Co-operative and Community Benefit Societies Bill (HC Bill 181)

Co-operative and Community Benefit Societies BillPage 40

78 Year of account: societies registered on or before 7 January 2012

(1) This section applies to a registered society to which section 77 (year of account:
societies registered on or after 8 January 2012) does not apply.

(2) A year of account—

(a) 5begins immediately after the end of the previous year of account, and

(b) ends with—

(i) the date of the last balance sheet published by the society in the
relevant period, or

(ii) if no balance sheet is published in that period, the 31 December
10in that period.

(3) The “relevant period”—

(a) begins with the 31 August following the beginning of the year of
account, and

(b) ends with the following 31 January.

(4) 15The society may by notice to the FCA alter the date on which its current and
subsequent years of account end to a date other than that provided for by
subsection (2)(b).

(5) A notice under subsection (4) must state whether it extends or shortens the
current year of account.

(6) 20A notice extending the current year of account has no effect if—

(a) it is given less than 5 years after the end of a year of account that was
extended under this section, or

(b) it would extend the year of account so that it would exceed 18 months.

(7) If the society is dissolved by an instrument of dissolution under section 119, its
25last year of account ends with the date of the instrument of dissolution.

Accounts and balance sheets

79 Duty to prepare revenue accounts

A registered society must ensure that there is prepared, in respect of each year
of account—

(a) 30a revenue account for that year which deals with the society’s affairs as
a whole, or

(b) two or more revenue accounts for that year which deal separately with
particular businesses carried on by the society.

80 Accounts and balance sheets to give a true and fair view

(1) 35A revenue account of a registered society must give a true and fair view of—

(a) the income and expenditure of the society as a whole (if the account
deals with the society’s affairs as a whole), or

(b) the income and expenditure of the society in respect of a particular
business carried on by it (if the account deals with that business),

40for the period to which the account relates.

(2) Where two or more revenue accounts are prepared in respect of a registered
society for a year of account (see section 79(b)), the accounts when considered

Co-operative and Community Benefit Societies BillPage 41

together must give a true and fair view of the income and expenditure of the
society as a whole for that year.

(3) A balance sheet of a registered society must give a true and fair view of the
state of the society’s affairs as at the date of the balance sheet.

(4) 5A member of a registered society’s committee commits an offence if the
member fails to take all reasonable steps to secure that—

(a) a revenue account of the society complies with subsection (1),

(b) revenue accounts of the society to which subsection (2) applies comply
with that subsection, or

(c) 10a balance sheet of the society complies with subsection (3).

(5) No offence is committed if the person had reasonable grounds to believe, and
did believe, that a competent and reliable person was charged with the duty of
securing that the relevant subsection was complied with and was in a position
to discharge that duty.

(6) 15In proceedings for an offence under this section it is for the defendant (in
Scotland, the accused) to prove the matters mentioned in subsection (5).

(7) A person guilty of an offence under this section is liable on summary
conviction—

(a) in England and Wales, to a fine;

(b) 20in Scotland, to a fine not exceeding level 5 on the standard scale.

81 Duty to display latest balance sheet at registered office

A registered society must, at all times, display a copy of its latest balance sheet
in a conspicuous position at its registered office.

82 Restrictions on publication of accounts and balance sheets

(1) 25A registered society must not publish a revenue account or balance sheet
unless the account or balance sheet complies with such of the requirements set
out in the following table as apply in relation to it.

Accounts and balance sheets to
which requirement applies
Requirement
1 Any revenue account or balance
sheet
30

Must be signed by—

(a)

the society’s secretary, and

(b)

two members of its
committee, acting on behalf
35of the committee.



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Accounts and balance sheets to
which requirement applies
Requirement
2 Year end revenue account or
balance sheet, where section 83
(duty to appoint auditors)
applies to the society for the
relevant year of account

Must—

(a)

5have been audited by the
auditors appointed under
section 83, and

(b)

incorporate a report by them
stating whether, in their
10opinion, it complies with
section 80(1) or (3) (true and
fair view).




15

3 Year end revenue account or
balance sheet, where section 85
(duty to obtain report in certain
cases where section 83
disapplied) applies to the
society for the relevant year of
account

Must—

(a)

20have obtained a report under
section 85(2)(a) on it, and

(b)

incorporate so much of the
report as relates to it.



25




30
4 Interim revenue account or
balance sheet, where section 83
applies to the society for the
relevant year of account and the
preceding year of account

Must—

(a)

have been audited by the
auditors last appointed
35under section 83, and

(b)

incorporate a report by them
stating whether, in their
opinion, it complies with
section 80(1) or (3).


