
(b)
the extent to which the profit or loss shown in the group accounts is attributable to profit or loss of that undertaking or group.
16
The information required by paragraph 13, 14 or 15 above need not be disclosed with respect to an undertaking which—
(a)
is established under the law of a country outside the United Kingdom, or
(b)
carries on business outside the United Kingdom,
if in the opinion of the directors of the parent company the disclosure would be seriously prejudicial to the business of that undertaking or to the business of the parent company or any of its subsidiary undertakings and the Secretary of State agrees that the information should not be disclosed.
Minority interests
17
(1)
The formats set out in Schedule 4 have effect in relation to group accounts with the following additions.
(2)
In the Balance Sheet Formats a further item headed “Minority interests” shall be added—
(a)
in Format 1, either after item J or at the end (after item K), and
(b)
in Format 2, under the general heading “LIABILITIES”, between items A and B;
and under that item shall be shown the amount of capital and reserves attributable to shares in subsidiary undertakings included in the consolidation held by or on behalf of persons other than the parent company and its subsidiary undertakings.
(3)
In the Profit and Loss Account Formats a further item headed “Minority interests” shall be added—
(a)
in Format 1, between items 14 and 15,
(b)
in Format 2, between items 16 and 17,
(c)
in Format 3, between items 7 and 8 in both sections A and B, and
(d)
in Format 4, between items 9 and 10 in both sections A and B;
and under that item shall be shown the amount of any profit or loss on ordinary activities attributable to shares in subsidiary undertakings included in the consolidation held by or on behalf of persons other than the parent company and its subsidiary undertakings.
(4)
In the Profit and Loss Account Formats a further item headed “Minority interests” shall be added—
(a)
in Format 1, between items 18 and 19,
(b)
in Format 2, between items 20 and 21,
(c)
in Format 3, between items 9 and 10 in section A and between items 8 and 9 in section B, and
(d)
in Format 4, between items 11 and 12 in section A and between items 10 and 11 in section B;
and under that item shall be shown the amount of any profit or loss on extraordinary activities attributable to shares in subsidiary undertakings included in the consolidation held by or on behalf of persons other than the parent company and its subsidiary undertakings.
(5)
For the purposes of paragraph 3(3) and (4) of Schedule 4 (power to adapt or combine items)—
(a)
the additional item required by sub-paragraph (2) above shall be treated as one to which a letter is assigned, and
(b)
the additional items required by sub-paragraphs (3) and (4) above shall be treated as ones to which an Arabic number is assigned.
Interests in subsidiary undertakings excluded from consolidation
18
The interest of the group in subsidiary undertakings excluded from consolidation under section 229(4) (undertakings with activities different from those of undertakings included in the consolidation), and the amount of profit or loss attributable to such an interest, shall be shown in the consolidated balance sheet or, as the case may be, in the consolidated profit and loss account by the equity method of accounting (including dealing with any goodwill arising in accordance with paragraphs 17 to 19 and 21 of Schedule 4).
Joint ventures
19
(1)
Where an undertaking included in the consolidation manages another undertaking jointly with one or more undertakings not included in the consolidation, that other undertaking (“the joint venture”) may, if it is not—
(a)
a body corporate, or
(b)
a subsidiary undertaking of the parent company,
be dealt with in the group accounts by the method of proportional consolidation.
(2)
The provisions of this Part relating to the preparation of consolidated accounts apply, with any necessary modifications, to proportional consolidation under this paragraph.
Associated undertakings
20
(1)
An “associated undertaking” means an undertaking in which an undertaking included in the consolidation has a participating interest and over whose operating and financial policy it exercises a significant influence, and which is not—
(a)
a subsidiary undertaking of the parent company, or
(b)
a joint venture dealt with in accordance with paragraph 19.
(2)
Where an undertaking holds 20 per cent. or more of the voting rights in another undertaking, it shall be presumed to exercise such an influence over it unless the contrary is shown.
(3)
The voting rights in an undertaking means the rights conferred on shareholders in respect of their shares or, in the case of an undertaking not having a share capital, on members, to vote at general meetings of the undertaking on all, or substantially all, matters.
(4)
The provisions of paragraphs 5 to 11 of Schedule 10A (rights to be taken into account and attribution of rights) apply in determining for the purposes of this paragraph whether an undertaking holds 20 per cent. or more of the voting rights in another undertaking.
21
(1)
The formats set out in Schedule 4 have effect in relation to group accounts with the following modifications.
(2)
In the Balance Sheet Formats the items headed “Participating interests”, that is—
(a)
in Format 1, item B.III.3, and
(b)
In Format 2, item B.III.3 under the heading “ASSETS”,
shall be replaced by two items, “Interests in associated undertakings” and “Other participating interests”.
(3)
In the Profit and Loss Account Formats, the items headed “Income from participating interests”, that is—
(a)
in Format 1, item 8,
(b)
in Format 2, item 10,
(c)
in Format 3, item B.4, and
(d)
in Format 4, item B.6,
shall be replaced by two items, “Income from interests in associated undertakings” and “Income from other participating interests”.
22
(1)
The interest of an undertaking in an associated undertaking, and the amount of profit or loss attributable to such an interest, shall be shown by the equity method of accounting (including dealing with any goodwill arising in accordance with paragraphs 17 to 19 and 21 of Schedule 4).
(2)
Where the associated undertaking is itself a parent undertaking, the net assets and profits or losses to be taken into account are those of the parent and its subsidiary undertakings (after making any consolidation adjustments).
(3)
The equity method of accounting need not be applied if the amounts in question are not material for the purpose of giving a true and fair view.
F379F379SCHEDULE 3
Part I Companies not Required to Prepare Group Accounts
Subsidiary undertakings
1
(1)
The following information shall be given where at the end of the financial year the company has subsidiary undertakings.
(2)
The name of each subsidiary undertaking shall be stated.
(3)
There shall be stated with respect to each subsidiary undertaking—
(a)
if it is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland;
(c)
if it is unincorporated, the address of its principal place of business.
(4)
The reason why the company is not required to prepare group accounts shall be stated.
(5)
If the reason is that all the subsidiary undertakings of the company fall within the exclusions provided for in section 229, it shall be stated with respect to each subsidiary undertaking which of those exclusions applies.
Holdings in subsidiary undertakings
2
(1)
There shall be stated in relation to shares of each class held by the company in a subsidiary undertaking—
(a)
the identity of the class, and
(b)
the proportion of the nominal value of the shares of that class represented by those shares.
(2)
The shares held by or on behalf of the company itself shall be distinguished from those attributed to the company which are held by or on behalf of a subsidiary undertaking.
Financial information about subsidiary undertakings
3
(1)
There shall be disclosed with respect to each subsidiary undertaking—
(a)
the aggregate amount of its capital and reserves as at the end of its relevant financial year, and
(b)
its profit or loss for that year.
(2)
That information need not be given if the company is exempt by virtue of section 228 from the requirement to prepare group accounts (parent company included in accounts of larger group).
(3)
That information need not be given if—
(a)
the subsidiary undertaking is not required by any provision of this Act to deliver a copy of its balance sheet for its relevant financial year and does not otherwise publish that balance sheet in Great Britain or elsewhere, and
(b)
the company’s holding is less than 50 per cent. of the nominal value of the shares in the undertaking.
(4)
Information otherwise required by this paragraph need not be given if it is not material.
(5)
For the purposes of this paragraph the “relevant financial year” of a subsidiary undertaking is—
(a)
if its financial year ends with that of the company, that year, and
(b)
if not, its financial year ending last before the end of the company’s financial year.
Financial years of subsidiary undertakings
4
Where the financial year of one or more subsidiary undertakings did not end with that of the company, there shall be stated in relation to each such undertaking—
(a)
the reasons why the company’s directors consider that its financial year should not end with that of the company, and
(b)
the date on which its last financial year ended (last before the end of the company’s financial year).
Instead of the dates required by paragraph (b) being given for each subsidiary undertaking the earliest and latest of those dates may be given.
Further information about subsidiary undertakings
5
(1)
There shall be disclosed—
(a)
any qualifications contained in the auditors’ reports on the accounts of subsidiary undertakings for financial years ending with or during the financial year of the company, and
(b)
any note or saving contained in such accounts to call attention to a matter which, apart from the note or saving, would properly have been referred to in such a qualification,
in so far as the matter which is the subject of the qualification or note is not covered by the company’s own accounts and is material from the point of view of its members.
(2)
The aggregate amount of the total investment of the company in the shares of subsidiary undertakings shall be stated by way of the equity method of valuation, unless—
(a)
the company is exempt from the requirement to prepare group accounts by virtue of section 228 (parent company included in accounts of larger group), and
(b)
the directors state their opinion that the aggregate value of the assets of the company consisting of shares in, or amounts owing (whether on account of a loan or otherwise) from, the company’s subsidiary undertakings is not less than the aggregate of the amounts at which those assets are stated or included in the company’s balance sheet.
(3)
In so far as information required by this paragraph is not obtainable, a statement to that effect shall be given instead.
Significant holdings in undertakings other than subsidiary undertakings
7
(1)
The information required by paragraphs 8 and 9 shall be given where at the end of the financial year the company has a significant holding in an undertaking which is not a subsidiary undertaking of the company.
(2)
A holding is significant for this purpose if—
(a)
it amounts to 10 per cent. or more of the nominal value of any class of shares in the undertaking, or
(b)
the amount of the holding (as stated or included in the company’s accounts) exceeds one-tenth of the amount (as so stated) of the company’s assets.
8
(1)
The name of the undertaking shall be stated.
(2)
There shall be stated—
(a)
if the undertaking is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland;
(c)
if it is unincorporated, the address of its principal place of business.
(3)
There shall also be stated—
(a)
the identity of each class of shares in the undertaking held by the company, and
(b)
the proportion of the nominal value of the shares of that class represented by those shares.
9
(1)
Where the company has a significant holding in an undertaking amounting to 20 per cent. or more of the nominal value of the shares in the undertaking, there shall also be stated—
(a)
the aggregate amount of the capital and reserves of the undertaking as at the end of its relevant financial year, and
(b)
its profit or loss for that year.
(2)
That information need not be given if—
(a)
the company is exempt by virtue of section 228 from the requirement to prepare group accounts (parent company included in accounts of larger group), and
(b)
the investment of the company in all undertakings in which it has such a holding as is mentioned in sub-paragraph (1) is shown, in aggregate, in the notes to the accounts by way of the equity method of valuation.
(3)
That information need not be given in respect of an undertaking if—
(a)
the undertaking is not required by any provision of this Act to deliver a copy of its balance sheet for its relevant financial year and does not otherwise publish that balance sheet in Great Britain or elsewhere, and
(b)
the company’s holding is less than 50 per cent. of the nominal value of the shares in the undertaking.
(4)
Information otherwise required by this paragraph need not be given if it is not material.
(5)
For the purposes of this paragraph the “relevant financial year” of an undertaking is—
(a)
if its financial year ends with that of the company, that year, and
(b)
if not, its financial year ending last before the end of the company’s financial year.
Arrangements attracting merger relief
10
(1)
This paragraph applies to arrangements attracting merger relief, that is, where a company allots shares in consideration for the issue, transfer or cancellation of shares in another body corporate (“the other company”) in circumstances such that section 130 of this Act (share premium account) does not, by virtue of section 131(2) (merger relief), apply to the premiums on the shares.
(2)
If the company makes such an arrangement during the financial year, the following information shall be given—
(a)
the name of the other company,
(b)
the number, nominal value and class of shares allotted,
(c)
the number, nominal value and class of shares in the other company issued, transferred or cancelled, and
(d)
particulars of the accounting treatment adopted in the company’s accounts in respect of the issue, transfer or cancellation.
(3)
Where the company made such an arrangement during the financial year, or during either of the two preceding financial years, and there is included in the company’s profit and loss account—
(a)
any profit or loss realised during the financial year by the company on the disposal of—
(i)
any shares in the other company, or
(ii)
any assets which were fixed assets of the other company or any of its subsidiary undertakings at the time of the arrangement, or
(b)
any part of any profit or loss realised during the financial year by the company on the disposal of any shares (other than shares in the other company) which was attributable to the fact that there were at the time of the disposal amongst the assets of the company which issued the shares, or any of its subsidiary undertakings, such shares or assets as are described in paragraph (a) above,
then, the net amount of that profit or loss or, as the case may be, the part so attributable shall be shown, together with an explanation of the transactions to which the information relates.
(4)
For the purposes of this paragraph the time of the arrangement shall be taken to be—
(a)
where as a result of the arrangement the other company becomes a subsidiary undertaking of the company, the date on which it does so or, if the arrangement in question becomes binding only on the fulfilment of a condition, the date on which that condition is fulfilled;
(b)
if the other company is already a subsidiary undertaking of the company, the date on which the shares are allotted or, if they are allotted on different days, the first day.
Parent undertaking drawing up accounts for larger group
11
(1)
Where the company is a subsidiary undertaking, the following information shall be given with respect to the parent undertaking of—
(a)
the largest group of undertakings for which group accounts are drawn up and of which the company is a member, and
(b)
the smallest such group of undertakings.
(2)
The name of the parent undertaking shall be stated.
(3)
There shall be stated—
(a)
if the undertaking is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland;
(c)
if it is unincorporated, the address of its principal place of business.
(4)
If copies of the group accounts referred to in sub-paragraph (1) are available to the public, there shall also be stated the addresses from which copies of the accounts can be obtained.
Identification of ultimate parent company
12
(1)
Where the company is a subsidiary undertaking, the following information shall be given with respect to the company (if any) regarded by the directors as being the company’s ultimate parent company.
(2)
The name of that company shall be stated.
(3)
If known to the directors, there shall be stated—
(a)
if that company is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland.
(4)
In this paragraph “company” includes any body corporate.
Part II Companies Required to Prepare Group Accounts
Introductory
14
In this Part of this Schedule “the group” means the group consisting of the parent company and its subsidiary undertakings.
Subsidiary undertakings
15
(1)
The following information shall be given with respect to the undertakings which are subsidiary undertakings of the parent company at the end of the financial year.
(2)
The name of each undertaking shall be stated.
(3)
There shall be stated—
(a)
if the undertaking is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland;
(c)
if it is unincorporated, the address of its principal place of business.
(4)
It shall also be stated whether the subsidiary undertaking is included in the consolidation and, if it is not, the reasons for excluding it from consolidation shall be given.
(5)
It shall be stated with respect to each subsidiary undertaking by virtue of which of the conditions specified in section 258(2) or (4) it is a subsidiary undertaking of its immediate parent undertaking.
That information need not be given if the relevant condition is that specified in subsection (2)(a) of that section (holding of a majority of the voting rights) and the immediate parent undertaking holds the same proportion of the shares in the undertaking as it holds voting rights.
Holdings in subsidiary undertakings
16
(1)
The following information shall be given with respect to the shares of a subsidiary undertaking held—
(a)
by the parent company, and
(b)
by the group;
and the information under paragraphs (a) and (b) shall (if different) be shown separately.
(2)
There shall be stated—
(a)
the identity of each class of shares held, and
(b)
the proportion of the nominal value of the shares of that class represented by those shares.
Financial information about subsidiary undertakings not included in the consolidation
17
(1)
There shall be shown with respect to each subsidiary undertaking not included in the consolidation—
(a)
the aggregate amount of its capital and reserves as at the end of its relevant financial year, and
(b)
its profit or loss for that year.
(2)
That information need not be given if the group’s investment in the undertaking is included in the accounts by way of the equity method of valuation or if—
(a)
the undertaking is not required by any provision of this Act to deliver a copy of its balance sheet for its relevant financial year and does not otherwise publish that balance sheet in Great Britain or elsewhere, and
(b)
the holding of the group is less than 50 per cent. of the nominal value of the shares in the undertaking.
(3)
Information otherwise required by this paragraph need not be given if it is not material.
(4)
For the purposes of this paragraph the “relevant financial year” of a subsidiary undertaking is—
(a)
if its financial year ends with that of the company, that year, and
(b)
if not, its financial year ending last before the end of the company’s financial year.
Further information about subsidiary undertakings excluded from consolidation
18
(1)
The following information shall be given with respect to subsidiary undertakings excluded from consolidation.
(2)
There shall be disclosed—
(a)
any qualifications contained in the auditors’ reports on the accounts of the undertaking for financial years ending with or during the financial year of the company, and
(b)
any note or saving contained in such accounts to call attention to a matter which, apart from the note or saving, would properly have been referred to in such a qualification,
in so far as the matter which is the subject of the qualification or note is not covered by the consolidated accounts and is material from the point of view of the members of the parent company.
(3)
In so far as information required by this paragraph is not obtainable, a statement to that effect shall be given instead.
Financial years of subsidiary undertakings
19
Where the financial year of one or more subsidiary undertakings did not end with that of the company, there shall be stated in relation to each such undertaking—
(a)
the reasons why the company’s directors consider that its financial year should not end with that of the company, and
(b)
the date on which its last financial year ended (last before the end of the company’s financial year).
Instead of the dates required by paragraph (b) being given for each subsidiary undertaking the earliest and latest of those dates may be given.
Joint ventures
21
(1)
The following information shall be given where an undertaking is dealt with in the consolidated accounts by the method of proportional consolidation in accordance with paragraph 19 of Schedule 4A (joint ventures)—
(a)
the name of the undertaking;
(b)
the address of the principal place of business of the undertaking;
(c)
the factors on which joint management of the undertaking is based; and
(d)
the proportion of the capital of the undertaking held by undertakings included in the consolidation.
(2)
Where the financial year of the undertaking did not end with that of the company, there shall be stated the date on which a financial year of the undertaking last ended before that date.
Associated undertakings
22
(1)
The following information shall be given where an undertaking included in the consolidation has an interest in an associated undertaking.
(2)
The name of the associated undertaking shall be stated.
(3)
There shall be stated—
(a)
if the undertaking is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland;
(c)
if it is unincorporated, the address of its principal place of business.
(4)
The following information shall be given with respect to the shares of the undertaking held—
(a)
by the parent company, and
(b)
by the group;
and the information under paragraphs (a) and (b) shall be shown separately.
(5)
There shall be stated—
(a)
the identity of each class of shares held, and
(b)
the proportion of the nominal value of the shares of that class represented by those shares.
(6)
In this paragraph “associated undertaking” has the meaning given by paragraph 20 of Schedule 4A; and the information required by this paragraph shall be given notwithstanding that paragraph 22(3) of that Schedule (materiality) applies in relation to the accounts themselves.
Other significant holdings of parent company or group
23
(1)
The information required by paragraphs 24 and 25 shall be given where at the end of the financial year the parent company has a significant holding in an undertaking which is not one of its subsidiary undertakings and does not fall within paragraph 21 (joint ventures) or paragraph 22 (associated undertakings).
(2)
A holding is significant for this purpose if—
(a)
it amounts to 10 per cent. or more of the nominal value of any class of shares in the undertaking, or
(b)
the amount of the holding (as stated or included in the company’s individual accounts) exceeds one-tenth of the amount of its assets (as so stated).
24
(1)
The name of the undertaking shall be stated.
(2)
There shall be stated—
(a)
if the undertaking is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland;
(c)
if it is unincorporated, the address of its principal place of business.
(3)
The following information shall be given with respect to the shares of the undertaking held by the parent company.
(4)
There shall be stated—
(a)
the identity of each class of shares held, and
(b)
the proportion of the nominal value of the shares of that class represented by those shares.
25
(1)
Where the company has a significant holding in an undertaking amounting to 20 per cent. or more of the nominal value of the shares in the undertaking, there shall also be stated—
(a)
the aggregate amount of the capital and reserves of the undertaking as at the end of its relevant financial year, and
(b)
its profit or loss for that year.
(2)
That information need not be given in respect of an undertaking if—
(a)
the undertaking is not required by any provision of this Act to deliver a copy of its balance sheet for its relevant financial year and does not otherwise publish that balance sheet in Great Britain or elsewhere, and
(b)
the company’s holding is less than 50 per cent. of the nominal value of the shares in the undertaking.
(3)
Information otherwise required by this paragraph need not be given if it is not material.
(4)
For the purposes of this paragraph the “relevant financial year” of an undertaking is—
(a)
if its financial year ends with that of the company, that year, and
(b)
if not, its financial year ending last before the end of the company’s financial year.
26
(1)
The information required by paragraphs 27 and 28 shall be given where at the end of the financial year the group has a significant holding in an undertaking which is not a subsidiary undertaking of the parent company and does not fall within paragraph 21 (joint ventures) or paragraph 22 (associated undertakings).
(2)
A holding is significant for this purpose if—
(a)
it amounts to 10 per cent. or more of the nominal value of any class of shares in the undertaking, or
(b)
the amount of the holding (as stated or included in the group accounts) exceeds one-tenth of the amount of the group’s assets (as so stated).
27
(1)
The name of the undertaking shall be stated.
(2)
There shall be stated—
(a)
if the undertaking is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland;
(c)
if it is unincorporated, the address of its principal place of business.
(3)
The following information shall be given with respect to the shares of the undertaking held by the group.
(4)
There shall be stated—
(a)
the identity of each class of shares held, and
(b)
the proportion of the nominal value of the shares of that class represented by those shares.
28
(1)
Where the holding of the group amounts to 20 per cent. or more of the nominal value of the shares in the undertaking, there shall also be stated—
(a)
the aggregate amount of the capital and reserves of the undertaking as at the end of its relevant financial year, and
(b)
its profit or loss for that year.
(2)
That information need not be given if—
(a)
the undertaking is not required by any provision of this Act to deliver a copy of its balance sheet for its relevant financial year and does not otherwise publish that balance sheet in Great Britain or elsewhere, and
(b)
the holding of the group is less than 50 per cent. of the nominal value of the shares in the undertaking.
(3)
Information otherwise required by this paragraph need not be given if it is not material.
(4)
For the purposes of this paragraph the “relevant financial year” of an outside undertaking is—
(a)
if its financial year ends with that of the parent company, that year, and
(b)
if not, its financial year ending last before the end of the parent company’s financial year.
Arrangements attracting merger relief
29
(1)
This paragraph applies to arrangements attracting merger relief, that is, where a company allots shares in consideration for the issue, transfer or cancellation of shares in another body corporate (“the other company”) in circumstances such that section 130 of this Act (share premium account) does not, by virtue of section 131(2) (merger relief), apply to the premiums on the shares.
(2)
If the parent company made such an arrangement during the financial year, the following information shall be given—
(a)
the name of the other company,
(b)
the number, nominal value and class of shares allotted,
(c)
the number, nominal value and class of shares in the other company issued, transferred or cancelled, and
(d)
particulars of the accounting treatment adopted in the parent company’s individual and group accounts in respect of the issue, transfer or cancellation, and
(e)
particulars of the extent to which and manner in which the profit or loss for the financial year shown in the group accounts is affected by any profit or loss of the other company, or any of its subsidiary undertakings, which arose before the time of the arrangement.
(3)
Where the parent company made such an arrangement during the financial year, or during either of the two preceding financial years, and there is included in the consolidated profit and loss account—
(a)
any profit or loss realised during the financial year on the disposal of—
(i)
any shares in the other company, or
(ii)
any assets which were fixed assets of the other company or any of its subsidiary undertakings at the time of the arrangement, or
(b)
any part of any profit or loss realised during the financial year on the disposal of any shares (other than shares in the other company) which was attributable to the fact that there were at the time of the disposal amongst the assets of the company which issued the shares, or any of its subsidiary undertakings, such shares or assets as are described in paragraph (a) above,
then, the net amount of that profit or loss or, as the case may be, the part so attributable shall be shown, together with an explanation of the transactions to which the information relates.
(4)
For the purposes of this paragraph the time of the arrangement shall be taken to be—
(a)
where as a result of the arrangement the other company becomes a subsidiary undertaking of the company in question, the date on which it does so or, if the arrangement in question becomes binding only on the fulfilment of a condition, the date on which that condition is fulfilled;
(b)
if the other company is already a subsidiary undertaking of that company, the date on which the shares are allotted or, if they are allotted on different days, the first day.
Parent undertaking drawing up accounts for larger group
30
(1)
Where the parent company is itself a subsidiary undertaking, the following information shall be given with respect to that parent undertaking of the company which heads—
(a)
the largest group of undertakings for which group accounts are drawn up and of which that company is a member, and
(b)
the smallest such group of undertakings.
(2)
The name of the parent undertaking shall be stated.
(3)
There shall be stated—
(a)
if the undertaking is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland;
(c)
if it is unincorporated, the address of its principal place of business.
(4)
If copies of the group accounts referred to in sub-paragraph (1) are available to the public, there shall also be stated the addresses from which copies of the accounts can be obtained.
Identification of ultimate parent company
31
(1)
Where the parent company is itself a subsidiary undertaking, the following information shall be given with respect to the company (if any) regarded by the directors as being that company’s ultimate parent company.
(2)
The name of that company shall be stated.
(3)
If known to the directors, there shall be stated—
(a)
if that company is incorporated outside Great Britain, the country in which it is incorporated;
(b)
if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland.
(4)
In this paragraph “company” includes any body corporate.
F380F380SCHEDULE 4
1
Schedule 6 to the Companies Act 1985 is amended as follows.
2
“ Disclosure of information: emoluments and other benefits of directors and others”.
3
“Part I Chairman’s and Directors’ Emoluments, Pensions and Compensation for Loss of Office
Aggregate amount of directors’ emoluments
1
(1)
The aggregate amount of directors’ emoluments shall be shown.
(2)
This means the emoluments paid to or receivable by any person in respect of—
(a)
his services as a director of the company, or
(b)
his services while director of the company—
(i)
as director of any of its subsidiary undertakings, or
(ii)
otherwise in connection with the management of the affairs of the company or any of its subsidiary undertakings.
(3)
There shall also be shown, separately, the aggregate amount within sub-paragraph (2)(a) and (b)(i) and the aggregate amount withinsub-paragraph (2)(b)(ii).
(4)
For the purposes of this paragraph the “emoluments” of a person include—
(a)
fees and percentages,
(b)
sums paid by way of expenses allowance (so far as those sums are chargeable to United Kingdom income tax),
(c)
contributions paid in respect of him under any pension scheme, and
(d)
the estimated money value of any other benefits received by him otherwise than in cash,
and emoluments in respect of a person’s accepting office as director shall be treated as emoluments in respect of his services as director.
Details of chairman’s and directors’ emoluments
2
Where the company is a parent company or a subsidiary undertaking, or where the amount shown in compliance with paragraph 1(1) is £60,000 or more, the information required by paragraphs 3 to 6 shall be given with respect to the emoluments of the chairman and directors, and emoluments waived.
3
(1)
The emoluments of the chairman shall be shown.
(2)
The “chairman” means the person elected by the directors to be chairman of their meetings, and includes a person who, though not so elected, holds an office (however designated) which in accordance with the company’s constitution carries with it functions substantially similar to those discharged by a person so elected.
(3)
Where there has been more than one chairman during the year, the emoluments of each shall be stated so far as attributable to the period during which he was chairman.
(4)
The emoluments of a person need not be shown if his duties as chairman were wholly or mainly discharged outside the United Kingdom.
4
(1)
The following information shall be given with respect to the emoluments of directors.
(2)
There shall be shown the number of directors whose emoluments fell within each of the following bands—
not more than £5,000,
more than £5,000 but not more than £10,000,
more than £10,000 but not more than £15,000,
and so on.
(3)
If the emoluments of any of the directors exceeded that of the chairman, there shall be shown the greatest amount of emoluments of any director.
(4)
Where more than one person has been chairman during the year, the reference in sub-paragraph (3) to the emoluments of the chairman is to the aggregate of the emoluments of each person who has been chairman, so far as attributable to the period during which he was chairman.
(5)
The information required by sub-paragraph (2) need not be given in respect of a director who discharged his duties as such wholly or mainly outside the United Kingdom; and any such director shall be left out of account for the purposes of sub-paragraph (3).
5
In paragraphs 3 and 4 “emoluments” has the same meaning as in paragraph 1, except that it does not include contributions paid in respect of a person under a pension scheme.
Emoluments waived
6
(1)
There shall be shown—
(a)
the number of directors who have waived rights to receive emoluments which, but for the waiver, would have fallen to be included in the amount shown under paragraph 1(1), and
(b)
the aggregate amount of those emoluments.
(2)
For the purposes of this paragraph it shall be assumed that a sum not receivable in respect of a period would have been paid at the time at which it was due, and if such a sum was payable only on demand, it shall be deemed to have been due at the time of the waiver.
Pensions of directors and past directors
7
(1)
There shall be shown the aggregate amount of directors’ or past directors’ pensions.
(2)
This amount does not include any pension paid or receivable under a pension scheme if the scheme is such that the contributions under it are substantially adequate for the maintenance of the scheme; but, subject to this, it includes any pension paid or receivable in respect of any such services of a director or past director as are mentioned in paragraph 1(2), whether to or by him or, on his nomination or by virtue of dependence on or other connection with him, to or by any other person.
(3)
The amount shown shall distinguish between pensions in respect of services as director, whether of the company or any of its subsidiary undertakings, and other pensions.
(4)
References to pensions include benefits otherwise than in cash and in relation to so much of a pension as consists of such a benefit references to its amount are to the estimated money value of the benefit.
The nature of any such benefit shall also be disclosed.
Compensation to directors for loss of office
8
(1)
There shall be shown the aggregate amount of any compensation to directors or past directors in respect of loss of office.
(2)
This amount includes compensation received or receivable by a director or past director for—
(a)
loss of office as director of the company, or
(b)
loss, while director of the company or on or in connection with his ceasing to be a director of it, of—
(i)
any other office in connection with the management of the company’s affairs, or
(ii)
any office as director or otherwise in connection with the management of the affairs of any subsidiary undertaking of the company;
and shall distinguish between compensation in respect of the office of director, whether of the company or any of its subsidiary undertakings, and compensation in respect of other offices.
(3)
References to compensation include benefits otherwise than in cash; and in relation to such compensation references to its amount are to the estimated money value of the benefit.
The nature of any such compensation shall be disclosed.
(4)
References to compensation for loss of office include compensation in consideration for, or in connection with, a person’s retirement from office.
Sums paid to third parties in respect of directors’ services
9
(1)
There shall be shown the aggregate amount of any consideration paid to or receivable by third parties for making available the services of any person—
(a)
as a director of the company, or
(b)
while director of the company—
(i)
as director of any of its subsidiary undertakings, or
(ii)
otherwise in connection with the management of the affairs of the company or any of its subsidiary undertakings.
(2)
The reference to consideration includes benefits otherwise than in cash; and in relation to such consideration the reference to its amount is to the estimated money value of the benefit.
The nature of any such consideration shall be disclosed.
(3)
The reference to third parties is to persons other than—
(a)
the director himself or a person connected with him or body corporate controlled by him, and
(b)
the company or any of its subsidiary undertakings.
Supplementary
10
(1)
The following applies with respect to the amounts to be shown under paragraphs 1, 7, 8 and 9.
(2)
The amount in each case includes all relevant sums paid by or receivable from—
(a)
the company; and
(b)
the company’s subsidiary undertakings; and
(c)
any other person,
except sums to be accounted for to the company or any of its subsidiary undertakings or, by virtue of sections 314 and 315 of this Act (duty of directors to make disclosure on company takeover; consequence of non-compliance), to past or present members of the company or any of its subsidiaries or any class of those members.
(3)
The amount to be shown under paragraph 8 shall distinguish between the sums respectively paid by or receivable from the company, the company’s subsidiary undertakings and persons other than the company and its subsidiary undertakings.
(4)
References to amounts paid to or receivable by a person include amounts pad to or receivable by a person connected with him or a body corporate controlled by him (but not so as to require an amount to be counted twice).
11
(1)
The amounts to be shown for any financial year under paragraphs 1, 7, 8 and 9 are the sums receivable in respect of that year (whenever paid) or, in the case of sums not receivable in respect of a period, the sums paid during that year.
(2)
But where—
(a)
any sums are not shown in a note to the accounts for the relevant financial year on the ground that the person receiving them is liable to account for them as mentioned in paragraph 10(2), but the liability is thereafter wholly or partly released or is not enforced within a period of 2 years; or
(b)
any sums paid by way of expenses allowance are charged to United Kingdom income tax after the end of the relevant financial year,
those sums shall, to the extent to which the liability is released or not enforced or they are charged as mentioned above (as the case may be), be shown in a note to the first accounts in which it is practicable to show them and shall be distinguished from the amounts to be shown apart from this provision.
12
Where it is necessary to do so for the purpose of making any distinction required by the preceding paragraphs in an amount to be shown in compliance with this Part of this Schedule, the directors may apportion any payments between the matters in respect of which these have been paid or are receivable in such manner as they think appropriate.
Interpretation
13
(1)
The following applies for the interpretation of this Part of this Schedule.
(2)
A reference to a subsidiary undertaking of the company—
(a)
in relation to a person who is or was, while a director of the company, a director also, by virtue of the company’s nomination (direct or indirect) of any other undertaking, includes (subject to the following sub-paragraph) that undertaking, whether or not it is or was in fact a subsidiary undertaking of the company, and
(b)
for the purposes of paragraphs 1 to 7 (including any provision of this Part of this Schedule referring to paragraph 1) is to an undertaking which is a subsidiary undertaking at the time the services were rendered, and for the purposes of paragraph 8 to a subsidiary undertaking immediately before the loss of office as director.
(3)
The following definitions apply—
(a)
“pension” includes any superannuation allowance, superannuation gratuity or similar payment,
(b)
“pension scheme” means a scheme for the provision of pensions in respect of services as director or otherwise which is maintained in whole or in part by means of contributions, and
(c)
“contribution”, in relation to a pension scheme, means any payment (including an insurance premium) paid for the purposes of the scheme by or in respect of persons rendering services in respect of which pensions will or may become payable under the scheme except that it does not include any payment in respect of two or more persons if the amount paid in respect of each of them is not ascertainable.
(4)
References in this Part of this Schedule to a person being “connected” with a director, and to a director “controlling” a body corporate, shall be construed in accordance with section 346.
Supplementary
14
This Part of this Schedule requires information to be given only so far as it is contained in the company’s books and papers or the company has the right to obtain it from the persons concerned.”.
4
(1)
“Part II Loans, Quasi-loans and Other Dealings in Favour of Directors”
(2)
Paragraphs 1 to 3 and 5 to 14 of that Part shall be renumbered 15 to 27, and internal cross-references in that Part shall be renumbered accordingly.
(3)
F381. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
In paragraph 1 (renumbered 15) for “Group accounts” substitute “
The group accounts of a holding company, or if it is not required to prepare group accounts its individual accounts,
”
.
(5)
“ Excluded transactions”
5
“(2)
In this Part of this Schedule “director” includes a shadow director.”.
6
(1)
“Part III Other Transactions, Arrangements and Agreements”
(2)
Paragraphs 15 to 17 of that Part shall be renumbered 28 to 30, and internal cross-references in that Part shall be renumbered accordingly.
(3)
In paragraph 16 (renumbered 29), for “made as mentioned in section 233(1)” substitute “
made by the company or a subsidiary of it for persons who at any time during the financial year were officers of the company (but not directors or shadow directors)
”
.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
F382. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F383F383SCHEDULE 5
1
Schedule 7 to the M56Companies Act 1985 (matters to be included in directors’ report) is amended as follows.
Subsidiary undertakings
2
(1)
F384. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
In paragraph 6 (general information), for
“subsidiaries” in each place where it occurs (three times) substitute “
subsidiary undertakings
”
.
Directors’ interests
3
“2
(1)
The information required by paragraphs 2A and 2B shall be given in the directors’ report, or by way of notes to the company’s annual accounts, with respect to each person who at the end of the financial year was a director of the company.
(2)
In those paragraphs—
(a)
“the register” means the register of directors’ interests kept by the company under section 325; and
(b)
references to a body corporate being in the same group as the company are to its being a subsidiary or holding company, or another subsidiary of a holding company, of the company.
2A
(1)
It shall be stated with respect to each director whether, according to the register, he was at the end of the financial year interested in shares in or debentures of the company or any other body corporate in the same group.
(2)
If he was so interested, there shall be stated the number of shares in and amount of debentures of each body (specifying it) in which, according to the register, he was then interested.
(3)
If a director was interested at the end of the financial year in shares in or debentures of the company or any other body corporate in the same group—
(a)
it shall also be stated whether, according to the register, he was at the beginning of the financial year (or, if he was not then a director, when he became one) interested in shares in or debentures of the company or any other body corporate in the same group, and
(b)
if he was so interested, there shall be stated the number of shares in and amount of debentures of each body (specifying it) in which, according to the register, he was then interested.
(4)
In this paragraph references to an interest in shares or debentures have the same meaning as in section 324; and references to the interest of a director include any interest falling to be treated as his for the purposes of that section.
(5)
The reference above to the time when a person became a director is, in the case of a person who became a director on more than one occasion, to the time when he first became a director.
2B
(1)
It shall be stated with respect to each director whether, according to the register, any right to subscribe for shares in or debentures of the company or another body corporate in the same group was during the financial year granted to, or exercised by, the director or a member of his immediate family.
(2)
If any such right was granted to, or exercised by, any such person during the financial year, there shall be stated the number of shares in and amount of debentures of each body (specifying it) in respect of which, according to the register, the right was granted or exercised.
(3)
A director’s “immediate family” means his or her spouse and infant children; and for this purpose “children” includes step-children, and “infant”, in relation to Scotland, means pupil or minor.
(4)
The reference above to a member of the director’s immediate family does not include a person who is himself or herself a director of the company.”.
F385F385SCHEDULE 6
Part I Small Companies
Balance sheet
1
(1)
The company may deliver a copy of an abbreviated version of the full balance sheet, showing only those items to which a letter or Roman number is assigned in the balance sheet format adopted under Part I of Schedule 4, but in other respects corresponding to the full balance sheet.
(2)
If a copy of an abbreviated balance sheet is delivered, there shall be disclosed in it or in a note to the company’s accounts delivered—
(a)
the aggregate of the amounts required by note (5) of the notes on the balance sheet formats set out in Part I of Schedule 4 to be shown separately for each item included under debtors (amounts falling due after one year), and
(b)
the aggregate of the amounts required by note (13) of those notes to be shown separately for each item included under creditors in Format 2 (amounts falling due within one year or after more than one year).
(3)
The provisions of section 233 as to the signing of the copy of the balance sheet delivered to the registrar apply to a copy of an abbreviated balance sheet delivered in accordance with this paragraph.
Profit and loss account
2
A copy of the company’s profit and loss account need not be delivered.
Disclosure of information in notes to accounts
3
(1)
Of the information required by Part III of Schedule 4 (information to be given in notes to accounts if not given in the accounts themselves) only the information required by the following provisions need be given—
paragraph 36 (accounting policies),
paragraph 38 (share capital),
paragraph 39 (particulars of allotments),
paragraph 42 (fixed assets), so far as it relates to those items to which a letter or Roman number is assigned in the balance sheet format adopted,
paragraph 48(1) and (4) (particulars of debts),
paragraph 58(1) (basis of conversion of foreign currency amounts into sterling),
paragraph 58(2) (corresponding amounts for previous financial year), so far as it relates to amounts stated in a note to the company’s accounts by virtue of a requirement of Schedule 4 or under any other provision of this Act.
(2)
Of the information required by Schedule 5 to be given in notes to the accounts, the information required by the following provisions need not be given—
paragraph 4 (financial years of subsidiary undertakings),
paragraph 5 (additional information about subsidiary undertakings),
paragraph 6 (shares and debentures of company held by subsidiary undertakings),
paragraph 10 (arrangements attracting merger relief).
(3)
Of the information required by Schedule 6 to be given in notes to the accounts, the information required by Part I (directors’ and chairman’s emoluments, pensions and compensation for loss of office) need not be given.
Directors’ report
4
A copy of the directors’ report need not be delivered.
Part II Small Companies
Profit and loss account
5
The company may deliver a profit and loss account in which the following items listed in the profit and loss account formats set out in Part I of Schedule 4 are combined as one item under the heading “gross profit or loss”—
Items 1, 2, 3 and 6 in Format 1;
Items 1 to 5 in Format 2;
Items A.1, B.1 and B.2 in Format 3;
Items A.1, A.2 and B.1 to B.4 in Format 4.
Disclosure of information in notes to accounts
6
The information required by paragraph 55 of Schedule 4 (particulars of turnover) need not be given.
Part III Supplementary Provisions
Statement that advantage taken of exemptions
7
(1)
Where the directors of a company take advantage of the exemptions conferred by Part I or Part II of this Schedule, the company’s balance sheet shall contain—
(a)
a statement that advantage is taken of the exemptions conferred by Part I or, as the case may be, Part II of this Schedule, and
(b)
a statement of the grounds on which, in the directors’ opinion, the company is entitled to those exemptions.
(2)
The statements shall appear in the balance sheet immediately above the signature required by section 233.
Special auditors’ report
8
(1)
If the directors of a company propose to take advantage of the exemptions conferred by Part I or II of this Schedule, it is the auditors’ duty to provide them with a report stating whether in their opinion the company is entitled to those exemptions and whether the documents to be proposed to be delivered in accordance with this Schedule are properly prepared.
(2)
The accounts delivered shall be accompanied by a special report of the auditors stating that in their opinion—
(a)
the company is entitled to the exemptions claimed in the directors’ statement, and
(b)
the accounts to be delivered are properly prepared in accordance with this Schedule.
(3)
In such a case a copy of the auditors’ report under section 235 need not be delivered separately, but the full text of it shall be reproduced in the special report; and if the report under section 235 is qualified there shall be included in the special report any further material necessary to understand the qualification.
(4)
Section 236 (signature of auditors’ report) applies to a special report under this paragraph as it applies to a report under section 235.
Dormant companies
9
Paragraphs 7 and 8 above do not apply where the company is exempt by virtue of section 250 (dormant companies) from the obligation to appoint auditors.
Requirements in connection with publication of accounts
10
(1)
Where advantage is taken of the exemptions conferred by Part I or II of this Schedule, section 240 (requirements in connection with publication of accounts) has effect with the following adaptations.
(2)
Accounts delivered in accordance with this Schedule and accounts in the form in which they would be required to be delivered apart from this Schedule are both “statutory accounts” for the purposes of that section.
(3)
References in that section to the auditors’ report under section 235 shall be read, in relation to accounts delivered in accordance with this Schedule, as references to the special report under paragraph 8 above.