40



5 Interim revenue account or
balance sheet, where— a resolution under
section 84 is in force in
respect of the relevant
year of account, and section 83 applies to the
society for the preceding
year of account
45

Must incorporate a report by an
appropriate person stating whether,
in the person’s opinion, it complies
with section 80(1) or (3).
50“Appropriate person” here means—

(a)

a qualified auditor, or

(b)

any person (if the society
made an appointment under
section 83(2)(b) for the
55preceding year and no
direction under section 86
has been made in respect of
that year).


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Accounts and balance sheets to
which requirement applies
Requirement
6 Interim revenue account or
balance sheet, where section 85
applies to the society for the
year of account preceding the
relevant year of account

Must incorporate a report by a
5qualified auditor stating whether, in
the auditor’s opinion—

(a)

it is in agreement with the
books of account kept by the
society under section 75, and

(b)

10(on the basis of the
information contained in
those books of account) it
complies with the
requirements of this Act.


15



7 Year end or interim revenue
account or balance sheet,
where— section 83 did not apply
to the society for the
relevant year of account
because of a resolution
under section 84, and a direction under section
86 (power to require
accounts etc for past
years to be audited) has
been given in respect of
that year of account
20Must incorporate a report by the
auditors appointed pursuant to the
direction stating whether, in their
opinion, it complies with section
80(1) or (3).

(2) 25The requirements in the rows 4 to 7 of the table do not apply to an interim
revenue account or balance sheet that—

(a) is published together with the latest year end revenue account and
balance sheet, which comply with the applicable requirements in row
2, 3 or 7 (as the case may be), and

(b) 30is marked in legible characters in a prominent position “UNAUDITED
REVENUE ACCOUNT” or “UNAUDITED BALANCE SHEET” (as the
case may be).

(3) In this section—

  • “interim balance sheet” means a balance sheet relating to the position at
    35any time other than the end of a year of account;

  • “interim revenue account” means a revenue account for any period within
    a year of account except one ending at the end of that year;

  • “relevant year of account” means the year of account to which the revenue
    account or balance sheet relates;

  • 40“year end balance sheet” means a balance sheet relating to the position at
    the end of a year of account;

  • “year end revenue account” means a revenue account for—

    (a)

    a year of account, or

    (b)

    any period within a year of account which ends at the end of
    45that year.

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Auditing of accounts etc

83 Duty to appoint auditors

(1) In each year of account, a registered society must (subject to subsection (2))
appoint one or more qualified auditors to audit its accounts and balance sheet
5for that year.

(2) If the society is a small society for the year of account, it must—

(a) make an appointment under subsection (1) for that year, or

(b) appoint two or more persons who are not qualified auditors to audit its
accounts and balance sheet for that year.

(3) 10The FCA may give a direction to a society that is a small society for the current
year of account, requiring it to make an appointment under subsection (1) for
that year.

(4) For the purposes of this Part a registered society is a “small society” for a year
of account if—

(a) 15the total amount of its receipts and payments in respect of the
preceding year of account did not exceed £5,000,

(b) it had no more than 500 members at the end of that year, and

(c) the total value of its assets at the end of that year did not exceed £5,000.

(5) The Treasury may by regulations—

(a) 20substitute for any sum or number for the time being specified in
subsection (4) such other sum or number as the Treasury consider
appropriate;

(b) prescribe what receipts and payments of a society are to be taken into
account for the purposes of that subsection.

25The regulations may make different provision for different cases or
circumstances.

(6) This section is subject to section 84 (power of certain societies to disapply this
section).

84 Power of certain societies to disapply section 83

(1) 30A registered society may by resolution disapply section 83 (duty to appoint
auditors) in respect of a year of account if—

(a) the total value of its assets at the end of the preceding year of account
did not exceed £2,800,000, and

(b) its turnover for that preceding year did not exceed £5,600,000.

(2) 35The resolution must be passed at a general meeting at which—

(a) less than 20% of the total votes cast are cast against the resolution, and

(b) less than 10% of the society’s members for the time being entitled under
its rules to vote cast their votes against the resolution.

(3) Subsection (1) does not apply to a society that—

(a) 40is a credit union,

(b) is a subsidiary,

(c) has a subsidiary,

Co-operative and Community Benefit Societies BillPage 45

(d) holds a deposit or has at any time since the end of the preceding year of
account held a deposit (other than a deposit in the form of
withdrawable share capital), or

(e) is registered in the register of social landlords maintained under section
520(1) of the Housing (Scotland) Act 2010 (asp 17)2010 (asp 17).

(4) The FCA may by notice to a society disapply subsection (1) in relation to the
year of account in which the notice is given.

(5) A resolution under subsection (1) has no effect if, at any time before the end of
the year of account to which it relates—

(a) 10the society is within a paragraph of subsection (3), or

(b) the society is given a notice under subsection (4).