F386F386SCHEDULE 7
Preliminary
Schedule 9 to the M57Companies Act 1985 is amended in accordance with this Schedule, as follows—
- (a)
for the heading of the Schedule substitute
“ SPECIAL PROVISIONS FOR BANKING AND INSURANCE COMPANIES AND GROUPS ”
; - (b)
omit the introductory paragraph preceding Part I, together with its heading;
- (c)
make the present provisions of Parts I to V of the Schedule (as amended by Part I of this Schedule) Part I of the Schedule, and accordingly—
- (i)
for the descriptive Part heading before paragraph 2 substitute
“ FORM AND CONTENT OF ACCOUNTS ”
, and - (ii)
omit the Part headings before paragraphs 19, 27, 31 and 32;
- (i)
- (d)
the provisions of Parts II, III and IV of this Schedule have effect as Parts II, III and IV of Schedule 9 to the Companies Act 1985.
Part I Form and Content of Accounts
1
In paragraph 10(1)(c) of Schedule 9 to the M58Companies Act 1985 (disclosure of outstanding loans in connection with certain cases of financial assistance for purchase of company’s own shares), after “153(4)(b)” insert “
, (bb)
”
.
2
In paragraph 13 of that Schedule (information supplementing balance sheet), omit sub-paragraph (3) (information as to acquisition of, or creation of lien or charge over, company’s own shares).
3
In paragraph 17(5) of that Schedule (statement of turnover: companies exempt from requirement) for “neither a holding company nor a subsidiary of another body corporate” substitute “
neither a parent company nor a subsidiary undertaking
”
.
4
“ Supplementary provisions
18A
(1)
Accounting policies shall be applied consistently within the same accounts and from one financial year to the next.
(2)
If it appears to the directors of a company that there are special reasons for departing from the principle stated in sub-paragraph (1) in preparing the company’s accounts in respect of any financial year, they may do so; but particulars of the departure, the reasons for it and its effect shall be given in a note to the accounts.
18B
It shall be stated whether the accounts have been prepared in accordance with applicable accounting standards, and particulars of any material departure from those standards and the reasons for it shall be given.
18C
(1)
In respect of every item shown in the balance sheet or profit and loss account, or stated in a note to the accounts, there shall be shown or stated the corresponding amount for the financial year immediately preceding that to which the accounts relate, subject to sub-paragraph (3).
(2)
Where the corresponding amount is not comparable, it shall be adjusted and particulars of the adjustment and the reasons for it shall be given in a note to the accounts.
(3)
Sub-paragraph (1) does not apply in relation to an amount shown—
(a)
as an amount the source or application of which is required by paragraph 8 above (reserves and provisions),
(b)
in pursuance of paragraph 13(10) above (acquisitions and disposals of fixed assets),
(c)
by virtue of paragraph 13 of Schedule 4A (details of accounting treatment of acquisitions),
(d)
by virtue of paragraph 2, 8(3), 16, 21(1)(d), 22(4) or (5), 24(3) or (4) or 27(3) or (4) of Schedule 5 (shareholdings in other undertakings), or
(e)
by virtue of Part II or III of Schedule 6 (loans and other dealings in favour of directors and others).”.
5
(1)
Before paragraph 19 of that Schedule insert the heading “
Provisions where company is parent company or subsidiary undertaking
”
;and that paragraph is amended as follows.
(2)
In sub-paragraph (1) for the words from “is a holding company” onwards substitute “
is a parent company
”
.
(3)
In sub-paragraph (2)—
(a)
for “subsidiaries”
(four times) substitute “
subsidiary undertakings
”
, and
(b)
in paragraph (a), for “Part I” substitute “
paragraphs 5, 6, 10, 13 and 14
”
.
(4)
Omit sub-paragraphs (3) to (7).
6
“20
(1)
This paragraph applies where the company is a subsidiary undertaking.
(2)
The balance sheet of the company shall show—
(a)
the aggregate amount of its indebtedness to undertakings of which it is a subsidiary undertaking or which are fellow subsidiary undertakings, and
(b)
the aggregate amount of the indebtedness of all such undertakings to it,
distinguishing in each case between indebtedness in respect of debentures and otherwise.
(3)
The balance sheet shall also show the aggregate amount of assets consisting of shares in fellow subsidiary undertakings.”.
7
Omit paragraphs 21 to 26 of that Schedule.
8
(1)
Before paragraph 27 of that Schedule insert the heading “
Exceptions for certain companies
”
;and that paragraph is amended as follows.
(2)
In sub-paragraph (2)—
(a)
for “Part I of this Schedule” substitute “
paragraphs 2 to 18 of this Schedule
”
, and
(b)
in paragraph (b) for the words from “paragraphs 15” to the end substitute “
and paragraph 15
”
.
(3)
In sub-paragraph (4), omit “of the said Part I”.
9
In paragraph 28 of that Schedule, in sub-paragraph (1)
(twice) and in sub-paragraph (2) for “Part I” substitute “
paragraphs 2 to 18
”
.
10
“28A
Where a company is entitled to, and has availed itself of, any of the provisions of paragraph 27 or 28 of this Schedule, section 235(2) only requires the auditors to state whether in their opinion the accounts have been properly prepared in accordance with this Act.”.
11
Omit paragraphs 29 to 31 of that Schedule.
12
Before paragraph 32 of that Schedule insert the heading “
Interpretation
”
;and in sub-paragraphs (1) and (2) of that paragraph for “this Schedule” substitute “
this Part of this Schedule
”
.
13
In paragraph 36 of that Schedule for “this Schedule” substitute “
this Part of this Schedule
”
.
Part II [Part II of Schedule 9 to the Companies Act 1985]Accounts of Banking or Insurance Group
Undertakings to be included in consolidation
1
The following descriptions of undertaking shall not be excluded from consolidation under section 229(4) (exclusion of undertakings whose activities are different from those of the undertakings consolidated)—
(a)
in the case of a banking group, an undertaking (other than a credit institution) whose activities are a direct extension of or ancillary to banking business;
(b)
in the case of an insurance group, an undertaking (other than one carrying on insurance business) whose activities are a direct extension of or ancillary to insurance business.
For the purposes of paragraph (a) “banking” means the carrying on of a deposit-taking business within the meaning of the M59Banking Act 1987.
General application of provisions applicable to individual accounts
2
(1)
In paragraph 1 of Schedule 4A (application to group accounts of provisions applicable to individual accounts), the reference in sub-paragraph (1) to the provisions of Schedule 4 shall be construed as a reference to the provisions of Part I of this Schedule; and accordingly—
(a)
the reference in sub-paragraph (2) to paragraph 59 of Schedule 4 shall be construed as a reference to paragraphs 19(2) and 20 of Part I of this Schedule; and
(b)
sub-paragraph (3) shall be omitted.
(2)
The general application of the provisions of Part I of this Schedule in place of those of Schedule 4 is subject to the following provisions.
Treatment of goodwill
3
(1)
The rules in paragraph 21 of Schedule 4 relating to the treatment of goodwill, and the rules in paragraphs 17 to 19 of that Schedule (valuation of fixed assets) so far as they relate to goodwill, apply for the purpose of dealing with any goodwill arising on consolidation.
(2)
Goodwill shall be shown as a separate item in the balance sheet under an appropriate heading; and this applies notwithstanding anything in paragraph 10(1)(b) or (2) of Part I of this Schedule (under which goodwill, patents and trade marks may be stated in the company’s individual accounts as a single item).
Minority interests and associated undertakings
4
The information required by paragraphs 17 and 20 to 22 of Schedule 4A (minority interests and associated undertakings) to be shown under separate items in the formats set out in Part I of Schedule 4 shall be shown separately in the balance sheet and profit and loss account under appropriate headings.
Companies entitled to benefit of exemptions
5
(1)
Where a banking or insurance company is entitled to the exemptions conferred by paragraph 27 or 28 of Part I of this Schedule, a group headed by that company is similarly entitled.
(2)
Paragraphs 27(4), 28(2) and 28A (accounts not to be taken to be other than true and fair; duty of auditors) apply accordingly where advantage is taken of those exemptions in relation to group accounts.
Part III [Part III of Schedule 9 to the Companies Act 1985]Additional Disclosure: Related Undertakings
1
Where accounts are prepared in accordance with the special provisions of this Part relating to banking companies or groups, there shall be disregarded for the purposes of—
(a)
paragraphs 7(2)(a), 23(2)(a) and 26(2)(a) of Schedule 5 (information about significant holdings in undertakings other than subsidiary undertakings: definition of 10 per cent. holding), and
(b)
paragraphs 9(1), 25(1) and 28(1) of that Schedule (additional information in case of 20 per cent. holding),
any holding of shares not comprised in the equity share capital of the undertaking in question.
Part IV [Part IV of Schedule 9 to the Companies Act 1985]Additional Disclosure: Emoluments and Other Benefits of Directors and Others
1
The provisions of this Part of this Schedule have effect with respect to the application of Schedule 6 (additional disclosure: emoluments and other benefits of directors and others) to a banking company or the holding company of such a company.
Loans, quasi-loans and other dealings
2
Part II of Schedule 6 (loans, quasi-loans and other dealings) does not apply for the purposes of accounts prepared by a banking company, or a company which is the holding company of a banking company, in relation to a transaction or arrangement of a kind mentioned in section 330, or an agreement to enter into such a transaction or arrangement, to which that banking company is a party.
Other transactions, arrangements and agreements
3
(1)
Part III of Schedule 6 (other transactions, arrangements and agreements) applies for the purposes of accounts prepared by a banking company, or a company which is the holding company of a banking company, only in relation to a transaction, arrangement or agreement made by that banking company for—
(a)
a person who was a director of the company preparing the accounts, or who was connected with such a director, or
(b)
a person who was a chief executive or manager (within the meaning of the M60Banking Act 1987) of that company or its holding company.
(2)
References in that Part to officers of the company shall be construed accordingly as including references to such persons.
(3)
In this paragraph “director” includes a shadow director.
(4)
For the purposes of that Part as it applies by virtue of this paragraph, a company which a person does not control shall not be treated as connected with him.
(5)
Section 346 of this Act applies for the purposes of this paragraph as regards the interpretation of references to a person being connected with a director or controlling a company.
F387F387SCHEDULE 8
Recent issues
1
(1)
This paragraph applies where a company prepares individual accounts in accordance with the special provisions of this Part relating to banking or insurance companies.
(2)
If in the financial year to which the accounts relate the company has issued any shares or debentures, the directors’ report shall state the reason for making the issue, the classes of shares or debentures issued and, as respects each class, the number of shares or amount of debentures issued and the consideration received by the company for the issue.
Turnover and profitability
2
(1)
This paragraph applies where a company prepares group accounts in accordance with the special provisions of this Part relating to banking or insurance groups.
(2)
If in the course of the financial year to which the accounts relate the group carried on business of two or more classes (other than banking or discounting or a class prescribed for the purposes of paragraph 17(2) of Part I of Schedule 9) that in the opinion of the directors differ substantially from each other, there shall be contained in the directors’ report a statement of—
(a)
the proportions in which the turnover for the financial year (so far as stated in the consolidated accounts) is divided amongst those classes (describing them), and
(b)
as regards business of each class, the extent or approximate extent (expressed in money terms) to which, in the opinion of the directors, the carrying on of business of that class contributed to or restricted the profit or loss of the group for that year (before taxation).
(3)
In sub-paragraph (2) “the group” means the undertakings included in the consolidation.
(4)
For the purposes of this paragraph classes of business which in the opinion of the directors do not differ substantially from each other shall be treated as one class.
Labour force and wages paid
3
(1)
This paragraph applies where a company prepares individual or group accounts in accordance with the special provisions of this Part relating to banking or insurance companies or groups.
(2)
There shall be stated in the directors’ report—
(a)
the average number of persons employed by the company or, if the company prepares group accounts, by the company and its subsidiary undertakings, and
(b)
the aggregate amount of the remuneration paid or payable to persons so employed.
(3)
The average number of persons employed shall be determined by adding together the number of persons employed (whether throughout the week or not) in each week of the financial year and dividing that total by the number of weeks in the financial year.
(4)
The aggregate amount of the remuneration paid or payable means the total amount of remuneration paid or payable in respect of the financial year; and for this purpose remuneration means gross remuneration and includes bonuses, whether payable under contract or not.
(5)
The information required by this paragraph need not be given if the average number of persons employed is less than 100.
(6)
No account shall be taken for the purposes of this paragraph of persons who worked wholly or mainly outside the United Kingdom.
(7)
This paragraph does not apply to a company which is a wholly-owned subsidiary of a company incorporated in Great Britain.
F388F388SCHEDULE 9
Introduction
1
The provisions of this Schedule explain expressions used in section 258 (parent and subsidiary undertakings) and otherwise supplement that section.
Voting rights in an undertaking
2
(1)
In section 258(2)(a) and (d) the references to the voting rights in an undertaking are to the rights conferred on shareholders in respect of their shares or, in the case of an undertaking not having a share capital, on members, to vote at general meetings of the undertaking on all, or substantially all, matters.
(2)
In relation to an undertaking which does not have general meetings at which matters are decided by the exercise of voting rights, the references to holding a majority of the voting rights in the undertaking shall be construed as references to having the right under the constitution of the undertaking to direct the overall policy of the undertaking or to alter the terms of its constitution.
Right to appoint or remove a majority of the directors
3
(1)
In section 258(2)(b) the reference to the right to appoint or remove a majority of the board of directors is to the right to appoint or remove directors holding a majority of the voting rights at meetings of the board on all, or substantially all, matters.
(2)
An undertaking shall be treated as having the right to appoint to a directorship if—
(a)
a person’s appointment to it follows necessarily from his appointment as director of the undertaking, or
(b)
the directorship is held by the undertaking itself.
(3)
A right to appoint or remove which is exercisable only with the consent or concurrence of another person shall be left out of account unless no other person has a right to appoint or, as the case may be, remove in relation to that directorship.
Right to exercise dominant influence
4
(1)
For the purposes of section 258(2)(c) an undertaking shall not be regarded as having the right to exercise a dominant influence over another undertaking unless it has a right to give directions with respect to the operating and financial policies of that other undertaking which its directors are obliged to comply with whether or not they are for the benefit of that other undertaking.
(2)
A “control contract” means a contract in writing conferring such a right which—
(a)
is of a kind authorised by the memorandum or articles of the undertaking in relation to which the right is exercisable, and
(b)
is permitted by the law under which that undertaking is established.
(3)
This paragraph shall not be read as affecting the construction of the expression “actually exercises a dominant influence” in section 258(4)(a).
Rights exercisable only in certain circumstances or temporarily incapable of exercise
5
(1)
Rights which are exercisable only in certain circumstances shall be taken into account only—
(a)
when the circumstances have arisen, and for so long as they continue to obtain, or
(b)
when the circumstances are within the control of the person having the rights.
(2)
Rights which are normally exercisable but are temporarily incapable of exercise shall continue to be taken into account.
Rights held by one person on behalf of another
6
Rights held by a person in a fiduciary capacity shall be treated as not held by him.
7
(1)
Rights held by a person as nominee for another shall be treated as held by the other.
(2)
Rights shall be regarded as held as nominee for another if they are exercisable only on his instructions or with his consent or concurrence.
Rights attributed to parent undertaking
9
(1)
Rights shall be treated as held by a parent undertaking if they are held by any of its subsidiary undertakings.
(2)
Nothing in paragraph 7 or 8 shall be construed as requiring rights held by a parent undertaking to be treated as held by any of its subsidiary undertakings.
(3)
For the purposes of paragraph 8 rights shall be treated as being exercisable in accordance with the instructions or in the interests of an undertaking if they are exercisable in accordance with the instructions of or, as the case may be, in the interests of any group undertaking.
Disregard of certain rights
10
The voting rights in an undertaking shall be reduced by any rights held by the undertaking itself.
Supplementary
11
References in any provision of paragraphs 6 to 10 to rights held by a person include rights falling to be treated as held by him by virtue of any other provision of those paragraphs but not rights which by virtue of any such provision are to be treated as not held by him.
SCHEDULE 10 Amendments Consequential on Part I
Part I Amendments of the Companies Act 1985
F3891
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
F390. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
F391. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
F392. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
F393. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
F394. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
F395. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
F396. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F3979
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
F398. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F39911
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F40012
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F40113
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
F402. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F40315
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F40416
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F40517
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F40618
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
F407. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20
F408. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
F409. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
F410. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
F411. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F41224
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II Amendments of Other Enactments
Betting, Gaming and Lotteries Act 1963 (c.2)
25
F413. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Harbours Act 1964 (c.40)
26
(1)
Section 42 of the Harbours Act 1964 (accounts and reports of statutory harbour undertakers) is amended as follows.
(2)
“(2)
Where a statutory harbour undertaker is a parent undertaking with subsidiary undertakings which carry on harbour activities or any associated activities, then, it shall be the duty of the company also to prepare group accounts relating to the harbour activities and associated activities carried on by it and its subsidiary undertakings.”
(3)
In subsection (6) (application of provisions of the M61Companies Act 1985)—
(a)
in paragraph (a) for “company accounts” substitute “
individual company accounts
”
;
(b)
in paragraph (c) omit the words “required to be attached to a company’s balance sheet”.
(4)
““parent undertaking” and “subsidiary undertaking” have the same meaning as in Part VII of the Companies Act 1985;”.
Coal Industry Act 1971 (c.16)
27
F414. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft and Shipbuilding Industries Act 1977 (c.3)
F41528
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crown Agents Act 1979 (c.43)
F41629
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
British Telecommunications Act 1981 (c.38)
F41730
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transport Act 1981 (c.56)
31
In section 11(4) of the Transport Act 1981, for “section 235” substitute “
section 234
”
.
Iron and Steel Act 1982 (c.25)
32
In section 24(5) of the Iron and Steel Act 1982 (meaning of “directors’ report”) for the words from “which, under section 235” to the end substitute “
which is required to be prepared under section 234 of the Companies Act 1985
”
.
Oil and Pipelines Act 1985 (c.62)
33
“ subsidiary undertakings ”, and at the end of that sub-paragraph add—
“In this sub-paragraph “subsidiary undertaking” has the same meaning as in Part VII of the Companies Act 1985.”.
Patents, Designs and Marks Act 1986 (c.39)
34
“(ii)
Part I of Schedule 4 and paragraphs 5(2)(d) and 10(1)(b) and (2) of Schedule 9 (form of company balance sheets); and”.
Company Directors Disqualification Act 1986 (c.46)
35
(1)
The Company Directors Disqualification Act 1986 is amended as follows.
(2)
In section 3(3)(b) (default orders)—
(a)
in sub-paragraph (i) for “section 244” substitute “
section 242(4)
”
, and
(b)
“(ia)
section 245B of that Act (order requiring preparation of revised accounts),”.
(3)
“5
The extent of the director’s responsibility for any failure by the directors of the company to comply with—
(a)
section 226 or 227 of the Companies Act (duty to prepare annual accounts), or
(b)
section 233 of that Act (approval and signature of accounts).”.
Financial Services Act 1986 (c.60)
F41836
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banking Act 1987 (c.22)
F41937
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income and Corporation Taxes Act 1988 (c.1)
38
(1)
The Income and Corporation Taxes Act 1988 is amended as follows.
F420(2)
In section 180 (annual return of registered profit-related pay scheme), in subsection (3) for “section 242(3)” substitute “
section 244(3)
”
.
(3)
F421. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dartford–Thurrock Crossing Act 1988 (c.20)
39
“(2)
In relation to a company “accounts” in subsection (1) means the company’s annual accounts for a financial year, together with the relevant directors’ report and the auditors’ report on those accounts.
Expressions used in this subsection have the same meaning as in Part VII of the Companies Act 1985.”.
F422F422SCHEDULE 11
Part I Grant and Revocation of Recognition
Application for recognition of supervisory body
1
(1)
A supervisory body may apply to the Secretary of State for an order declaring it to be a recognised supervisory body for the purposes of this Part of this Act.
(2)
Any such application—
(a)
shall be made in such manner as the Secretary of State may direct, and
(b)
shall be accompanied by such information as the Secretary of State may reasonably require for the purpose of determining the application.
(3)
At any time after receiving an application and before determining it the Secretary of State may require the applicant to furnish additional information.
(4)
The directions and requirements given or imposed under sub-paragraphs (2) and (3) may differ as between different applications.
(5)
Any information to be furnished to the Secretary of State under this paragraph shall, if he so requires, be in such form or verified in such manner as he may specify.
(6)
Every application shall be accompanied by a copy of the applicant’s rules and of any guidance issued by the applicant which is intended to have continuing effect and is issued in writing or other legible form.
Grant and refusal of recognition
2
(1)
The Secretary of State may, on an application duly made in accordance with paragraph 1 and after being furnished with all such information as he may require under that paragraph, make or refuse to make an order (a “recognition order”) declaring the applicant to be a recognised supervisory body for the purposes of this Part of this Act.
(2)
The Secretary of State shall not make a recognition order unless it appears to him, from the information furnished by the body and having regard to any other information in his possession, that the requirements of Part II of this Schedule are satisfied as respects that body.
(3)
The Secretary of State may refuse to make a recognition order in respect of a body if he considers that its recognition is unnecessary having regard to the existence of one or more other bodies which maintain and enforce rules as to the appointment and conduct of company auditors and which have been or are likely to be recognised.