(6) Subsection (1) applies in relation to a registered society that is a charity or
recognised body as if for paragraph (b) there were substituted—

(b) its gross income for that preceding year did not exceed
15£250,000.

(7) In subsection (6) “recognised body” has the meaning given by article 3(6)(c) of
the Charities and Trustee Investment (Scotland) Act 2005 (Consequential
Provisions and Modifications) Order 2006 (SI 2006/242SI 2006/242).

(8) Where a society’s year of account is for a period other than a calendar year, the
20figure in subsection (1)(b) (including that provision as it has effect by virtue of
subsection (6)) is to be proportionately adjusted.

85 Duty to obtain report in certain cases where section 83 is disapplied

(1) This section applies to a registered society for a year of account (“the year”) if—

(a) section 83 (duty to appoint auditors) does not apply to the society for
25the year because of a resolution under section 84 (power to disapply
auditing requirements), and

(b) the society’s turnover in the preceding year of account exceeded
£90,000.

(2) The society must, within the period of 28 days beginning immediately after the
30end of the year, appoint a qualified auditor to make—

(a) a report on its accounts and balance sheet for the year which states, in
the auditor’s opinion—

(i) whether its revenue account, any other account to which the
report relates, and balance sheet are in agreement with its books
35of account kept under section 75, and

(ii) (on the basis of the information contained in those books of
account) whether the revenue account and balance sheet
comply with the requirements of this Act, and

(b) a report relating to the preceding year of account which states whether,
40in the auditor’s opinion, the financial criteria for the exercise of the
power conferred by section 84 were met in relation to the year.

86 Power to require accounts etc for past years to be audited by qualified auditor

(1) The FCA may give a direction under this section to a registered society in
respect of any relevant year.

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(2) A “relevant year”, in relation to a society, is any year of account before the
current year of account for which—

(a) the society was a small society and made an appointment under section
83(2)(b) (appointment of non-qualified auditors), or

(b) 5section 83 did not apply to the society because of a resolution under
section 84 (power to disapply auditing requirements).

(3) If a direction is given—

(a) the society must appoint one or more qualified auditors to audit its
accounts and balance sheet for the relevant year, and

(b) 10if the society sent its annual return for the relevant year to the FCA
before the date of the direction, the society must (after audit, and within
3 months from receipt of the direction) send to the FCA a further annual
return complying with the requirements of this Part (other than as to
the time it is given).

87 15Auditors: content of report and powers

(1) This section applies where a registered society has appointed auditors under
section 83 for a year of account (“the year”).

(2) The auditors must make a report to the society on—

(a) the accounts examined by them, and

(b) 20the society’s revenue account and balance sheet for the year.

(3) The report must state—

(a) whether, in the auditors’ opinion, the revenue account and balance
sheet for the year give a true and fair view of the matters mentioned in
section 80(1) to (3);

(b) 25whether that revenue account and balance sheet comply with the other
requirements of this Act;

(c) if the report relates to any other accounts, whether those accounts give
a true and fair view of any matter to which they relate.

(4) In preparing the report, the auditors must carry out such investigations as will
30enable them to form an opinion as to—

(a) whether the society has kept proper books of account, and maintained
a satisfactory system of control over its transactions, in accordance with
section 75;

(b) whether the revenue account, any other accounts to which the report
35relates, and the balance sheet are in agreement with the society’s books
of account.

(5) If—

(a) the auditors are of opinion that the society has failed to comply with
section 75, or

(b) 40the revenue account, any other accounts to which the report relates and
the balance sheet are not in agreement with its books of account,

this must be stated in the report.

(6) Each of the auditors—

(a) has a right of access at all times to the society’s books, deeds and
45accounts and to all other documents relating to its affairs, and

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(b) is entitled to require from the society’s officers such information and
explanations as the auditor considers necessary for the performance of
the auditors’ duties.

(7) If the auditors fail to obtain all the information and explanations which, to the
5best of their knowledge and belief, are necessary for the purposes of their audit,
this must be stated in the report.

(8) The auditors are entitled—

(a) to attend any general meeting of the society;

(b) to receive all notices of, and other communications relating to, any
10general meeting which any member of the society is entitled to receive;

(c) to be heard at any meeting which they attend on any part of the
business of the meeting which concerns them as auditors.

88 Persons appointed under section 82 or 85: powers etc

(1) This section applies to a person appointed by a registered society—

(a) 15for the purposes of making a report of a kind mentioned in any of rows
4 to 6 of the table in section 82 (report on interim revenue account or
balance sheet), or

(b) under section 85 (duty to obtain report in certain cases where section 83
disapplied).

(2) 20For the purposes of the appointment, the person—

(a) has a right of access at all times to the society’s books, deeds and
accounts and to all other documents relating to its affairs, and

(b) is entitled to require from the society’s officers such information and
explanations as the person considers necessary.