(4)
Where the Secretary of State refuses an application for a recognition order he shall give the applicant a written notice to that effect specifying which requirements in the opinion of the Secretary of State are not satisfied or stating that the application is refused on the ground mentioned in sub-paragraph (3).
(5)
A recognition order shall state the date on which it takes effect.
Revocation of Recognition
3
(1)
A recognition order may be revoked by a further order made by the Secretary of State if at any time it appears to him—
(a)
that any requirement of Part II of this Schedule is not satisfied in the case of the body to which the recognition order relates (“the recognised body”),
(b)
that the recognised body has failed to comply with any obligation to which it is subject by virtue of this Part of this Act, or
(c)
that the continued recognition of the body is undesirable having regard to the existence of one or more other bodies which have been or are to be recognised.
(2)
An order revoking a recognition order shall state the date on which it takes effect and that date shall not be earlier than three months after the day on which the revocation order is made.
(3)
Before revoking a recognition order the Secretary of State shall give written notice of his intention to do so to the recognised body, take such steps as he considers reasonably practicable for bringing the notice to the attention of members of the body and publish it in such manner as he thinks appropriate for bringing it to the attention of any other persons who are in his opinion likely to be affected.
(4)
A notice under sub-paragraph (3) shall state the reasons for which the Secretary of State proposes to act and give particulars of the rights conferred by sub-paragraph (5).
(5)
A body on which a notice is served under sub-paragraph (3), any member of the body and any other person who appears to the Secretary of State to be affected may within three months after the date of service or publication, or within such longer time as the Secretary of State may allow, make written representations to the Secretary of State and, if desired, oral representations to a person appointed for that purpose by the Secretary of State; and the Secretary of State shall have regard to any representations made in accordance with this sub-paragraph in determining whether to revoke the recognition order.
(6)
If in any case the Secretary of State considers it essential to do so in the public interest he may revoke a recognition order without regard to the restriction imposed by sub-paragraph (2) and notwithstanding that no notice has been given or published under sub-paragraph (3) or that the time for making representations in pursuance of such a notice has not expired.
(7)
An order revoking a recognition order may contain such transitional provisions as the Secretary of State thinks necessary or expedient.
(8)
A recognition order may be revoked at the request or with the consent of the recognised body and any such revocation shall not be subject to the restrictions imposed by sub-paragraphs (1) and (2) or the requirements of sub-paragraphs (3) to (5).
(9)
On making an order revoking a recognition order the Secretary of State shall give the body written notice of the making of the order, take such steps as he considers reasonably practicable for bringing the making of the order to the attention of members of the body and publish a notice of the making of the order in such manner as he thinks appropriate for bringing it to the attention of any other persons who are in his opinion likely to be affected.
Part II Requirements for Recognition
Holding of appropriate qualification
4
(1)
The body must have rules to the effect that a person is not eligible for appointment as a company auditor unless—
(a)
in the case of an individual, he holds an appropriate qualification;
(b)
in the case of a firm—
(i)
the individuals responsible for company audit work on behalf of the firm hold an appropriate qualification, and
(ii)
the firm is controlled by qualified persons (see paragraph 5 below).
(2)
This does not prevent the body from imposing more stringent requirements.
(3)
A firm which has ceased to comply with the conditions mentioned in sub-paragraph (1)(b) may be permitted to remain eligible for appointment as a company auditor for a period of not more than three months.
5
(1)
The following provisions explain what is meant in paragraph 4(1)(b)(ii) by a firm being “controlled by qualified persons”.
(2)
For this purpose references to a person being qualified are, in relation to an individual, to his holding an appropriate qualification, and in relation to a firm, to its being eligible for appointment as a company auditor.
(3)
A firm shall be treated as controlled by qualified persons if, and only if—
(a)
a majority of the members of the firm are qualified persons, and
(b)
where the firm’s affairs are managed by a board of directors, committee or other management body, a majority of the members of that body are qualified persons or, if the body consists of two persons only, at least one of them is a qualified person.
(4)
A majority of the members of a firm means—
(a)
where under the firm’s constitution matters are decided apon by the exercise of voting rights, members holding a majority of the rights to vote on all, or substantially all, matters;
(b)
in any other case, members having such rights under the constitution of the firm as enable them to direct its overall policy or alter its constitution.
(5)
A majority of the members of the management body of a firm means—
(a)
where matters are decided at meetings of the management body by the exercise of voting rights, members holding a majority of the rights to vote on all, or substantially all, matters at such meetings;
(b)
in any other case, members having such rights under the constitution of the firm as enable them to direct its overall policy or alter its constitution.
(6)
The provisions of paragraphs 5 to 11 of Schedule 10A to the Companies Act 1985 (rights to be taken into account and attribution of rights) apply for the purposes of this paragraph.
Auditors to be fit and proper persons
6
(1)
The body must have adequate rules and practices designed to ensure that the persons eligible under its rules for appointment as a company auditor are fit and proper persons to be so appointed.
(2)
The matters which the body may take into account for this purpose in relation to a person must include—
(a)
any matter relating to any person who is or will be employed by or associated with him for the purposes of or in connection with company audit work; and
(b)
in the case of a body corporate, any matter relating to any director or controller of the body, to any other body corporate in the same group or to any director or controller of any such other body; and
(c)
in the case of a partnership, any matter relating to any of the partners, any director or controller of any of the partners, any body corporate in the same group as any of the partners and any director or controller of any such other body.
(3)
In sub-paragraph (2)(b) and (c) “controller”, in relation to a body corporate, means a person who either alone or with any associate or associates is entitled to exercise or control the exercise of 15 per cent. or more of the rights to vote on all, or substantially all, matters at general meetings of the body or another body corporate of which it is a subsidiary.
Professional integrity and independence
7
(1)
The body must have adequate rules and practices designed to ensure—
(a)
that company audit work is conducted properly and with integrity, and
(b)
that persons are not appointed company auditor in circumstances in which they have any interest likely to conflict with the proper conduct of the audit.
F423(1A)
The body must participate in arrangements within paragraph 17, and the rules and practices mentioned in sub-paragraph (1) above must include provision requiring compliance with any standards for the time being determined under such arrangements.
(2)
The body must also have adequate rules and practices designed to ensure that no firm is eligible under its rules for appointment as a company auditor unless the firm has arrangements to prevent—
(a)
individuals who do not hold an appropriate qualification, and
(b)
persons who are not members of the firm,
from being able to exert any influence over the way in which an audit is conducted in circumstances in which that influence would be likely to affect the independence or integrity of the audit.
Technical standards
8
F424(1)
The body must have rules and practices as to the technical standards to be applied in company audit work and as to the manner in which those standards are to be applied in practice.
F425(2)
The body must participate in arrangements within paragraph 18, and the rules and practices mentioned in sub-paragraph (1) above must include provision requiring compliance with any standards for the time being determined under such arrangements.
Procedures for maintaining competence
9
The body must have rules and practices designed to ensure that persons eligible under its rules for appointment as a company auditor continue to maintain an appropriate level of competence in the conduct of company audits.
Monitoring and enforcement
10
(1)
The body must have adequate arrangements and resources for the effective monitoring and enforcement of compliance with its rules.
(2)
The arrangements for monitoring may make provision for that function to be performed on behalf of the body (and without affecting its responsibility) by any other body or person who is able and willing to perform it.
Independent monitoring of audits of listed and other major companies
10A
(1)
The body must—
(a)
participate in arrangements within paragraph 19(1), and
(b)
have rules designed to ensure that members of the body who perform any company audit functions in respect of major audits take such steps as may be reasonably required of them to enable their performance of any such functions to be monitored by means of inspections carried out under the arrangements.
(2)
Any monitoring of such persons under the arrangements is to be regarded (so far as their performance of company audit functions in respect of major audits is concerned) as monitoring of compliance with the body’s rules for the purposes of paragraph 10(1).
(3)
In this paragraph “company audit function” and “major audit” have the same meaning as in paragraph 19.
Membership, eligibility and discipline
11
The rules and practices of the body relating to—
(a)
the admission and expulsion of members,
(b)
the grant and withdrawal of eligibility for appointment as a company auditor, and
(c)
the discipline it exercises over its members,
must be fair and reasonable and include adequate provision for appeals.
Investigation of complaints
12
(1)
The body must have effective arrangements for the investigation of complaints—
(a)
against persons who are eligible under its rules to be appointed company auditor, or
(b)
against the body in respect of matters arising out of its functions as a supervisory body.
(2)
The arrangements may make provision for the whole or part of that function to be performed by and to be the responsibility of a body or person independent of the body itself.
Independent investigation for disciplinary purposes of public interest cases
12A
(1)
The body must—
(a)
participate in arrangements within paragraph 20(1), and
(b)
have rules and practices designed to ensure that, where the designated persons have decided that any particular disciplinary action should be taken against a member of the body following the conclusion of an investigation under such arrangements, that decision is to be treated as if it were a decision made by the body in disciplinary proceedings against the member.
(2)
In sub-paragraph (1) “the designated persons” means the persons who, under the arrangements, have the function of deciding whether (and, if so, what) disciplinary action should be taken against a member of the body in the light of an investigation carried out under the arrangements.
Meeting of claims arising out of audit work
13
(1)
The body must have adequate rules or arrangements designed to ensure that persons eligible under its rules for appointment as a company auditor take such steps as may reasonably be expected of them to secure that they are able to meet claims against them arising out of company audit work.
(2)
This may be achieved by professional indemnity insurance or other appropriate arrangements.
Register of auditors and other information to be made available
14
The body must have rules requiring persons eligible under its rules for appointment as a company auditor to comply with any obligations imposed on them by regulations under section 35 or 36.
Taking account of costs of compliance
15
The body must have satisfactory arrangements for taking account, in framing its rules, of the cost to those to whom the rules would apply of complying with those rules and any other controls to which they are subject.
Promotion and maintenance of standards
16
The body must be able and willing to promote and maintain high standards of integrity in the conduct of company audit work and to co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority, body or person having responsibility in the United Kingdom for the qualification, supervision or regulation of auditors.
Part 3Arrangements in which supervisory bodies are required to participate
Arrangements for setting standards relating to professional integrity and independence
17
The arrangements referred to in paragraph 7(1A) are appropriate funded arrangements—
(a)
for the determining of standards for the purposes of the rules and practices mentioned in paragraph 7(1), and
(b)
for ensuring that the determination of those standards is done independently of the body.
Arrangements for setting technical standards
18
The arrangements referred to in paragraph 8(2) are appropriate funded arrangements—
(a)
for the determining of standards for the purposes of the rules and practices mentioned in paragraph 8(1), and
(b)
for ensuring that the determination of those standards is done independently of the body.
Arrangements for independent monitoring of audits of listed and other major companies
19
(1)
The arrangements referred to in paragraph 10A(1) are appropriate funded arrangements—
(a)
for enabling the performance by members of the body of company audit functions in respect of major audits to be monitored by means of inspections carried out under the arrangements, and
(b)
for ensuring that the carrying out of such monitoring and inspections is done independently of the body.
(2)
In this paragraph—
“company audit function” means any function performed as a company auditor;
“major audit” means an audit conducted in respect of—
(a)
a company any of whose securities have been admitted to the official list (within the meaning of Part 6 of the Financial Services and Markets Act 2000), or
(b)
any other company in whose financial condition there is a major public interest.
Arrangements for independent investigation for disciplinary purposes of public interest cases
20
(1)
The arrangements referred to in paragraph 12A(1) are appropriate funded arrangements—
(a)
for the carrying out of investigations into public interest cases arising in connection with the performance of company audit functions by members of the body,
(b)
for the holding of disciplinary hearings relating to members of the body which appear to be desirable following the conclusion of such investigations,
(c)
for requiring such hearings to be held in public except where the interests of justice otherwise require,
(d)
for the persons before whom such hearings have taken place to decide whether (and, if so, what) disciplinary action should be taken against the members to whom the hearings related, and
(e)
for ensuring that the carrying out of those investigations, the holding of those hearings, and the taking of those decisions are done independently of the body.
(2)
In this paragraph—
“company audit function” means any function performed as a company auditor;
“public interest cases” means matters which raise or appear to raise important issues affecting the public interest.
Supplementary: arrangements to operate independently of body
21
(1)
This paragraph applies for the purposes of—
paragraph 17(b),
paragraph 18(b),
paragraph 19(1)(b), or
paragraph 20(1)(e).
(2)
Arrangements cannot be regarded as appropriate for the purpose of ensuring that the thing or things mentioned in that provision is or are done independently of the body unless they are designed to ensure that the body—
(a)
will have no involvement in the appointment or selection of any of the persons who are to be responsible for doing the thing or things in question, and
(b)
will not otherwise be involved in the doing of that thing or those things.
(3)
Sub-paragraph (2) imposes a minimum requirement and does not preclude the possibility that additional criteria may need to be satisfied in order for the arrangements to be regarded as appropriate for the purpose in question.
Supplementary: “funded” arrangements etc.
22
(1)
For the purposes of any of paragraphs 17, 18, 19 and 20, arrangements are “funded”arrangements if, in the event of their providing for the payment of costs of maintaining the arrangements, such costs are to be paid by the body in accordance with the arrangements.
(2)
Arrangements can qualify as arrangements within any of paragraphs 17, 18, 19(1) and 20(1) even though the matters for which they provide are more extensive in any respect than those mentioned in that provision.
F426F426SCHEDULE 12
Part I Grant and Revocation of Recognition
Application for recognition of professional qualification
1
(1)
A qualifying body may apply to the Secretary of State for an order declaring a qualification offered by it to be a recognised professional qualification for the purposes of this Part of this Act.
(2)
Any such application—
(a)
shall be made in such manner as the Secretary of State may direct, and
(b)
shall be accompanied by such information as the Secretary of State may reasonably require for the purpose of determining the application.
(3)
At any time after receiving an application and before determining it the Secretary of State may require the applicant to furnish additional information.
(4)
The directions and requirements given or imposed under sub-paragraphs (2) and (3) may differ as between different applications.
(5)
Any information to be furnished to the Secretary of State under this section shall, if he so requires, be in such form or verified in such manner as he may specify.
In the case of examination standards, the verification required may include independent moderation of the examinations over such period as the Secretary of State considers necessary.
(6)
Every application shall be accompanied by a copy of the applicant’s rules and of any guidance issued by it which is intended to have continuing effect and is issued in writing or other legible form.
Grant and refusal of recognition
2
(1)
The Secretary of State may, on an application duly made in accordance with paragraph 1 and after being furnished with all such information as he may require under that paragraph, make or refuse to make an order (a “recognition order”) declaring the qualification in respect of which the application was made to be a recognised professional qualification for the purposes of this Part of this Act.
In this Part of this Act a “recognised qualifying body” means a qualifying body offering a recognised professional qualification.
(2)
The Secretary of State shall not make a recognition order unless it appears to him, from the information furnished by the applicant and having regard to any other information in his possession, that the requirements of Part II of this Schedule are satisfied as respects the qualification.
(3)
Where the Secretary of State refuses an application for a recognition order he shall give the applicant a written notice to that effect specifying which requirements, in his opinion, are not satisfied.
(4)
A recognition order shall state the date on which it takes effect.
Revocation of recognition
3
(1)
A recognition order may be revoked by a further order made by the Secretary of State if at any time it appears to him—
(a)
that any requirement of Part II of this Schedule is not satisfied in relation to the qualification to which the recognition order relates, or
(b)
that the qualifying body has failed to comply with any obligation to which it is subject by virtue of this Part of this Act.
(2)
An order revoking a recognition order shall state the date on which it takes effect and that date shall not be earlier than three months after the day on which the revocation order is made.
(3)
Before revoking a recognition order the Secretary of State shall give written notice of his intention to do so to the qualifying body, take such steps as he considers reasonably practicable for bringing the notice to the attention of persons holding the qualification or in the course of studying for it and publish it in such manner as he thinks appropriate for bringing it to the attention of any other persons who are in his opinion likely to be affected.
(4)
A notice under sub-paragraph (3) shall state the reasons for which the Secretary of State proposes to act and give particulars of the rights conferred by sub-paragraph (5).
(5)
A body on which a notice is served under sub-paragraph (3), any person holding the qualification or in the course of studying for it and any other person who appears to the Secretary of State to be affected may within three months after the date of service or publication, or within such longer time as the Secretary of State may allow, make written representations to the Secretary of State and, if desired, oral representations to a person appointed for that purpose by the Secretary of State; and the Secretary of State shall have regard to any representations made in accordance with this subsection in determining whether to revoke the recognition order.
(6)
If in any case the Secretary of State considers it essential to do so in the public interest he may revoke a recognition order without regard to the restriction imposed by sub-paragraph (2) and notwithstanding that no notice has been given or published under sub-paragraph (3) or that the time for making representations in pursuance of such a notice has not expired.
(7)
An order revoking a recognition order may contain such transitional provisions as the Secretary of State thinks necessary or expedient.
(8)
A recognition order may be revoked at the request or with the consent of the qualifying body and any such revocation shall not be subject to the restrictions imposed by sub-paragraphs (1) and (2) or the requirements of sub-paragraphs (3) to (5).
(9)
On making an order revoking a recognition order the Secretary of State shall give the qualifying body written notice of the making of the order, take such steps as he considers reasonably practicable for bringing the making of the order to the attention of persons holding the qualification or in the course of studying for it and publish a notice of the making of the order in such manner as he thinks appropriate for bringing it to the attention of any other persons who are in his opinion likely to be affected.
Part II Requirements for Recognition
Entry requirements
4
(1)
The qualification must only be open to persons who have attained university entrance level or have a sufficient period of professional experience.
(2)
In relation to a person who has not been admitted to a university or other similar establishment in the United Kingdom, attaining university entrance level means—
(a)
being educated to such a standard as would entitle him to be considered for such admission on the basis of—
(i)
academic or professional qualifications obtained in the United Kingdom and recognised by the Secretary of State to be of an appropriate standard, or
(ii)
academic or professional qualifications obtained outside the United Kingdom which the Secretary of State considers to be of an equivalent standard; or
(b)
being assessed on the basis of written tests of a kind appearing to the Secretary of State to be adequate for the purpose, with or without oral examination, as of such a standard of ability as would entitle him to be considered for such admission.
(3)
The assessment, tests and oral examination referred to in sub-paragraph (2)(b) may be conducted by the qualifying body or by some other body approved by the Secretary of State.
Course of theoretical instruction
5
The qualification must be restricted to persons who have completed a course of theoretical instruction in the subjects prescribed for the purposes of paragraph 7 or have a sufficient period of professional experience.
Sufficient period of professional experience
6
(1)
The references in paragraphs 4 and 5 to a sufficient period of professional experience are to not less than seven years’ experience in a professional capacity in the fields of finance, law and accountancy.
(2)
Periods of theoretical instruction in the fields of finance, law and accountancy may be deducted from the required period of professional experience, provided the instruction—
(a)
lasted at least one year, and
(b)
is attested by an examination recognised by the Secretary of State for the purposes of this paragraph;
but the period of professional experience may not be so reduced by more than four years.
(3)
The period of professional experience together with the practical training required in the case of persons satisfying the requirement in paragraph 5 by virtue of having a sufficient period of professional experience must not be shorter than the course of theoretical instruction referred to in that paragraph and the practical training required in the case of persons satisfying the requirement of that paragraph by virtue of having completed such a course.
Examination
7
(1)
The qualification must be restricted to persons who have passed an examination (at least part of which is in writing) testing—
(a)
theoretical knowledge of the subjects prescribed for the purposes of this paragraph by regulations made by the Secretary of State, and
(b)
ability to apply that knowledge in practice,
and requiring a standard of attainment at least equivalent to that required to obtain a degree from a university or similar establishment in the United Kingdom.
(2)
The qualification may be awarded to a person without his theoretical knowledge of a subject being tested by examination if he has passed a university or other examination of equivalent standard in that subject or holds a university degree or equivalent qualification in it.
(3)
The qualification may be awarded to a person without his ability to apply his theoretical knowledge of a subject in practice being tested by examination if he has received practical training in that subject which is attested by an examination or diploma recognised by the Secretary of State for the purposes of this paragraph.
(4)
Regulations under this paragraph shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
Practical training
8
(1)
The qualification must be restricted to persons who have completed at least three years’ practical training of which—
(a)
part was spent being trained in company audit work, and
(b)
a substantial part was spent being trained in company audit work or other audit work of a description approved by the Secretary of State as being similar to company audit work.
For this purpose “company audit work” includes the work of a person appointed as auditor under the M62Companies (Northern Ireland) Order 1986 or under the law of a country or territory outside the United Kingdom where it appears to the Secretary of State that the law and practice with respect to the audit of company accounts is similar to that in the United Kingdom.
(2)
The training must be given by persons approved by the body offering the qualification as persons as to whom the body is satisfied, in the light of undertakings given by them and the supervision to which they are subject (whether by the body itself or some other body or organisation), that they will provide adequate training.
(3)
At least two-thirds of the training must be given by a fully-qualified auditor, that is, a person—
(a)
eligible in accordance with this Part of this Act to be appointed as a company auditor, or
(b)
satisfying the corresponding requirements of the law of Northern Ireland or another member State of the European Economic Community.
The body offering the qualification
9
(1)
The body offering the qualification must have—
(a)
rules and arrangements adequate to ensure compliance with the requirements of paragraphs 4 to 8, and
(b)
adequate arrangements for the effective monitoring of its continued compliance with those requirements.
(2)
The arrangements must include arrangements for monitoring the standard of its examinations and the adequacy of the practical training given by the persons approved by it for that purpose.
F427F427SCHEDULE 13
F428Operation of this Schedule
F4291
(1)
This Schedule has effect in relation to a body designated by an order under section 46 as follows—
(a)
paragraphs 2 to 12 have effect in relation to the body where it is established by the order;
(b)
paragraphs 2 and 6 to 11 have effect in relation to the body where it is an existing body (see section 46(1A)(b)); and
(c)
paragraph 13 has effect in relation to the body where it is an existing body that is an unincorporated association.
(2)
In their operation in accordance with sub-paragraph (1)(b), paragraphs 2 and 6 apply only in relation to—
(a)
things done by or in relation to the body in or in connection with the exercise of functions transferred to it by the order, and
(b)
functions of the body which are functions so transferred.
(3)
Any power conferred by this Schedule to make provision by order is a power to make provision by an order under section 46.
Status
2
The body shall not be regarded as acting on behalf of the Crown and its members, officers and employees shall not be regarded as Crown servants.
Name, members and chairman
3
(1)
The body shall be known by such name as may be specified in the delegation order.
(2)
The body shall consist of such persons (not being less than eight) as the Secretary of State may appoint after such consultation as he thinks appropriate; and the chairman of the body shall be such person as the Secretary of State may appoint from amongst its members.
(3)
The Secretary of State may make provision by order as to the terms on which the members of the body are to hold and vacate office and as to the terms on which a person appointed as chairman is to hold and vacate the office of chairman.
Financial provisions
4
(1)
The body shall pay to its chairman and members such remuneration, and such allowances in respect of expenses properly incurred by them in the performance of their duties, as the Secretary of State may determine.
(2)
As regards any chairman or member in whose case the Secretary of State so determines, the body shall pay or make provision for the payment of—
(a)
such pension, allowance or gratuity to or in respect of that person on his retirement or death, or
(b)
such contributions or other payment towards the provision of such a pension, allowance or gratuity,
as the Secretary of State may determine.
(3)
Where a person ceases to be a member of the body otherwise than on the expiry of his term of office and it appears to the Secretary of State that there are special circumstances which make it right for him to receive compensation, the body shall make a payment to him by way of compensation of such amount as the Secretary of State may determine.
Proceedings
5
(1)
The delegation order may contain such provision as the Secretary of State considers appropriate with respect to the proceedings of the body.
(2)
The order may, in particular—
(a)
authorise the body to discharge any functions by means of committees consisting wholly or partly of members of the body;
(b)
provide that the validity of proceedings of the body, or of any such committee, is not affected by any vacancy among the members or any defect in the appointment of any member.
Fees
6
(1)
The body may retain fees payable to it.
(2)
The fees shall be applied for meeting the expenses of the body in discharging its functions and for any purposes incidental to those functions.
(3)
Those expenses include any expenses incurred by the body on such staff, accommodation, services and other facilities as appear to it to be necessary or expedient for the proper performance of its functions.
(4)
In prescribing the amount of fees in the exercise of the functions transferred to it the body shall prescribe such fees as appear to it sufficient to defray those expenses, taking one year with another.
(5)
Any exercise by the body of the power to prescribe fees requires the approval of the Secretary of State; and the Secretary of State may, after consultation with the body, by order vary or revoke any regulations made by it prescribing fees.
Legislative functions
7
(1)
Regulations made by the body in the exercise of the functions transferred to it shall be made by instrument in writing, but not by statutory instrument.
(2)
The instrument shall specify the provision of this Part of this Act under which it is made.
(3)
The Secretary of State may by order impose such requirements as he thinks necessary or expedient as to the circumstances and manner in which the body must consult on any regulations it proposes to make.
8
(1)
Immediately after an instrument is made it shall be printed and made available to the public with or without payment.
(2)
A person shall not be taken to have contravened any regulation if he shows that at the time of the alleged contravention the instrument containing the regulation had not been made available as required by this paragraph.
9
(1)
The production of a printed copy of an instrument purporting to be made by the body on which is endorsed a certificate signed by an officer of the body authorised by it for the purpose and stating—
(a)
that the instrument was made by the body,
(b)
that the copy is a true copy of the instrument, and
(c)
that on a specified date the instrument was made available to the public as required by paragraph 8,
is prima facie evidence or, in Scotland, sufficient evidence of the facts stated in the certificate.
(2)
A certificate purporting to be signed as mentioned in sub-paragraph (1) shall be deemed to have been duly signed unless the contrary is shown.
(3)
Any person wishing in any legal proceedings to cite an instrument made by the body may require the body to cause a copy of it to be endorsed with such a certificate as is mentioned in this paragraph.
Report and accounts
10
(1)
The body shall at least once in each year for which the delegation order is in force make a report to the Secretary of State on the discharge of the functions transferred to it and on such other matters as the Secretary of State may by order require.
(2)
The Secretary of State shall lay before Parliament copies of each report received by him under this paragraph.
F430(2A)
The following provisions of this paragraph apply as follows—
(a)
sub-paragraphs (3) and (4) apply only where the body is established by the order, and
(b)
sub-paragraphs (5) and (6) apply only where the body is an existing body.
(3)
The Secretary of State may, with the consent of the Treasury, give directions to the body with respect to its accounts and the audit of its accounts and it is the duty of the body to comply with the directions.
(4)
A person shall not be appointed auditor of the body unless he is eligible for appointment as a company auditor under section 25.
F431(5)
Unless the body is a company to which section 226 of the Companies Act 1985 (duty to prepare individual company accounts) applies—
(a)
the Secretary of State may, with the consent of the Treasury, give directions to the body with respect to its accounts and the audit of its accounts, and
(b)
it is the duty of the body to comply with the directions.
(6)
Whether or not the body is a company to which section 226 of the Companies Act 1985 applies—
(a)
the Secretary of State may give directions to the body providing that any provisions of that Act specified in the directions are to apply to the body, with or without any modifications so specified, and
(b)
it is the duty of the body to comply with the directions.
Other supplementary provisions
11
(1)
The transfer of a function to a body F432designated by a delegation order does not affect anything previously done in the exercise of the function transferred; and the resumption of a function so transferred does not affect anything previously done in exercise of the function resumed.
(2)
The Secretary of State may by order make such transitional and other supplementary provision as he thinks necessary or expedient in relation to the transfer or resumption of a function.
(3)
The provision that may be made in connection with the transfer of a function includes, in particular, provision—
(a)
for modifying or excluding any provision of this Part of this Act in its application to the function transferred;
(b)
for applying to the body F432designated by the delegation order, in connection with the function transferred, any provision applying to the Secretary of State which is contained in or made under any other enactment;
(c)
for the transfer of any property, rights or liabilities from the Secretary of State to that body;
(d)
for the carrying on and completion by that body of anything in process of being done by the Secretary of State when the order takes effect;
(e)
for the substitution of that body for the Secretary of State in any instrument, contract or legal proceedings.
(4)
The provision that may be made in connection with the resumption of a function includes, in particular, provision—
(a)
for the transfer of any property, rights or liabilities from that body to the Secretary of State;
(b)
for the carrying on and completion by the Secretary of State of anything in process of being done by that body when the order takes effect;
(c)
for the substitution of the Secretary of State for that body in any instrument, contract or legal proceedings.
12
Where a delegation order is revoked, the Secretary of State may by order make provision—
(a)
for the payment of compensation to persons ceasing to be employed by the body established by the delegation order; and
(b)
as to the winding up and dissolution of the body.
13
(1)
This paragraph applies where the body is an unincorporated association.
(2)
Any relevant proceedings may be brought by or against the body in the name of any body corporate whose constitution provides for the establishment of the body.
(3)
In sub-paragraph (2) “relevant proceedings” means proceedings brought in or in connection with the exercise of any transferred function.
(4)
In relation to proceedings brought as mentioned in sub-paragraph (2), any reference in paragraph 11(3)(e) or (4)(c) to the body replacing or being replaced by the Secretary of State in any legal proceedings is to be read with the appropriate modifications.
F433SCHEDULE 14 Supervisory and qualifying bodies: Restrictive practices
Part I Prevention of restrictive practices
Notification of changes to rules or guidance
2
(1)
Where a recognised supervisory or qualifying body amends, revokes or adds to its rules or guidance in a manner which may reasonably be regarded as likely—
(a)
to restrict, distort or prevent competition to any significant extent, or
(b)
otherwise to affect the question whether the recognition order granted to the body should continue in force,
it shall within seven days give the Secretary of State written notice of the amendment, revocation or addition.
(2)
Notice need not be given under sub-paragraph (1) of the revocation of guidance not intended to have continuing effect or issued otherwise than in writing or other legible form, or of any amendment or addition to guidance which does not result in or consist of guidance which is intended to have continuing effect and is issued in writing or other legible form.
Continuing scrutiny by the Director General of Fair Trading
3
(1)
The F436OFT shall keep under review the rules made or guidance issued by a recognised supervisory or qualifying body, and if F437it is of the opinion that any rules or guidance of such a body have, or are intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition, F437it shall report F437its opinion to the Secretary of State, stating what in F437its opinion the effect is or is likely to be.
(2)
(3)
(4)
The F436OFT may from time to time consider whether—
(a)
any practices of a recognised supervisory or qualifying body in its capacity as such, or
(b)
any relevant practices required or contemplated by the rules or guidance of such a body or otherwise attributable to its conduct in its capacity as such,
have, or are intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition and, if so, what that effect is or is likely to be; and if F439it is of that opinion F439it shall make a report to the Secretary of State stating F439its opinion and what the effect is or is likely to be.
(5)
The practices relevant for the purposes of sub-paragraph (4)(b) in the case of a recognised supervisory body are practices engaged in for the purposes of, or in connection with, appointment as a company auditor or the conduct of company audit work by persons who—
(a)
are eligible under its rules for appointment as a company auditor, or
(b)
hold an appropriate qualification and are directors or other officers of bodies corporate which are so eligible or partners in, or employees of, partnerships which are so eligible.
(6)
The practices relevant for the purposes of sub-paragraph (4)(b) in the case of a recognised qualifying body are—
(a)
practices engaged in by persons in the course of seeking to obtain a recognised professional qualification from that body, and
(b)
practices engaged in by persons approved by the body for the purposes of giving practical training to persons seeking such a qualification and which relate to such training.
Investigatory powers of the Director
4
(1)
(2)
The F440OFT may by a notice in writing require any person to produce, at a time and place specified in the notice, to the F440OFT or to any person appointed by F442it for the purpose, any documents which are specified or described in the notice and which are documents in his custody or under his control and relating to any matter relevant to the investigation.
(3)
(4)
A person shall not under this paragraph be required to produce any document or disclose any information which he would be entitled to refuse to produce or disclose on grounds of legal professional privilege in proceedings in the High Court or on the grounds of confidentiality as between client and professional legal adviser in proceedings in the Court of Session.
(5)
F443. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F444Enforcement
4A
(1)
The court may, on an application by the OFT, enquire into whether any person (“the defaulter”) has refused or otherwise failed, without reasonable excuse, to comply with a notice under paragraph 4.
(2)
An application under sub-paragraph (1) shall include details of the possible failure which the OFT considers has occurred.
(3)
In enquiring into a case under sub-paragraph (1), the court shall hear any witness who may be produced against or on behalf of the defaulter and any statement which may be offered in defence.
(4)
Sub-paragraphs (5) and (6) apply where the court is satisfied, after hearing any witnesses and statements as mentioned in sub-paragraph (3), that the defaulter has refused or otherwise failed, without reasonable excuse, to comply with the notice under paragraph 4.
(5)
The court may punish the defaulter as it would have been able to punish him had he been guilty of contempt of court.
(6)
Where the defaulter is a body corporate, the court may punish any director or officer of the defaulter as it would have been able to punish that director or officer had the director or officer been guilty of contempt of court.
F445(6A)
Where the defaulter is a partnership constituted under the law of Scotland, the court may punish any partner of the defaulter as it would have been able to punish him had he been guilty of contempt of court.
(7)
In this section “the court”—
(a)
in relation to England and Wales, means the High Court, and
(b)
in relation to Scotland, means the Court of Session.
F4464B
(1)
A person commits an offence if he intentionally alters, suppresses or destroys a document which he has been required to produce by a notice under paragraph 4.
(2)
A person who commits an offence under sub-paragraph (1) shall be liable—
(a)
on summary conviction, to a fine not exceeding the statutory maximum;
(b)
on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.
Publication of Director’s reports
5
(1)
(2)
F447It shall exclude from a published report, so far as practicable, any matter which relates to the affairs of a particular person (other than the supervisory or qualifying body concerned) the publication of which would or might in F447its opinion seriously and prejudicially affect the interests of that person.
Powers exercisable by the Secretary of State in consequence of report
6
(1)
The powers conferred by this section are exercisable by the Secretary of State if, having received and considered a report from the F448OFT under paragraph 3(1) or (4), it appears to him that—
(a)
any rules made or guidance issued by a recognised supervisory or qualifying body, or
(b)
any such practices as are mentioned in paragraph 3(4),
have, or are intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition and that that effect is greater than is reasonably justifiable having regard to the purposes of this Part of this Act.
(2)
The powers are—
(a)
to revoke the recognition order granted to the body concerned,
(b)
to direct it to take specified steps for the purpose of securing that the rules, guidance or practices in question do not have the effect mentioned in sub-paragraph (1), and
(c)
to make alterations in the rules of the body for that purpose.
(3)
The provisions of paragraph 3(2) to (5), (7) and (9) of Schedule 11 or, as the case may be, Schedule 12 have effect in relation to the revocation of a recognition order under sub-paragraph (2)(a) above as they have effect in relation to the revocation of such an order under that Schedule.
(4)
Before the Secretary of State exercises the power conferred by sub-paragraph (2)(b) or (c) above he shall—
(a)
give written notice of his intention to do so to the body concerned and take such steps (whether by publication or otherwise) as he thinks appropriate for bringing the notice to the attention of any other person who in his opinion is likely to be affected by the exercise of the power, and
(b)
have regard to any representation made within such time as he considers reasonable by the body or any such other person.
(5)
A notice under sub-paragraph (4) shall give particulars of the manner in which the Secretary of State proposes to exercise the power in question and state the reasons for which he proposes to act; and the statement of reasons may include matters contained in any report received by him under paragraph 4.
Supplementary provisions
7
(1)
A direction under paragraph 6 is, on the application of the Secretary of State, enforceable by injunction or, in Scotland, by an order under section 45 of the M63Court of Session Act 1988.
(2)
The fact that any rules made by a recognised supervisory or qualifying body have been altered by the Secretary of State, or pursuant to a direction of the Secretary of State, under paragraph 6 does not preclude their subsequent alteration or revocation by that body.
(3)
In determining for the purposes of this Part of this Schedule whether any guidance has, or is likely to have, any particular effect the Secretary of State and the F449OFT may assume that the persons to whom it is addressed will act in conformity with it.
Part II Consequential Exemptions from Competition Law
Fair Trading Act 1973 (c. 41)
8
F450. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F451The Competition Act 1998
F4529
(1)
The Chapter I prohibition does not apply to an agreement for the constitution of a recognised supervisory or qualifying body to the extent to which it relates to—
(a)
rules of, or guidance issued by, the body; and
(b)
incidental matters connected with the rules or guidance.
(2)
The Chapter I prohibition does not apply to an agreement the parties to which consist of or include—
(a)
a recognised supervisory or qualifying body, or
(b)
any person mentioned in paragraph 3(5) or (6) above,
to the extent to which the agreement consists of provisions the inclusion of which in the agreement is required or contemplated by the rules or guidance of that body.
(3)
The Chapter I prohibition does not apply to the practices mentioned in paragraph 3(4)(a) and (b) above.
(4)
Where a recognition order is revoked, sub-paragraphs (1) to (3) above are to continue to apply for a period of six months beginning with the day on which the revocation takes effect, as if the order were still in force.
(5)
In this paragraph—
(a)
“the Chapter I prohibition” means the prohibition imposed by section 2(1) of the Competition Act 1998,
(b)
references to an agreement are to be read as applying equally to, or in relation to, a decision or concerted practice,
and expressions used in this paragraph which are also used in Part I of the Competition Act 1998 are to be interpreted in the same way as for the purposes of that Part of that Act.
(6)
In the application of this paragraph to decisions and concerted practices, references to provisions of an agreement are to be read as references to elements of a decision or concerted practice.
Competition Act 1980 (c. 21)
F45310
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F454SCHEDULE 15 Charges on Property of Oversea Companies
F454. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F455SCHEDULE 16 Amendments Consequential on Part IV
F455 Land Charges Act 1972 (c. 61)
F4551
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F455 Companies Act 1985 (c. 6)
F4551A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4552
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F455 Insolvency Act 1986 (c. 45)
F4553
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F455 Company Directors Disqualification Act 1986 (c. 46)
F4554
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F456SCHEDULE 17 Company Contracts, Seals, &c.: Further Provisions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4561
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4562
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4564
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4567
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4568
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4569
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F45610
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE 18“Subsidiary” and related expressions: consequential amendments and savings
Coal Industry Nationalisation Act 1946 (c. 59)
1
In Schedule 2A to the Coal Industry Nationalisation Act 1946 (eligibility for superannuation benefits), in the definition of “subsidiary” in paragraph 5 of the Table, for “section 154 of the Companies Act 1948” substitute “section 736 of the Companies Act 1985”.
Electricity Act 1947 (c. 54)
2
F457. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Landlord and Tenant Act 1954 (c. 56)
3
F458. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transport Act 1962 (c. 46)
4
In the Transport Act 1946, in the definition of “subsidiary” in section 92(1) (interpretation) omit the words “(taking references in that section to a company as being references to a body corporate)”.
Harbours Act 1964 (c. 40)
5
In section 57(1) of the Harbours Act 1964 (interpretation), in the definition of “marine work” for “section 154 of the Companies Act 1948” substitute “
section 736 of the Companies Act 1985
”
.
General Rate Act 1967 (c. 9)
6
In section 32A of the General Rate Act 1967 (rateable premises of Transport Boards), in the definition of “subsidiary” in subsection (6) omit the words “(taking references in that section to a company as being references to a body corporate)”.
Transport Act 1968 (c. 73)
F4597
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Post Office Act 1969 (c. 48)
8
In section 86 of the Post Office Act 1969 (interpretation), in subsection (2) for “736(5)(b)” substitute “
736
”
.
Industry Act 1972 (c. 63)
9
In section 10 of the Industry Act 1972 (construction credits), in subsection (9) for “for the purposes of the Companies Act 1985 by section 736 of that Act” substitute “
by section 736 of the Companies Act 1985
”
.
Coal Industry Act 1973 (c. 8)
10
F460. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industry Act 1975 (c. 68)
11
F461. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scottish Development Agency Act 1975 (c. 69)
F46212
In section 25(1) of the Scottish Development Agency Act 1975 (interpretation), in the definition of “wholly-owned subsidiary” for “section 736(5)(b)” substitute “
section 736
”
.
Welsh Development Agency Act 1975 (c. 70)
13
In section 27(1) of the Welsh Development Agency Act 1975 (interpretation), in the definition of “wholly-owned subsidiary” for “section 736(5)(b)” substitute “
section 736
”
.
Restrictive Trade Practices Act 1976 (c. 41)
F46314
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial Common Ownership Act 1976 (c. 78)
15
In section 2(5) of the Industrial Common Ownership Act 1976 (common ownership and co-operative enterprises) for “for the purposes of the Companies Act 1985” substitute “
as defined by section 736 of the Companies Act 1985 or for the purposes of
”
.
Aircraft and Shipbuilding Industries Act 1977 (c. 3)
16
In section 56(1) of the Aircraft and Shipbuilding Industries Act 1977 (interpretation), in the definition of “subsidiary” for “the same meaning as in” substitute “
the meaning given by section 736 of
”
.
Nuclear Industry (Finance) Act 1977 (c. 7)
17
In section 3 of the Nuclear Industry (Finance) Act 1977 (expenditure on acquisition of shares in National Nuclear Corporation Ltd and subsidiaries), after “within the meaning of” insert “
section 736 of
”
.
Coal Industry Act 1977 (c. 39)
18
F464. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shipbuilding (Redundancy Payments) Act 1978 (c. 11)
19
F465. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Gains Tax Act 1979 (c. 14)
F46620
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crown Agents Act 1979 (c. 43)
21
In section 31(1) of the Crown Agents Act 1979 (interpretation), in the definition of “wholly-owned subsidiary” for “section 736(5)(b)” substitute “
section 736(2)
”
.
Competition Act 1980 (c. 21)
22
In sections 11(3)(f) and 12 of the Competition Act 1980 (references relating to public bodies, &c.), after “within the meaning of” insert “
section 736 of
”
.
British Aerospace Act 1980 (c. 26)
23
In section 14(1) of the British Aerospace Act 1980 (interpretation)—
(a)
in the definition of “subsidiary” for “the same meaning as in the Companies Act 1948”, and
(b)
in the definition of “wholly-owned subsidiary” for “the same meaning as it has for the purposes of section 150 of the Companies Act 1948”,
substitute “
the meaning given by section 736 of the Companies Act 1985
”
.