(3) 25If the person fails to obtain all the information and explanations which, to the
best of the person’s knowledge and belief, are necessary for the purposes of
doing what the person has been appointed to do, this must be stated in the
person’s report.

(4) The person is entitled—

(a) 30to receive notice of, and attend, any general meeting of the society at
which a relevant matter is discussed, and

(b) to be heard at any such general meeting which the person attends on
any part of the business of the meeting which relates to a relevant
matter.

(5) 35In subsection (4) “relevant matter” means—

(a) any report made by the person, or

(b) any matter which is relevant to what the person has been appointed to
do.

Annual returns

89 40Annual returns

(1) A registered society must, within the period of 7 months beginning
immediately after the end of a year of account, send to the FCA—

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(a) a return relating to its affairs for that year (the society’s “annual return”
for that year),

(b) a copy of each balance sheet made during that year, and

(c) a copy of any relevant auditor’s report for that year.

(2) 5The annual return—

(a) must contain the society’s revenue account for that year prepared in
accordance with section 79 and a balance sheet as at the end of that year,
and

(b) may contain other accounts only if they have been reported on under
10section 85(2)(a) or 87.

(3) “Relevant auditor’s report” means—

(a) if section 83 (duty to appoint auditors) applies for that year, the
auditor’s report on the society’s accounts for that year and any
auditor’s report on a balance sheet made during that year;

(b) 15otherwise, any report for that year required by section 85.

(4) The powers under sections 143 and 144 to determine the form of an annual
return and the particulars to be contained in annual returns are subject to
subsection (2).

90 Duty to provide copy of annual return on demand

(1) 20A registered society must give a copy of its latest annual return, free of charge,
to any member or person interested in the society’s funds who asks for it.

(2) Where a request under subsection (1) is made, the following must be supplied
with the annual return—

(a) a copy of—

(i) 25the auditor’s report on the accounts and balance sheet
contained in the return, or

(ii) if section 83 (duty to appoint auditors) does not apply to the
society for the year of account to which the annual return
relates, any report required by section 85(2)(a);

(b) 30the society’s latest group accounts (if any).

(3) A society is regarded as having given a person a copy of its latest annual return
and the documents required by subsection (2) to be supplied with that return
(“the relevant documents”) if the following conditions are met—

(a) the person has agreed (generally or specifically) that the society may
35make the relevant documents available to the person on a website (and
has not revoked that agreement);

(b) the society has notified the person of the following—

(i) the website address;

(ii) the presence of the documents on the website;

(iii) 40the place on the website where the documents may be accessed;

(iv) how to access them; and

(c) the documents are present on the website for the whole of the period—

(i) beginning with the day the notification under paragraph (b) is
sent (or, if later, the day the documents first appear on the
45website), and

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(ii) ending with the day the annual return ceases to be the society’s
latest annual return.

(4) If any of the documents is absent from the website for part of the period
referred to in subsection (3)(c), the absence is to be disregarded if it is wholly
5attributable to circumstances that it would not be reasonable to have expected
the society to prevent or avoid.

Auditors

91 Meaning of “qualified auditor”

In this Part “qualified auditor” means a person eligible for appointment as a
10statutory auditor under Part 42 of the Companies Act 2006.

92 Persons ineligible for appointment as auditors etc

(1) This section applies to an appointment by a registered society of a person—

(a) as auditor of the society,

(b) for the purposes of making a report of a kind mentioned in row 5 or 6
15of the table in section 82 (report on interim revenue account or balance
sheet), or

(c) under section 85 (duty to obtain report in certain cases where section 83
disapplied).

(2) None of the following may be appointed—

(a) 20an officer or employee of the society or any connected registered
society;

(b) an employee, employer or partner of a person within paragraph (a);

(c) a person prohibited by section 1214 of the Companies Act 2006
(independence requirement) from acting as statutory auditor of a
25company that is a subsidiary of the society.

(3) For this purpose, a society is “connected with” another society if—

(a) one of them is a subsidiary of the other, or

(b) they are both subsidiaries of another registered society.

(4) An appointment made in contravention of this section is ineffective for the
30purposes of this Part.

(5) For the purposes of subsection (2), a society’s auditor is not to be regarded as
an employee of the society (and the auditor is not an “officer” - see section 149).

93 Re-appointment and removal of qualified auditors

(1) A qualified auditor appointed to audit a registered society’s accounts and
35balance sheet for the preceding year of account (“the existing auditor”) is re-
appointed as the society’s auditor for the current year of account.

This is subject to the following provisions of this section.

This is subject to the following provisions of this section.

(2) The existing auditor is not re-appointed if a resolution is passed at a general
40meeting of the society—

(a) appointing another person instead of the existing auditor,