Local Government, Planning and Land Act 1980 (c. 65)
24
In sections 100(1), 141(7) and 170(1)(d) and (2) of the Local Government, Planning and Land Act 1980 (which refer to wholly-owned subsidiaries) for “within the meaning of section 736(5)(b)” substitute “
as defined by section 736
”
.
British Telecommunications Act 1981 (c. 38)
25
“(2)
Any reference in this Act to a subsidiary or wholly-owned subsidiary shall be construed in accordance with section 736 of the Companies Act 1985.”.
Transport Act 1981 (c. 56)
26
F467. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value Added Tax Act 1983 (c. 55)
F46827
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telecommunications Act 1984 (c. 12)
F46928
In section 73(1) of the Telecommunications Act 1984 (interpretation of Part V), for “the same meaning as in” substitute “the meaning given by section 736 of”.
London Regional Transport Act 1984 (c. 32)
29
““subsidiary” (subject to section 62 of this Act) has the meaning given by section 736 of the Companies Act 1985;”.
Inheritance Tax Act 1984 (c. 51)
30
(1)
The Inheritance Tax Act 1984 is amended as follows.
(2)
In section 13 (dispositions by close companies for benefit of employees), in the definition of “subsidiary” in subsection (5) for “the same meaning as in” substitute “
the meaning given by section 736 of
”
.
(3)
In section 103 (introductory provisions relating to relief for business property), in subsection (2) for “the same meanings as in” substitute “
the meanings given by section 736 of
”
.
(4)
In section 234 (interest on instalments) in subsection (3) for “within the meaning of” substitute “
as defined in section 736 of
”
.
Ordnance Factories and Military Services Act 1984 (c. 59)
31
““subsidiary” and “wholly-owned subsidiary” have the meanings given by section 736 of the Companies Act 1985.”.
Companies Act 1985 (c. 6)
F47032
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47033
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47034
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47035
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47036
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47037
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47038
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transport Act 1985 (c. 67)
39
In section 137(1) of the Transport Act 1985 (interpretation), in the definition of “subsidiary” for the words from “as defined” to the end substitute “
within the meaning of section 736 of the Companies Act 1985 as originally enacted (and not as substituted by section 144(1) of the Companies Act 1989);
”
.
Housing Act 1985 (c. 68)
40
In section 622 of the Housing Act 1985 (minor definitions: general), in the definition of “subsidiary” for “the same meaning as in” substitute “
the meaning given by section 736 of
”
.
Housing Associations Act 1985 (c. 69)
41
In section 101 of the Housing Associations Act 1985 (minor definitions: Part II), in the definition of “subsidiary” for “the same meaning as in” substitute “
the meaning given by section 736 of
”
.
Atomic Energy Authority Act 1986 (c. 3)
42
In section 9 of the Atomic Energy Authority Act 1986 (interpretation), in the definition of “subsidiary” and “wholly-owned subsidiary” for “have the same meaning as in” substitute “
have the meaning given by section 736 of
”
.
Airports Act 1986 (c. 31)
43
In section 82 of the Airports Act 1986 (general interpretation), in the definition of “subsidiary” for “has the same meaning as in” substitute “
has the meaning given by section 736 of
”
.
Gas Act 1986 (c. 44)
44
In the Gas Act 1986—
(a)
in section 48(1) (interpretation of Part I), in the definitions of “holding company” and “subsidiary”, and
(b)
in section 61(1) (interpretation of Part II), in the definition of “subsidiary”,
for “has the same meaning as in” substitute “
has the meaning given by section 736 of
”
.
Building Societies Act 1986 (c. 53)
45
In section 119 of the Building Societies Act 1986 (interpretation), in the definition of “subsidiary” for “has the same meaning as in” substitute “
has the meaning given by section 736 of
”
.
Income and Corporation Taxes Act 1988 (c. 1)
46
F471. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
British Steel Act 1988 (c. 35)
47
In section 15(1) of the British Steel Act 1988 (interpretation), in the definition of “subsidiary” for “has the same meaning as in” substitute “
has the meaning given by section 736 of
”
.
SCHEDULE 19 Minor amendments of the Companies Act 1985
Correction of cross-reference
F4721
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Particulars to be given of directors and secretaries
F4722
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4723
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4724
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4725
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4726
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4727
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transactions with directors not requiring authorisation
F4728
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time limit for holding extraordinary general meeting convened on members’ requisition
F4729
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Protection of company’s members against unfair prejudice
F47311
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Requirements for registration by joint stock companies
F47312
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delivery of documents by oversea companies
F47313
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Companies’ registered numbers
F47314
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exemptions from limit of 20 on members of partnership
F47315
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47316
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “officer who is in default”
17
F474. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Offences committed by partnerships and other unincorporated bodies
18
F475. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “office copy” in Scotland
F47619
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index of defined expressions
F47620
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fraudulent trading by unregistered companies
F47621
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE 20 Amendments about mergers and related matters
Fair Trading Act 1973 (c. 41)
1
F477. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
F478. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
F479. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
F480. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
F481. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
F482. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
F483. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
F484. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
F485. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
F486. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
F487. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
F488. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
(1)
F489. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
F490. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
F491. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
F492. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
F493. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
In section 132(1) of that Act, after “85(6)” there is inserted “
section 93B
”
.
18
(1)
In Schedule 3 to that Act, in paragraph 16(2) for “75” there is substituted “
“73
”
.
(2)
This paragraph does not apply in relation to any report made before the passing of this Act.
19
F494. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20
F495. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Competition Act 1980 (c. 21)
F49621
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F49722
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F49823
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F49924
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telecommunications Act 1984 (c. 12)
25
(1)
In section 13(9) of the Telecommunications Act 1984, after “Commission)” there is inserted “
together with section 24 of the Competition Act 1980 (modification of provisions about performance of Commission’s functions)
”
.
(2)
The Monopolies and Mergers Commission (Performance of Functions) Order 1989 shall have effect as if sub-paragraph (1) above had come into force immediately before the making of the Order.
Financial Services Act 1986 (c. 60)
F50026
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F501 SCHEDULE 21
Part IU.K. investment exchanges
Default Rules
1
(1)
The exchange must have default rules which, in the event of a member of the exchange appearing to be unable to meet his obligations in respect of one or more market contracts, enable action to be taken in respect of unsettled market contracts to which he is a party.
(2)
The rules may authorise the taking of the same or similar action in relation to a member who appears to be likely to become unable to meet his obligations in respect of one or more market contracts.
(3)
The rules must enable action to be taken in respect of all unsettled market contracts, other than those entered into by a recognised clearing house for the purposes of or in connection with the provision of clearing services for the exchange.
(4)
As regards contracts F502falling within section 155(2)(b) above, the rules must contain provision corresponding to that required by paragraphs 9 to 11 below in the case of a UK clearing house.
(5)
As regards F502contracts falling within section 155(2)(a) above the rules must contain provision complying with paragraphs 2 and 3 below.
Content of rules
2
(1)
The rules must provide for all rights and liabilities between those party as principal to unsettled market contracts to which the defaulter is party as principal to be discharged and for there to be paid by one party to the other such sum of money (if any) as may be determined in accordance with the rules.
(2)
The rules must further provide—
(a)
for the sums so payable in respect of different contracts between the same parties to be aggregated or set off so as to produce a net sum, and
(b)
for the certification by or on behalf of the exchange of the net sum payable or, as the case may be, of the fact that no sum is payable.
(3)
The rules may make special provision with respect to, or exclude from the provisions required by sub-paragraphs (1) and (2), contracts of any description prescribed for the purposes of this sub-paragraph by regulations made by the Secretary of State.
F503(4)
The reference in sub-paragraph (1) to rights and liabilities between those party as principal to unsettled market contracts does not include rights and liabilities—
(a)
in respect of margin; or
(b)
arising out of a failure to perform a market contract.
Notification to other parties affected
3
The exchange must have adequate arrangements for securing that—
(a)
parties to unsettled market contracts with a defaulter acting as principal are notified as soon as reasonably practicable of the default and of any decision taken under the rules in relation to contracts to which they are a party; and
(b)
parties to unsettled market contracts with a defaulter acting as agent and the defaulter’s principals are notified as soon as reasonably practicable of the default and of the identity of the other party to the contract.
Application of default rules to designated non-members
4
(1)
The rules may make the same or similar provision in relation to designated non-members as in relation to members of the exchange.
(2)
If such provision is made, the exchange must have adequate procedures—
(a)
for designating the persons, or descriptions of person, in respect of whom action may be taken,
(b)
for keeping under review the question which persons or descriptions of person should be or remain so designated, and
(c)
for withdrawing such designation.
(3)
The procedures shall be designed to secure that a person is not or does not remain designated if failure by him to meet his obligations in respect of one or more market contracts would be unlikely adversely to affect the operation of the market, and that a description of persons is not or does not remain designated if failure by a person of that description to meet his obligations in respect of one or more market contracts would be unlikely adversely to affect the operation of the market.
(4)
The exchange must have adequate arrangements—
(a)
for bringing a designation or withdrawal of designation to the attention of the person or description of persons concerned, and
(b)
where a description of persons is designated, or the designation of a description of persons is withdrawn, for ascertaining which persons fall within that description.
Delegation of functions in connection with default procedures
5
The rules may make provision for the whole or part of the functions mentioned in paragraphs 1 to 4 to be performed by another body or person on behalf of the exchange.
Co-operation with other authorities
6
The exchange must be able and willing to co-operate, by the sharing of information and otherwise, with the Secretary of State, any relevant office-holder and any other authority or body having responsibility for any matter arising out of, or connected with, the default of a member of the exchange or any designated non-member.
Margin
F504I487
Where the exchange provides clearing services, paragraph 14 below applies in respect of any margined transactions effected by or on behalf of the exchange as it applies in relation to a clearing house.
Part IIU.K. clearing houses
Default rules
8
(1)
The clearing house must have default rules which, in the event of a member of the clearing house appearing to be unable to meet his obligations in respect of one or more market contracts, enable action to be taken to close out his position in relation to all unsettled market contracts to which he is a party.
(2)
The rules may authorise the taking of the same or similar action where a member appears to be likely to become unable to meet his obligations in respect of one or more market contracts.
Content of rules
9
(1)
The rules must provide for all rights and liabilities of the defaulter under or in respect of unsettled market contracts to be discharged and for there to be paid by or to the defaulter such sum of money (if any) as may be determined in accordance with the rules.
(2)
The rules must further provide—
(a)
for the sums so payable by or to the defaulter in respect of different contracts to be aggregated or set off so as to produce a net sum;
(b)
for that sum—
(i)
if payable by the defaulter to the clearing house, to be set off against any property provided by or on behalf of the defaulter as cover for margin (or the proceeds of realisation of such property) so as to produce a further net sum, and
(ii)
if payable by the clearing house to the defaulter to be aggregated with any property provided by or on behalf of the defaulter as cover for margin (or the proceeds of realisation of such property); and
(c)
for the certification by or on behalf of the clearing house of the sum finally payable or, as the case may be, of the fact that no sum is payable.
10
(1)
The reference in paragraph 9 to the rights and liabilities of a defaulter under or in respect of an unsettled market contract includes (without prejudice to the generality of that provision) rights and liabilities arising in consequence of action taken under provisions of the rules authorising—
(a)
the effecting by the clearing house of corresponding contracts in relation to unsettled market contracts to which the defaulter is a party;
(b)
the transfer of the defaulter’s position under an unsettled market contract to another member of the clearing house;
(c)
the exercise by the clearing house of any option granted by an unsettled market contract.
(2)
A “corresponding contract” means a contract on the same terms (except as to price or premium) as the market contract, but under which the person who is the buyer under the market contract agrees to sell and the person who is the seller under the market contract agrees to buy.
This sub-paragraph applies with any necessary modifications in relation to a market contract which is not an agreement to sell.
(3)
The reference in paragraph 9 to the rights and liabilities of a defaulter under or in respect of an unsettled market contract does not include, where he acts as agent, rights or liabilities of his arising out of the relationship of principal and agent.
Notification to other parties affected
11
The clearing house must have adequate arrangements for securing that parties to unsettled market contracts with a defaulter are notified as soon as reasonably practicable of the default and of any decision taken under the rules in relation to contracts to which they are a party.
Delegation of functions in connection with default procedures
12
The rules may make provision for the whole or part of the functions mentioned in paragraphs 8 to 11 to be performed by another body or person on behalf of the clearing house.
Co-operation with other authorities
13
The clearing house must be able and willing to co-operate, by the sharing of information and otherwise, with the Secretary of State, any relevant office-holder and any other authority or body having responsibility for any matter arising out of, or connected with, the default of a member of the clearing house.
Margin
14
(1)
The rules of the clearing house must provide that, in the event of a default, margin provided by the defaulter for his own account is not to be applied to meet a shortfall on a client account.
(2)
This is without prejudice to the requirements of any relevant regulations under section 55 of the M64Financial Services Act 1986 (clients’ money).
Part III Overseas investment exchanges and clearing houses
15
(1)
The rules and practices of the body, together with the law of the country in which the body’s head office is situated, must be such as to provide adequate procedures for dealing with the default of persons party to market contracts connected with the body.
(2)
The reference in sub-paragraph (1) to default is to a person being unable to meet his obligations.
F505 SCHEDULE 22
Introductory
1
The provisions of this Schedule have effect for the purpose of safeguarding the operation of certain financial markets—
(a)
in the event of the insolvency, winding up or default of a person party to transactions in the market (paragraphs 2 to 8), and
(b)
as regards the effectiveness or enforcement of certain charges given to secure obligations in connection with such transactions (paragraphs 9 to 12).
Recognised investment exchanges and clearing houses
2
(1)
This Schedule applies to the following descriptions of contract connected with a recognised investment exchange or recognised clearing house.
The contracts are referred to in this Schedule as “market contracts”.
(2)
In relation to a recognised investment exchange, this Schedule applies to—
(a)
contracts entered into by a member or designated non-member of the exchange which are—
(i)
made on or otherwise subject to the rules of the exchange,
(ii)
on terms expressed to be as traded on the exchange, or
(iii)
on the same terms as those on which an equivalent contract would be made on the exchange; and
(b)
contracts subject to the rules of the exchange entered into by the exchange for the purposes of or in connection with the provision of clearing services.
A “designated non-member” means a person in respect of whom action may be taken under the default rules of the exchange but who is not a member of the exchange.
(3)
In relation to a recognised clearing house, this Schedule applies to contracts subject to the rules of the clearing house entered into by the clearing house for the purposes of or in connection with the provision of clearing services for a recognised investment exchange.
This includes contracts effected under or in consequence of action taken by the clearing house under its default rules.
3
The general law of insolvency has effect in relation to market contracts, and action taken under the rules of a recognised investment exchange or recognised clearing house with respect to such contracts, subject to the following provisions of this Schedule.
4
(1)
None of the following shall be regarded as to any extent invalid at law on the ground of inconsistency with the law relating to the distribution of the assets of a person on bankruptcy, winding up or sequestration, or in the administration of an insolvent estate—
(a)
a market contract,
(b)
the rules of a recognised investment exchange or recognised clearing house as to the settlement of market contracts,
(c)
the default rules of a recognised investment exchange or recognised clearing house.
(2)
The powers of a relevant office-holder in his capacity as such, and the powers of the court under the M65Insolvency Act 1986 or the M66Bankruptcy (Scotland) Act 1985, shall not be exercised in such a way as to prevent or interfere with—
(a)
the settlement of a market contract in accordance with the rules of a recognised investment exchange or recognised clearing house,
(b)
any action taken under the default rules of such an exchange or clearing house.
(3)
Nothing in the following provisions of this Schedule shall be construed as affecting the generality of sub-paragraph (2).
(4)
A debt or other liability arising out of a market contract which is the subject of default proceedings may not be proved in a winding up or bankruptcy, or in Scotland claimed in a winding up or sequestration, until the completion of the default proceedings.
A debt or other liability which by virtue of this sub-paragraph may not be proved or claimed shall not be taken into account for the purposes of any set-off until the completion of the default proceedings.
5
(1)
A liquidator or trustee of a defaulter shall not—
(a)
declare or pay any dividend to the creditors, or
(b)
return any capital to contributories,
unless he has retained what he reasonably considers to be an adequate reserve in respect of any claims arising as a result of the default proceedings of the exchange or clearing house concerned.
(2)
Nothing in section 11(3), 130 or 285 of the Insolvency Act 1986 (which restrict the taking of certain legal proceedings and other steps), and nothing in the Bankruptcy (Scotland) Act 1985, shall affect any action taken by an exchange or clearing house for the purpose of its default proceedings.
6
(1)
The following provisions apply with respect to the net sum certified by a recognised investment exchange or recognised clearing house, upon the completion of proceedings under its default rules, to be payable by or to a defaulter.
(2)
If, in England and Wales, a bankruptcy or winding up order has been made, or a resolution for voluntary winding up has been passed, the debt—
(a)
is provable in the bankruptcy or winding up or, as the case may be, is payable to the relevant office-holder, and
(b)
shall be taken into account, where appropriate, under section 323 of the Insolvency Act 1986 (mutual dealings and set-off) or the corresponding provision applicable in the case of a winding up,
in the same way as a debt due before the commencement of the bankruptcy or winding up.
(3)
If, in Scotland, an award of sequestration or a winding-up order has been made, or a resolution for voluntary winding up has been passed, the debt—
(a)
may be claimed in the sequestration or winding up or, as the case may be, is payable to the relevant office-holder, and
(b)
shall be taken into account for the purposes of any rule of law relating to compensation or set-off applicable in sequestration or winding up,
in the same way as a debt due before the date of sequestration (within the meaning of section 73(1) of the Bankruptcy (Scotland) Act 1985) or the commencement of the winding up.
7
(1)
Sections 178, 186, 315 and 345 of the Insolvency Act 1986 (power to disclaim onerous property and court’s power to order rescission of contracts, &c.) do not apply in relation to—
(a)
a market contract, or
(b)
a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to market contracts.
In the application of this sub-paragraph in Scotland, the reference to sections 178 and 315 shall be construed as a reference to any rule of law having the like effect as those sections.
(2)
Sections 127 and 284 of the M67Insolvency Act 1986 (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition) do not apply to—
(a)
a market contract, or any disposition of property in pursuance of such a contract,
(b)
the provision of margin in relation to market contracts,
(c)
a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to a market contract, or any disposition of property in pursuance of such a contract, or
(d)
any disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as margin.
(3)
However, if a person enters into a market contract knowing that a petition has been presented for the winding up or bankruptcy of the other party to the contract, the value of any profit or benefit to him arising from the contract is recoverable from him by the relevant office-holder unless the court directs otherwise.
(4)
Any sum recoverable by virtue of sub-paragraph (3) has the same priority, in the event of the insolvency of the person from whom it is due, as if it were secured by a fixed charge.
8
(1)
No order shall be made in relation to a market contract under—
(a)
section 238 or 339 of the Insolvency Act 1986 (transactions at an under-value),
(b)
section 239 or 340 of that Act (preferences), or
(c)
section 423 of that Act (transactions defrauding creditors),
unless the court is satisfied that the person in favour of whom the contract was made knew at the time he entered into it that it was at an under-value (within the meaning of the relevant provision) or, as the case may be, that a preference was being given.
(2)
As respects Scotland, no decree shall be granted in relation to a market contract—
(a)
under section 34 or 36 of the M68Bankruptcy (Scotland) Act 1985 or section 242 or 243 of the Insolvency Act 1986 (gratuitous alienations and unfair preferences), or
(b)
at common law,
unless the court is satisfied that the person with whom the contract was made knew at the time he entered into it that it was challengeable under any of the provisions mentioned in paragraph (a) or at common law.
(3)
Sub-paragraphs (1) and (2) apply in relation to—
(a)
a disposition of property in pursuance of a market contract,
(b)
the provision of margin in relation to market contracts,
(c)
a contract effected by a recognised investment exchange or recognised clearing house for the purpose of realising property provided as margin, or
(d)
a disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as margin,
as they apply in relation to the making of a market contract.
Market charges
9
(1)
The charges to which paragraphs 10 to 12 apply are charges, whether fixed or floating, granted—
(a)
in favour of a recognised investment exchange, for the purpose of securing debts or liabilities arising in connection with the settlement of market contracts,
(b)
in favour of a recognised clearing house, for the purpose of securing debts or liabilities arising in connection with their ensuring the performance of market contracts, or
(c)
in favour of a person who agrees to make payments as a result of the transfer of specified securities made through the medium of a computer-based system established by the Bank of England and The Stock Exchange, for the purpose of securing debts or liabilities of the transferee arising in connection with the payments.
Those charges are referred to in this Schedule as “market charges”.
(2)
Where a charge is granted partly for purposes specified in sub-paragraph (1)(a), (b) or (c) and partly for other purposes, paragraphs 10 to 12 apply to it so far as it has effect for the specified purposes; and the expression “market charge” shall be construed accordingly.
(3)
In this paragraph and paragraphs 10 to 12—
“charge” means any form of security, including a mortgage and, in Scotland, a heritable security; and
“specified securities” means securities for the time being specified in the list in Schedule 1 to the M69Stock Transfer Act 1982, and includes any right to such securities.
10
The general law of insolvency has effect in relation to market charges and action taken in enforcing them subject to the following provisions of this Schedule.
11
(1)
Sections 10(1)(b) and 11(3)(c) of the M70Insolvency Act 1986 (no enforcement of security while petition for administration order pending or order in force) do not apply to a market charge.
(2)
Section 11(2) of that Act (receiver to vacate office when so required by administrator) does not apply to a receiver appointed under a market charge.
(3)
Section 15(1) and (2) of that Act (administrator’s power to deal with charged property) do not apply to a market charge.
(4)
Sections 127 and 284 of that Act (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition) do not apply to—
(a)
a disposition of property as a result of which the property becomes subject to a market charge, or any transaction pursuant to which that disposition is made, or
(b)
any disposition of property made in enforcing a market charge.
(5)
However, if a person (other than the chargee under the market charge) who is a party to a disposition mentioned in sub-paragraph (4)(a) knows at the time of the disposition that a petition has been presented for the winding up or bankruptcy of the party making the disposition, the value of any profit or benefit to him arising from the disposition is recoverable from him by the relevant office-holder unless the court directs otherwise.
(6)
Any sum recoverable by virtue of sub-paragraph (5) has the same priority, in the event of the insolvency of the person from whom it is due, as if it were secured by a fixed charge.
12
(1)
No legal proceedings, execution or other legal process may be commenced or continued, and no distress may be levied against property which is, or becomes, subject to a market charge except with the consent of the person in whose favour the charge was granted or the leave of the court.
(2)
The court may give leave subject to such terms as it thinks fit.
(3)
Sub-paragraph (1) does not apply to proceedings to enforce any security over, or any equitable interest in, the property.
(4)
Sections 10(1)(c), 11(3)(d), 130(3) and 285(3) of the M71Insolvency Act 1986 (which restrict the taking of certain legal proceedings and other steps) have effect accordingly.
(5)
In the application of this paragraph to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied shall be omitted.
Supplementary provisions
13
(1)
In this Schedule “default rules” means—
(a)
in relation to a recognised investment exchange, rules which provide in the event of a member or designated non-member of the exchange appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts, for the settlement forthwith of all unsettled market contracts to which he is a party as principal, other than those whose performance is ensured by a recognised clearing house;
(b)
in relation to a recognised clearing house, rules which provide in the event of a member of the clearing house appearing to be unable, or likely to become unable, to meet his obligations in respect of any market contract, for the closing out of his position in relation to all market contracts to which he is a party.
(2)
References in this Schedule to a “defaulter” are to a person in respect of whom action has been taken by a recognised investment exchange or recognised clearing house under its default rules, whether by declaring him to be a defaulter or otherwise; and references in this Schedule to “default” shall be construed accordingly.
(3)
In this Schedule “default proceedings” means proceedings taken by a recognised investment exchange or recognised clearing house under its default rules.
14
(1)
The following are relevant office-holders for the purposes of this Schedule—
(a)
the official receiver,
(b)
any person acting in relation to a company as its liquidator, provisional liquidator, administrator or administrative receiver,
(c)
any person acting in relation to an individual (or, in Scotland, a deceased debtor) as his trustee in bankruptcy or interim receiver of his property or as permanent or interim trustee in the sequestration of his estate,
(d)
any person acting as administrator (or, in Scotland, as judicial factor) of an insolvent estate of a deceased person.
(2)
Sub-paragraph (1)(c) applies in relation to a partnership, and any debtor within the meaning of the M72Bankruptcy (Scotland) Act 1985, as it applies in relation to an individual.
(3)
In this paragraph—
“administrative receiver” has the meaning given by section 251 of the Insolvency Act 1986;
“company” means a company within the meaning of section 735(1) of the M73Companies Act 1985 or a company which may be wound up under Part V of the M74Insolvency Act 1986.
“interim trustee” and “permanent trustee” have the same meaning as in the M75Bankruptcy (Scotland) Act 1985.
15
(1)
In this Schedule—
“clearing house” has the same meaning as in the M76Financial Services Act 1986;
“investment” and “investment exchange” have the same meaning as in the Financial Services Act 1986;
“recognised” means recognised under the Financial Services Act 1986;
“The Stock Exchange” means The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited.
(2)
References in this Schedule to ensuring the performance of a transaction have the same meaning as in the Financial Services Act 1986.
(3)
References in this Schedule to a market contract to which a person is a party include, unless the contrary intention appears, contracts to which he is party as agent.
F506SCHEDULE 23
Part I General Amendments
1
(1)
Section 13 of the Financial Services Act 1986 (power to direct alteration of rules of recognised self-regulating organisation) is amended as follows.
(2)
Omit subsection (1).
(3)
“(2)
If at any time it appears to the Secretary of State that—
(a)
a recognised self-regulating organisation is concerned with two or more kinds of investment business, and
(b)
the requirement in paragraph 3(1) of Schedule 2 to this Act is not satisfied in respect of investment business of one or more but not all of those kinds,
he may, instead of revoking the recognition order or making an application under section 12 above, direct the organisation to alter, or himself alter, its rules so that they preclude a member from carrying on investment business of a kind in respect of which that requirement is not satisfied, unless he is an authorised person otherwise than by virtue of membership of the organisation or is an exempted person in respect of that business.”.
(4)
“(3)
A direction under this section is enforceable on the application of the Secretary of State by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988.”.
(5)
Omit subsections (4) to (6).
2
(1)
Section 48 of the Financial Services Act 1986 (conduct of business rules) is amended as follows.
(2)
In subsection (1) omit the words “members of a recognised self-regulating organisation or” and “organisation or”.
(3)
“(11)
Section 63A below (application of designated rules) has effect as regards the application of rules under this section to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.”.
3
(1)
Section 49 of the M77Financial Services Act 1986 (financial resources rules) is amended as follows.
(2)
“(1)
The Secretary of State may make rules requiring—
(a)
a person authorised to carry on investment business by virtue of section 25 or 31 above, or
(b)
a member of a recognised self-regulating organisation carrying on investment business in the carrying on of which he is subject to the rules of the organisation,
to have and maintain in respect of that business such financial resources as are required by the rules.”.
(3)
“(3)
Section 63A below (application of designated rules) has effect as regards the application of rules under this section to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.”.
4
“(4)
The powers conferred by subsection (1) above shall not be exercised in a case where the powers conferred by section 63B below are exercisable (powers of recognised self-regulating organisation in relation to designated rules).”.
5
In section 52 of the Financial Services Act 1986 (notification regulations), in subsection (3) (application to member of recognised self-regulating organisation or professional body), for “subject to any of the rules made under section 48 above” substitute “not subject to the rules of that organisation or body”.
6
(1)
Section 55 of the Financial Services Act 1986 (clients’ money) is amended as follows.
(2)
In subsection (2)(b) and (e) omit the words “a member of a recognised self-regulating organisation or” and “organisation or”.
(3)
In subsection (3) omit the words “organisation or”.
(4)
“(6)
Section 63A below (application of designated regulations) has effect as regards the application of regulations under this section to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.”.
7
“(7)
Section 63A below (application of designated regulations) has effect as regards the application of regulations under this section to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.
As it applies to such persons in respect of such business the reference in subsection (1) above to conduct permitted by regulations made by the Secretary of State shall be construed—
(a)
where or to the extent that the regulations do not apply, as a reference to conduct permitted by the rules of the organisation; and
(b)
where or to the extent that the regulations do apply but are expressed to have effect subject to the rules of the organisation, as a reference to conduct permitted by the regulations together with the rules of the organisation.
(7A)
In the application of this section to anything done by a person certified by a recognised professional body in carrying on investment business in the carrying on of which he is subject to the rules of the body, the reference in subsection (1) above to conduct permitted by regulations made by the Secretary of State shall be construed as a reference to conduct permitted by the rules of the body.”.
8
“This subsection also applies to statements of principle under section 47A and codes of practice under section 63A so far as they relate to matters falling within the rule-making power in section 48.”.
9
“(3)
The disciplinary action which may be taken by virtue of section 47A(3) (failure to comply with statement of principle) includes—
(a)
the giving of a direction under section 91(2), and
(b)
the application by the Secretary of State for an order under section 93;
and subsection (6) of section 47A (duty of the Secretary of State as to exercise of powers) has effect accordingly.”.
10
(1)
Section 107 of the Financial Services Act 1986 (appointment of auditors) is amended as follows.
(2)
“(1)
The Secretary of State may make rules requiring—
(a)
a person authorised to carry on investment business by virtue of section 25 or 31 above, or
(b)
a member of a recognised self-regulating organisation carrying on investment business in the carrying on of which he is subject to the rules of the organisation,
and who, apart from the rules, is not required by or under any enactment to appoint an auditor, to appoint as an auditor a person satisfying such conditions as to qualifications and otherwise as may be specified in or imposed under the rules.”.
(3)
“(4)
In its application to members of recognised self-regulating organisations, this section has effect subject to section 107A below.”.
11
“107A Application of audit rules to members of self-regulating organisations.
(1)
The Secretary of State may in rules under section 107 designate provisions which apply, to such extent as may be specified, to a member of a recognised self-regulating organisation in respect of investment business in the carrying on of which he is subject to the rules of the organisation.
(2)
It may be provided that the designated rules have effect, generally or to such extent as may be specified, subject to the rules of the organisation.
(3)
A member of a recognised self-regulating organisation who contravenes a rule applying to him by virtue of that section shall be treated as having contravened the rules of the organisation.
(4)
Except as mentioned above, rules made under section 107 do not apply to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.
(5)
A recognised self-regulating organisation may on the application of a member of the organisation—
(a)
modify a rule designated under this section so as to adapt it to his circumstances or to any particular kind of business carried on by him, or
(b)
dispense him from compliance with any such rule, generally or in relation to any particular kind of business carried on by him.
(6)
The powers conferred by subsection (5) shall not be exercised unless it appears to the organisation—
(a)
that compliance with the rule in question would be unduly burdensome for the applicant having regard to the benefit which compliance would confer on investors, and
(b)
that the exercise of those powers will not result in any undue risk to investors.
(7)
The powers conferred by subsection (5) may be exercised unconditionally or subject to conditions; and subsection (3) applies in the case of a contravention of a condition as in the case of contravention of a designated rule.
(8)
The reference in paragraph 4(1) of Schedule 2 (requirements for recognition of self-regulating organisations) to monitoring and enforcement of compliance with rules includes monitoring and enforcement of compliance with conditions imposed by the organisation under subsection (7).”.
12
(1)
Section 114 of the M79Financial Services Act 1986 (power to transfer functions to designated agency) is amended as follows.
(2)
“(9)
The Secretary of State shall not make a delegation order transferring any legislative functions unless—
(a)
the agency has furnished him with a copy of the instruments it proposes to issue or make in the exercise of those functions, and
(b)
he is satisfied that those instruments will afford investors an adequate level of protection and, in the case of such provisions as are mentioned in Schedule 8 to this Act, comply with the principles set out in that Schedule.
In this subsection “legislative functions” means the functions of issuing or making statements of principle, rules, regulations or codes of practice.”.
(3)
In subsection (12) for “rules or regulations made” substitute “statements of principle, rules, regulations or codes of practice issued or made”.
13
(1)
Section 115 of the M80Financial Services Act 1986 (resumption of transferred functions) is amended as follows.
(2)
“(5)
Where the transferred functions consist of or include any legislative functions, an order may be made under subsection (2) above if at any time it appears to the Secretary of State that the instruments issued or made by the agency do not satisfy the requirements of section 114(9)(b) above.”.
(3)
In subsection (7)—
(a)
in the opening words, for “subsection (2)(b) above” substitute “this section”, and
(b)
in paragraph (a) for “functions of making rules or regulations” substitute “functions of issuing or making statements of principle, rules, regulations or codes of practice”.
14
(1)
Section 119 of the Financial Services Act 1986 (competition scrutiny: recognition orders) is amended as follows.
(2)
“(a)
in the case of a self-regulating organisation, the rules and any guidance of which copies are furnished with the application for the order, together with any statements of principle, rules, regulations or codes of practice to which members of the organisation would be subject by virtue of Chapter V of this Part,
(b)
in the case of an investment exchange, the rules and any guidance of which copies are furnished with the application for the order, together with any arrangements of which particulars are furnished with the application,
(c)
in the case of a clearing house, the rules and any guidance of which copies are furnished with the application for the order,”.
(3)
“(a)
in the case of a self-regulating organisation—
(i)
any rules made or guidance issued by the organisation,
(ii)
any practices of the organisation, or
(iii)
any practices of persons who are members of, or otherwise subject to the rules made by, the organisation,
together with any statements of principle, rules, regulations or codes of practice to which members of the organisation are subject by virtue of Chapter V of this Part,
(b)
in the case of a recognised investment exchange—
(i)
any rules made or guidance issued by the exchange,
(ii)
any practices of the exchange, or
(iii)
any practices of persons who are members of, or otherwise subject to the rules made by, the exchange,
(c)
in the case of a recognised clearing house—
(i)
any rules made or guidance issued by the clearing house,
(ii)
any practices of the clearing house, or
(iii)
any practices of persons who are members of, or otherwise subject to the rules made by, the clearing house,
or any clearing arrangements made by the clearing house,”.
(4)
In subsection (3) (powers exercisable in relation to recognised body)—
(a)
in paragraph (b) for “the rules” substitute “its rules, or the”, and
(b)
in paragraph (c) for “the rules” substitute “its rules”.
(5)
In subsection (5) (construction of references to practices)—
(a)
for “paragraph (b)” substitute “paragraph (a)(ii), (b)(ii) and (c)(ii)”, and
(b)
omit the words from “and the practices referred to in paragraph (c)” to the end.
(6)
“(6)
The practices referred to in paragraph (a)(iii), (b)(iii) and (c)(iii) of subsection (2) above are—
(a)
in relation to a recognised self-regulating organisation, practices in relation to business in respect of which the persons in question are subject to—
(i)
the rules of the organisation, or
(ii)
statements of principle, rules, regulations or codes of practice to which its members are subject by virtue of Chapter V of this Part,
and which are required or contemplated by the rules of the organisation or by those statements, rules, regulations or codes, or by guidance issued by the organisation,
(b)
in relation to a recognised investment exchange or clearing house, practices in relation to business in respect of which the persons in question are subject to the rules of the exchange or clearing house, and which are required or contemplated by its rules or guidance,
or which are otherwise attributable to the conduct of the organisation, exchange or clearing house as such.”.
15
(1)
Section 121 of the M81Financial Services Act 1986 (competition scrutiny: designated agencies) is amended as follows.
(2)
In subsection (1) for “rules, regulations” substitute “statements of principle, rules, regulations, codes of practice”.
(3)
In subsection (2)(a) and (c) for “rules or regulations made” substitute “statements of principle, rules, regulations or codes of practice issued or made”.
(4)
In subsection (3)(b) for “rules, regulations” substitute “statements of principle, rules, regulations, codes of practice”.
(5)
In subsection (4) for “rules or regulations” (twice) substitute “statements of principle, rules, regulations or codes of practice”.
16
(1)
Section 122 of the Financial Services Act 1986 (reports by Director General of Fair Trading) is amended as follows.
(2)
In subsection (1) for “and regulations” substitute “, statements of principle, regulations and codes of practice”.
(3)
In subsection (2) for “regulations,” substitute “statements of principle, regulations, codes of practice,”.
(4)
In subsection (4)—
(a)
in paragraph (a) for “rules, guidance, arrangements and regulations” substitute “rules, statements of principle, regulations, codes of practice, guidance and arrangements”, and
(b)
in the words following the paragraphs, for “rules, guidance, arrangements, regulations” substitute “rules, statements of principle, regulations, codes of practice, guidance, arrangements”, and for “rules, guidance, arrangements or regulations” substitute “rules, statements of principle, regulations, codes of practice, guidance or arrangements”.
17
(1)
Section 124 of the M82Financial Services Act 1986 (matters to be left out of account for certain purposes in connection with competition scrutiny) is amended as follows.
(2)
In subsection (1) (matters to be left out of account in determining whether monopoly situation exists), in paragraph (c) for “rules or regulations made or guidance issued” substitute “statements of principle, rules, regulations, codes of practice or guidance issued or made”.
(3)
In subsection (3) (matters to be excluded from consideration where monopoly situation exists)—
(a)
in paragraph (a), for “rules or regulations made” substitute “statements of principle, rules, regulations or codes of practice issued or made”,
(b)
in paragraph (b), for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”, and
(c)
in the closing words, for “rules, regulations” substitute “statements of principle, rules, regulations, codes of practice”.
18
“205 General power to make regulations.
The Secretary of State may make regulations prescribing anything which by this Act is authorised or required to be prescribed.
205A Supplementary provisions with respect to subordinate legislation.
(1)
The following provisions apply to any power of the Secretary of State under this Act—
(a)
to issue statements of principle,
(b)
to make rules or regulations,
(c)
to make orders (other than such orders as are excepted by subsection (4) below), or
(d)
to issue codes of practice.
(2)
Any such power is exercisable by statutory instrument and includes power to make different provision for different cases.
(3)
Except as otherwise provided, a statutory instrument containing statements of principle, rules or regulations shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(4)
The above provisions do not apply to a recognition order, an order declaring a collective investment scheme to be an authorised unit trust scheme or a recognised scheme or to an order revoking any such order.”.
19
In section 206(1) of the Financial Services Act 1986 (publication of information and advice)—
(a)
in paragraph (a), for “rules and regulations made” substitute “statements of principle, rules, regulations and codes of practice issued or made”, and
(b)
in paragraph (b) for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”.
20
In Schedule 2 to the Financial Services Act 1986 (requirements for recognition of self-regulating organisations), in paragraph 4(1) (monitoring and enforcement) for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”.
21
In Schedule 3 to the M83Financial Services Act 1986 (requirements for recognition of professional bodies), in paragraph 4(2) (monitoring and enforcement) for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”.
22
In Schedule 7 to the Financial Services Act 1986 (qualifications of designated agency), in paragraph 2(2) (arrangements for discharge of functions: matters to be decided upon by the governing body) for “rules or regulations must be made” substitute “statements of principle, rules, regulations and codes of practice must be issued or made”.
23
(1)
Schedule 8 to the Financial Services Act 1986 (principles applicable to designated agency’s rules and regulations) is amended as follows.
(2)
In the heading for “Rules and Regulations” substitute “Legislative Provisions”.
(3)
“1 Introduction
(1)
In this Schedule “legislative provisions” means the provisions of statements of principle, rules, regulations and codes of practice issued or made under Part I of this Act.
(2)
References in this Schedule to “conduct of business provisions” are to rules made under section 48 of this Act and statements of principle and codes of practice so far as they relate to matters falling within that rule-making power.
(3)
References in this Schedule to provisions made for the purposes of a specified section or Chapter are to rules or regulations made under that section or Chapter and statements of principle and codes of practice so far as they relate to matters falling within that power to make rules or regulations.
1A Standards
The conduct of business provisions and the other legislative provisions must promote high standards of integrity and fair dealing in the conduct of investment business.”.
(4)
In paragraphs 2 to 7, 9, 11 and 12 for “conduct of business rules” substitute “conduct of business provisions”.
(5)
In paragraph 7 for “those rules and rules under” substitute “those provisions and provisions made for the purposes of”.
(6)
In paragraph 8 for “Rules made under” substitute “Provisions made for the purposes of”.
(7)
In paragraph 9 for “regulations made under” substitute “provisions made for the purposes of”.
(8)
In paragraph 10 for “Rules made under” substitute “Provisions made for the purposes of” and for “under those sections” substitute “for the purposes of those sections”.
(9)
In paragraph 12 for “rules and regulations made under” substitute “provisions made for the purposes of”.
24
(1)
Schedule 9 to the Financial Services Act 1986 (designated agency: exercise of transferred functions) is amended as follows.
(2)
In paragraph 4(1) (copies of instruments to be sent to Secretary of State), for “any rules or regulations made” substitute “any statements of principle, rules, regulations or codes of practice issued or made”.
(3)
“5
Paragraphs 6 to 9 below have effect instead of section 205A of this Act in relation to statements of principle, rules, regulations and codes of practice issued or made by a designated agency in the exercise of powers transferred to it by a delegation order.
6
Any such power is exercisable by instrument in writing and includes power to make different provision for different cases.”.
(4)
In paragraph 8 (instruments to be printed and made available to public)—
(a)
in sub-paragraph (1) for “is made” substitute “is issued or made”, and
(b)
in sub-paragraph (2) for “rule or regulation” (twice) substitute “statement of principle, rule, regulation or code of practice”.
(5)
In paragraph 9 (proof of instruments), for “made by the agency” (twice) substitute “made or issued by the agency”.
(6)
“12
(1)
Where a designated agency proposes, in the exercise of powers transferred to it by a delegation order, to issue or make any statements of principle, rules, regulations or codes of practice, it shall publish the proposed instrument in such manner as appears to it best calculated to bring the proposals to the attention of the public, together with a statement that representations about the proposals (and, in particular, representations as to the cost of complying with the proposed provisions) can be made to the agency within a specified time.
(2)
Before issuing or making the instrument the agency shall have regard to any representations duly made in accordance with that statement.
(3)
The above requirements do not apply—
(a)
where the agency considers that the delay involved in complying with them would be prejudicial to the interests of investors;
(b)
to the issuing or making of an instrument in the same, or substantially the same, terms as a proposed instrument which was furnished by the agency to the Secretary of State for the purposes of section 114(9) of this Act.”.
25
(1)
Schedule 10 to the M84Financial Services Act 1986 (application of investment business provisions to regulated insurance companies) is amended as follows.
(2)
“(2A)
Sub-paragraphs (1) and (2) also apply to statements of principle under section 47A and codes of practice under section 63A so far as they relate to matters falling within the rule-making power in section 48.”.
(3)
“(3)
The disciplinary action which may be taken by virtue of section 47A(3) of this Act (failure to comply with statement of principle) includes—
(a)
the withdrawal of authorisation under section 11(2)(a) of the Insurance Companies Act 1982, and
(b)
the giving of a direction under section 13(2A) of that Act;
and subsection (6) of section 47A (duty of the Secretary of State as to exercise of powers) has effect accordingly.”.
Part II Amendments Relating to Friendly Societies
26
Schedule 11 to the M85Financial Services Act 1986 (friendly societies) is amended as follows.
27
In paragraph 3(2) (competition scrutiny: recognition of self-regulating organisation for friendly societies), after “sent to him under this sub-paragraph” insert “, together with any statements of principle, rules, regulations or codes of practice to which members of the organisation would be subject by virtue of this Schedule,”.
28
(1)
Paragraph 4 (requirements for recognition of self-regulating organisation for friendly societies) is amended as follows.
(2)
In sub-paragraph (4)—
(a)
in paragraph (a) for “22” substitute “22D”, and
(b)
omit paragraph (b).
(3)
In sub-paragraph (5) for “22” substitute “22D”.
29
Omit paragraph 7.
30
(1)
Paragraph 10 (competition scrutiny: circumstances in which powers are exercisable in relation to recognised self-regulating organisation for friendly societies) is amended as follows.
(2)
In sub-paragraph (1), after paragraph (c) insert “together with any statements of principle, rules, regulations or codes of practice to which members of the organisation are subject by virtue of this Schedule,”.
(3)
In sub-paragraph (2)—
(a)
in paragraph (b), for “the rules” substitute “its rules, or the”, and
(c)
in paragraph (c), for “the rules” substitute “its rules”.
(4)
“(3A)
The practices referred to in paragraph (c) of sub-paragraph (1) above are practices in relation to business in respect of which the persons in question are subject to—
(a)
the rules of the organisation, or
(b)
statements of principle, rules, regulations or codes of practice to which its members are subject by virtue of this Schedule,
and which are required or contemplated by the rules of the organisation or by those statements, rules, regulations or codes, or by guidance issued by the organisation, or which are otherwise attributable to the conduct of the organisation as such.”.
31
In paragraph 13, for “Paragraphs 14 to 25” substitute “Paragraphs 13A to 25”.
32
“13A
(1)
The Registrar may issue statements of principle with respect to the conduct expected of regulated friendly societies.
(2)
The conduct expected may include compliance with a code or standard issued by another person, as for the time being in force, and may allow for the exercise of discretion by any person pursuant to any such code or standard.
(3)
Failure to comply with a statement of principle under this paragraph is a ground for the taking of disciplinary action or the exercise of powers of intervention, but it does not give rise to any right of action by investors or other persons affected or affect the validity of any transaction.
(4)
The disciplinary action which may be taken by virtue of sub-paragraph (3) is—
(a)
the making of a public statement under paragraph 21, or
(b)
the application by the Registrar for an injunction, interdict or other order under paragraph 22(1), or
(c)
any action under paragraph 26 or 27 of this Schedule;
and the reference in that sub-paragraph to powers of intervention is to the powers conferred by Chapter VI of Part I of this Act.
(5)
Where a statement of principle relates to compliance with a code or standard issued by another person, the statement of principle may provide—
(a)
that failure to comply with the code or standard shall be a ground for the taking of disciplinary action, or the exercise of powers of intervention, only in such cases and to such extent as may be specified; and
(b)
that no such action shall be taken, or any such power exercised, except at the request of the person by whom the code or standard in question was issued.
(6)
The Registrar shall exercise his powers in such manner as appears to him appropriate to secure compliance with statements of principle under this paragraph.
13B
(1)
The relevant regulatory authority may on the application of a regulated friendly society—
(a)
modify a statement of principle issued under paragraph 13A so as to adapt it to the circumstances of the society or to any particular kind of business carried on by it, or
(b)
dispense the society from compliance with any such statement of principle, generally or in relation to any particular kind of business carried on by it.
(2)
The powers conferred by this paragraph shall not be exercised unless it appears to the relevant regulatory authority—
(a)
that compliance with the statement of principle in question would be unduly burdensome for the applicant having regard to the benefit which compliance would confer on investors, and
(b)
that the exercise of those powers will not result in any undue risk to investors.
(3)
The powers conferred by this paragraph may be exercised unconditionally or subject to conditions; and paragraph 13A(3) applies in the case of failure to comply with a condition as in the case of failure to comply with a statement of principle.
(4)
The relevant regulatory authority for the purposes of this paragraph is—
(a)
in the case of a member society of a recognised self-regulating organisation for friendly societies, in relation to investment business in the carrying on of which it is subject to the rules of the organisation, that organisation;
(b)
in any other case, or in relation to other investment business, the Registrar.
(5)
The reference in paragraph 4(1) of Schedule 2 as applied by paragraph 4 above (requirements for recognition of self-regulating organisation for friendly societies) to monitoring and enforcement of compliance with statements of principle includes monitoring and enforcement of compliance with conditions imposed by the organisation under this paragraph.”.
33
(1)
Paragraph 14 (conduct of business rules) is amended as follows.
(2)
In sub-paragraph (1), omit the words “other than a member society”.
(3)
“(2A)
Paragraph 22B below has effect as regards the application of rules under this paragraph to member societies in respect of investment business in the carrying on of which they are subject to the rules of a recognised self-regulating organisation for friendly societies.”.
(4)
“; and
(c)
for the references in subsection (4) to section 63B and a recognised self-regulating organisation there shall be substituted references to paragraph 13B and a recognised self-regulating organisation for friendly societies.”.
34
(1)
Paragraph 19 (clients’ money regulations) is amended as follows.
(2)
In sub-paragraph (2) for the words from “(but with the substitution” to the end substitute “(but with the substitution for the reference in paragraph (e) of subsection (2) to the Secretary of State of a reference to the Registrar)”.
(3)
“(3)
Paragraph 22B below has effect as regards the application of regulations under this paragraph to member societies in respect of investment business in the carrying on of which they are subject to the rules of a recognised self-regulating organisation for friendly societies.”.
35
“20
(1)
Regulations under section 56(1) of this Act shall not permit anything to be done by a regulated friendly society but that section shall not apply to anything done by such a society in the course of or in consequence of an unsolicited call which, as respects the society, constitutes the carrying on of regulated business, if it is permitted to be done by the society by regulations made by the Registrar with the consent of the Secretary of State.
(2)
Paragraph 22B below has effect as regards the application of regulations under this paragraph to member societies in respect of investment business in the carrying on of which they are subject to the rules of a recognised self-regulating organisation for friendly societies.
(3)
As it applies to such persons in respect of such business, the reference in sub-paragraph (1) above to conduct permitted by regulations made by the Registrar with the consent of the Secretary of State shall be construed—
(a)
where or to the extent that the regulations do not apply, as a reference to conduct permitted by the rules of the organisation; and
(b)
where or to the extent that the regulations do apply but are expressed to have effect subject to the rules of the organisation, as a reference to conduct permitted by the regulations together with the rules of the organisation.”.
36
“22B
(1)
The Registrar may in rules and regulations under—
(a)
paragraph 14 (conduct of business rules),
(b)
paragraph 19 (clients’ money regulations), or
(c)
paragraph 20 (regulations as to unsolicited calls),
designate provisions which apply, to such extent as may be specified, to a member society in respect of investment business in the carrying on of which it is subject to the rules of a recognised self-regulating organisation for friendly societies.
(2)
It may be provided that the designated rules or regulations have effect, generally or to such extent as may be specified, subject to the rules of the organisation.
(3)
A member society which contravenes a rule or regulation applying to it by virtue of this paragraph shall be treated as having contravened the rules of the relevant recognised self-regulating organisation for friendly societies.
(4)
It may be provided that, to such extent as may be specified, the designated rules or regulations may not be modified or waived (under paragraph 22C below or section 50) in relation to a member society.
Where such provision is made any modification or waiver previously granted shall cease to have effect, subject to any transitional provision or saving contained in the rules or regulations.
(5)
Except as mentioned in sub-paragraph (1), the rules and regulations referred to in that sub-paragraph do not apply to a member society in respect of investment business in the carrying on of which it is subject to the rules of a recognised self-regulating organisation for friendly societies.
22C
(1)
A recognised self-regulating organisation for friendly societies may on the application of a society which is a member of the organisation—
(a)
modify a rule or regulation designated under paragraph 22B so as to adapt it to the circumstances of the society or to any particular kind of business carried on by it, or
(b)
dispense the society from compliance with any such rule or regulation, generally or in relation to any particular kind of business carried on by it.
(2)
The powers conferred by this paragraph shall not be exercised unless it appears to the organisation—
(a)
that compliance with the rule or regulation in question would be unduly burdensome for the applicant having regard to the benefit which compliance would confer on investors, and
(b)
that the exercise of those powers will not result in any undue risk to investors.
(3)
The powers conferred by this paragraph may be exercised unconditionally or subject to conditions; and paragraph 22B(3) applies in the case of a contravention of a condition as in the case of contravention of a designated rule or regulation.
(4)
The reference in paragraph 4(1) of Schedule 2 as applied by paragraph 4 above (requirements for recognition of self-regulating organisation for friendly societies) to monitoring and enforcement of compliance with rules and regulations includes monitoring and enforcement of compliance with conditions imposed by the organisation under this paragraph.
22D
(1)
The Registrar may issue codes of practice with respect to any matters dealt with by statements of principle issued under paragraph 13A or by rules or regulations made under any provision of this Schedule.
(2)
In determining whether a society has failed to comply with a statement of principle—
(a)
a failure by it to comply with any relevant provision of a code of practice may be relied on as tending to establish failure to comply with the statement of principle, and
(b)
compliance by it with the relevant provisions of a code of practice may be relied on as tending to negative any such failure.
(3)
A contravention of a code of practice with respect to a matter dealt with by rules or regulations shall not of itself give rise to any liability or invalidate any transaction; but in determining whether a society’s conduct amounts to contravention of a rule or regulation—
(a)
contravention by it of any relevant provision of a code of practice may be relied on as tending to establish liability, and
(b)
compliance by it with the relevant provisions of a code of practice may be relied on as tending to negative liability.
(4)
Where by virtue of paragraph 22B (application of designated rules and regulations to member societies) rules or regulations—
(a)
do not apply, to any extent, to a member society of a recognised self-regulating organisation for friendly societies, or
(b)
apply, to any extent, subject to the rules of the organisation,
a code of practice with respect to a matter dealt with by the rules or regulations may contain provision limiting its application to a corresponding extent.”.
37
“29
(1)
The Registrar shall not make a transfer order transferring any legislative functions to a transferee body unless—
(a)
the body has furnished him and the Secretary of State with a copy of the instruments it proposes to issue or make in the exercise of those functions, and
(b)
they are both satisfied that those instruments will—
(i)
afford investors an adequate level of protection,
(ii)
in the case of provisions corresponding to those mentioned in Schedule 8 to this Act, comply with the principles set out in that Schedule, and
(iii)
take proper account of the supervision of friendly societies by the Registrar under the enactments relating to friendly societies.
(2)
In this paragraph “legislative functions” means the functions of issuing or making statements of principle, rules, regulations or codes of practice.”.
38
In paragraph 30(2), for “rules or regulations made” substitute “statements of principle, rules, regulations or codes of practice issued or made”.
39
In paragraph 31(6)(c), for “as if the reference to section 205(2) were a reference to paragraph 45(1) below” substitute “as if the reference to section 205A were a reference to paragraph 45(1) and (3) below”.
40
“34
(1)
A transferee body to which the Registrar has transferred any legislative functions may exercise those functions without the consent of the Secretary of State.
(2)
In this paragraph “legislative functions” means the functions of issuing or making statements of principle, rules, regulations or codes of practice.”.
41
In paragraph 36 (competition scrutiny: transferee bodies) in sub-paragraphs (1) and (3)(b) for “rules, regulations” substitute “statements of principle, rules, regulations, codes of practice”.
42
In paragraph 38(1) (publication of information and advice)—
(a)
in paragraph (a), for “rules and regulations made” substitute “statements of principle, rules, regulations and codes of practice issued or made”, and
(b)
in paragraph (b) for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”.
43
In paragraph 45—
(a)
in sub-paragraph (1) for “make regulations, rules or orders” substitute “issue or make statements of principle, rules, regulations, orders or codes of practice”, and
(b)
in sub-paragraph (3) for “regulations, rules or orders” substitute “statements of principle, rules, regulations, orders or codes of practice.”.
SCHEDULE 24Repeals
Chapter | Short title | Extent of repeal |
|---|---|---|
1964 c. 40. | Harbours Act 1964. | In section 42(6), the words “required to be attached to a company’s balance sheet”. |
1973 c. 41. | Fair Trading Act 1973. | Section 46(3). |
In section 71, in subsection (1) the words “made under section 69(4) of this Act” and subsection (2). | ||
In section 74(1), the words from “and does not” to “section 69(4) of this Act”. | ||
In section 85, subsection (5) and, in subsection (6), paragraph (b) and the word “or” preceding it. | ||
In section 88(6), the words from “the relevant parties” to the “and” immediately following paragraph (c). | ||
In section 89(2), the words “Part II of”. | ||
In Schedule 9, in paragraph 4 the words from “either” to the end. | ||
1985 c. 6. | Companies Act 1985. | Section 160(3). |
1985 c. 6—cont. | Companies Act 1985—cont. | In section 169(5), the words from “, during business hours” to “for inspection)”. |
In section 175(6)(b), the words from “during business hours” to “period”. | ||
In section 191— | ||
(a) in subsection (1), the words from “(but” to “for inspection)”; | ||
(b) in subsection (3), paragraphs (a) and (b). | ||
Section 201. | ||
In section 202(1), the words “(except where section 201(3) applies)”. | ||
Section 209(1)(j). | ||
In section 219(1), the words from “during” to “for inspection)”. | ||
In section 288(3), the words from “during” to “for inspection)”. | ||
In section 318(7), the words from “during” to “for inspection)”. | ||
In section 356— | ||
(a) in subsection (1), the words “during business hours”; | ||
(b) subsections (2) and (4). | ||
In section 383— | ||
(a) in subsection (1), the words “during business hours”; | ||
(b) subsection (2); | ||
(c) in subsection (3), the words from “at a charge” to the end. | ||
Section 389. | ||
Section 435. | ||
Section 440. | ||
Section 443(4). | ||
In section 446— | ||
(a) in subsection (3), paragraph (b) and the word “and” preceding it; | ||
(b) subsection (7). | ||
Section 447(1). | ||
In section 449(1)— | ||
(a) the words “or 448”; | ||
(b) paragraph (e). | ||
Section 452(1)(b). | ||
In section 460(1), the words “(inspection of company’s books and papers)” and “under section 440”. | ||
1985 c. 6—cont. | Companies Act 1985—cont. | In section 464(5), at the end of paragraph (c), the word “and”. |
In section 466— | ||
(a) in subsection (2), paragraph (a) and (d) and the word “or” preceding the latter; | ||
(b) subsections (4) and (5); | ||
(c) in subsection (6), the words “falling under subsection (4) of this section”. | ||
In section 651(1), the words “at any time within 2 years of the date of the dissolution”. | ||
In section 708(1)(b), the words “or other material”. | ||
Sections 712 and 715. | ||
In section 716(2), the words following paragraph (c). | ||
In section 717(1), the words following paragraph (c). | ||
In section 733(3), the words from “then” to “216(3)”. | ||
In section 735A(1), the words “440, 449(1)(a) and (d)”. | ||
In section 744, the definitions of “annual return”, “authorised institution”, “authorised minimum”, “expert”, “floating charge”, “joint stock company” and “undistributable reserves”. | ||
In section 746, the words “Except as provided by section 243(6),”. | ||
In Schedule 2— | ||
(a) in paragraph 1(1), the words “paragraph 60(2) of Schedule 4 or paragraph 19(3) of Schedule 9”; | ||
(b) paragraph 1(5); | ||
(c) in paragraph 2(1), the word “23,”; | ||
(d) paragraph 2(2); | ||
(e) in paragraph 3(1), the words “paragraph 60(2) of Schedule 4 or paragraph 19(3) of Schedule 9”; | ||
(f) paragraph 3(3); | ||
1985 c. 6—cont. | Companies Act 1985—cont. | (g) in paragraph 4(1), the words “(whether as personal representative or otherwise)”; |
(h) in paragraph 4(2), the words “paragraph 60(2) of Schedule 4 or paragraph 19(3) of Schedule 9”. | ||
In Schedule 4, paragraphs 50(6), 53(7), 60 to 70, 74, 75, 77 to 81, 87, 90 to 92 and 95. | ||
In Schedule 9— | ||
(a) paragraphs 1, 13(3) and (18), 16, 18(5), 19(3) to (7) and 21 to 26; | ||
(b) in paragraph 27(4), the words “of the said Part I”; | ||
(c) in paragraph 28, in sub-paragraph (1) the words “to which Part II of the Insurance Companies Act 1982 applies” and in sub-paragraph (2) the words “of Part I of this Schedule”; | ||
(d) paragraphs 29 to 31. | ||
In Schedule 11— | ||
(a) paragraph 4(b) and (c); | ||
(b) paragraph 5(b). | ||
In Schedule 13, in paragraph 25, the words from “during” to “for inspection)”. | ||
Schedule 15. | ||
In Schedule 22— | ||
(a) the entry relating to section 36(4); | ||
(b) in the entry relating to sections 363 to 365, the words “(with Schedule 15)”; | ||
(c) in the entry relating to sections 384 to 393, in column 2, the word “qualifications”. | ||
In Schedule 24, the entries relating to sections 245(1), 245(2), 255(5), 260(3), 287(3), 365(3), 384(5), 386(2), 389(10), 390(7), 391(4), 392(2) and 393. | ||
1985 c. 65. | Insolvency Act 1985. | In Schedule 6, paragraphs 7(3), 23 and 45. |
1986 c. 45. | Insolvency Act 1986. | In sections 45(5), 53(2), 54(3) and 62(5), the words “and, for continued contravention, to a daily default fine”. |
1986 c. 45—cont. | Insolvency Act 1986—cont. | In Schedule 10, the entries in column 5 relating to sections 45(5), 53(2), 54(3) and 62(5). |
In Part I of Schedule 13, the entries relating to sections 222(4), 225 and 733(3). | ||
1986 c. 46. | Company Directors Disqualification Act 1986. | In section 21(2), the words “and section 431 (summary proceedings)”. |
1986 c. 53. | Building Societies Act 1986. | In Schedule 15, in paragraph 3(2)(b), the words “, a shadow director”. |
In Schedule 18, paragraphs 16 and 17. | ||
1986 c. 60. | Financial Services Act 1986. | In section 13— |
(a) subsection (1); | ||
(b) subsections (4) to (6). | ||
In section 48(1), the words “members of a recognised self-regulating organisation or” and “organisation o r”. | ||
In section 55— | ||
(a) in subsection (2)(b) and (e), the words “a member of a recognised self-regulating organisation or” and “organisation or”; | ||
(b) in subsection (3), the words “organisation or”. | ||
In section 94— | ||
(a) in subsection (3), the words “except section 435(1)(a) and (b) and (2)”; | ||
(b) in subsection (4), the words “or its affairs”, “and the affairs mentioned in subsection (1) or (2) above” and “or director”. | ||
Section 105(7). | ||
In section 119(5), the words from “and the practices referred to in paragraph (c)” to the end. | ||
In sections 159(1) and 160(1), the words from the beginning to “section 161 below”. | ||
In section 179(3), the word “and” preceding paragraph (i). | ||
Section 180(6). | ||
Section 196(3). | ||
Section 198(1). | ||
1986 c. 60—cont. | Financial Services Act 1986—cont. | In section 199(9), the words from “and, in relation” to the end. |
In Schedule 11— | ||
(a) paragraph 4(4)(b); | ||
(b) paragraph 7; | ||
(c) in paragraph 10(3), the words from “and the practices referred to in paragraph (c)” to the end; | ||
(d) in paragraph 14(1), the words “other than a member society”; | ||
(e) in paragraph 14(3), the word “and” after paragraph (a). | ||
In Schedule 16, paragraph 22. | ||
1987 c. 22. | Banking Act 1987. | In the Table in section 84(1), the entry relating to persons appointed under section 94, 106 or 177 of the Financial Services Act 1986. |
Section 90(1). | ||
In Schedule 6— | ||
(a) paragraph 18(1) to (6); | ||
(b) in paragraph 18(7), the words “and (1A)”; | ||
(c) paragraph 18(8) and (9); | ||
(d) in paragraph 27(3), the words “and (6)”. | ||
1987 c. 41. | Criminal Justice (Scotland) Act 1987. | Section 55(a). |
1988 c. 1. | Income and Corporation Taxes Act 1988. | Section 565(6)(b). |
1988 c. 33. | Criminal Justice Act 1988. | Section 145(a). |
1988 c. 48. | Copyright, Designs and Patents Act 1988. | In Schedule 7, paragraph 31. |