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Make
provision for the production and publication of annual reports
on the |
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social, environmental and
economic impacts and perfomance of companies |
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and Government departments;
to specify certain duties of directors and |
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Ministers; and for connected
purposes. |
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Be
it enacted by the Queen’s most Excellent Majesty,
by and with the advice and |
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consent of the Lords Spiritual
and Temporal, and Commons, in this present |
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Parliament assembled, and
by the authority of the same, as follows:— |
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1 |
Operating
and financial review |
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(1) |
The directors of a company
must, for each financial year of the company in |
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which it is a major company,
prepare an operating and financial review. |
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(2) |
The directors must secure
that the information contained in the operating and |
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financial review is such
that the review will, in their opinion, achieve the |
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5 |
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(3) |
The review objective is:
providing such information as will permit the |
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members of the company, as
of the approval date, to make an informed |
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(a) |
the company’s operations; |
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(b) |
its financial position; |
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(c) |
its future strategies and
prospects; and |
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(d) |
its impacts on the environment
and on any communities in which the |
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(4) |
The directors must also secure
that the operating and financial review— |
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(a) |
complies with the requirements
of this Act as to its content; and |
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(b) |
complies with any rules as
to its content or as to its form. |
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(5) |
The directors must comply
with any rules about the manner in which the |
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operating and financial review
is to be prepared. |
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(6) |
Information contained in
a document annexed to the operating and financial |
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review is, for the purposes
of this section, contained in that review, but that is |
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(7) |
In
this section “the approval date” means the date on
which the operating and |
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financial review is approved
by the board of directors under section 4. |
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(8) |
As to the companies which
are major companies for the purposes of this |
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section, see sections 5
and 6. |
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(9) |
Rules under this section
may be made by regulations made by the Secretary of |
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5 |
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(10) |
Regulations made by the
Secretary of State under this section are subject to |
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annulment in pursuance of
a resolution of either House of Parliament. |
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2 |
Compulsory
content of operating and financial review |
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(1) |
In order to achieve the
review objective, an operating and financial review |
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must contain at least the
core elements. |
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(2) |
The core elements are— |
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(a) |
a statement of the company’s
business in the financial year to which the |
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operating and financial review
relates; |
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(b) |
a fair review of the performance
during the financial year and of the |
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position of the company at
the end of that year; and |
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(c) |
a fair projection of the
prospects for the company’s business and of |
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events which will, or are
likely to, substantially affect that business. |
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3 |
Duty
to consider including other matters in operating and financial
review |
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(1) |
If the directors of a company
are required to form an opinion for the purposes |
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of section 1(2),
they must consider whether the inclusion of information about
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any matter mentioned in subsection
(2) is necessary in order to achieve the |
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(a) |
the management structure of
the company; |
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(b) |
receipts from, and returns
to, members of the company in the financial |
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year to which the operating
and financial review relates in relation to |
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(c) |
the impact of the company’s
operations, policies, products and |
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procurement practices in relation
to employment; |
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(d) |
the impact of the company’s
operations, policies, products and |
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procurement practices on the
environment; |
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(e) |
the impact of the company’s
operations, policies, products and |
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procurement practices on social
and community issues; |
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(f) |
the company’s performance,
in the financial year to which the |
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operating and financial review
relates, in carrying out the policies |
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mentioned in paragraphs (c)
to (e); and |
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(g) |
matters not falling within
the preceding paragraphs which affect, or |
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may affect, the company’s
reputation. |
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(3) |
Nothing in this section
limits the duty imposed by section 1(2). |
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4 |
Approval
and signature of operating and financial review |
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(1) |
The operating and financial
review prepared for a financial year must be |
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approved by the board of
directors. |
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(2) |
After
the review has been approved by the board, it must be signed on
behalf |
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(a) |
record the date on which it
was approved by the board; |
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(b) |
state the name of the director
who signs it on behalf of the board; and |
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(c) |
record the date when it is
signed by that director. |
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5 |
Companies
required to publish operating and financial review |
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(1) |
For the purposes of section
1,
a company is a major company in a financial year |
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(a) |
two or more of the conditions
in this section are met in relation to that |
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(b) |
two or more of the conditions
were met in relation to that company in |
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(c) |
it is not a subsidiary undertaking
of a European Economic Area parent |
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(2) |
A company shall be treated
for the purposes of section 1 as being a major |
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company in a financial year— |
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(a) |
if it was a major company
in the preceding financial year or was treated |
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as being such a company under
paragraph (b); or |
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(b) |
if it was treated as being
a major company in relation to the previous |
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financial year by virtue of
paragraph (a) and it satisfies paragraphs (a) |
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and (c) of subsection (1)
in relation to the year in question. |
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(3) |
The first condition is that
the company’s turnover is at least £50 million in
the |
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financial year in question. |
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(4) |
The second condition is
that the company has a balance sheet total of at least |
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£25 million at the
end of the financial year in question. |
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(5) |
The third condition is that
the average number of the company’s employees is |
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at least 500 in the financial
year in question. |
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(6) |
In this section “European
Economic Area parent undertaking” means a parent |
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undertaking incorporated
in a European Economic Area State. |
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(7) |
The Secretary of State shall
from time to time review the conditions in this |
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section, and he may make
regulations to reduce the quantities in subsections |
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(8) |
Regulations made by the
Secretary of State under this section are subject to |
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annulment in pursuance of
a resolution of either House of Parliament. |
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6 |
Meaning
of “turnover” and “balance sheet total” |
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(1) |
A company’s “turnover”
is the amounts derived from the provision of goods |
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and services falling within
the company’s ordinary activities after the |
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(c) |
any
other taxes based on the amounts so derived. |
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(2) |
If
a company’s financial year is not in fact a year, a calculation
which is |
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required, for the purposes
of this Act, to be made by reference to the amount |
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of the company’s turnover
shall be proportionally adjusted. |
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(3) |
A company’s “balance
sheet total” is the aggregate amount of the company’s
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assets after the deduction
of any amount representing the depreciation of those |
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5 |
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7 |
Calculation
of number of employees |
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(1) |
This section applies for
the purpose of calculating the average number of |
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employees of a company in
a financial year. |
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(2) |
That number is determined
by dividing the annual number of employees for |
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the financial year by the
number of months in that year. |
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(3) |
The annual number of employees
for a financial year is the sum of the monthly |
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(4) |
A monthly number is the
number of the persons employed (whether |
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throughout the month or not)
under contracts of service by the company in a |
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month of the financial year
in question. |
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A director of a company must act
in accordance with— |
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(a) |
the company’s constitution,
and |
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(b) |
decisions taken under the
constitution (or by the company, or any class |
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of members, under any enactment
or rule of law as to means of taking |
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company or class decisions), |
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and
must exercise his powers for their proper purpose. |
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9 |
Promotion
of company’s objectives |
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(1) |
A director of a company must
in any given case— |
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(a) |
act in the way he decides,
in good faith, would be most likely to |
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promote the success of the
company for the benefit of its members as a |
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whole (excluding anything
which would breach his duty under section |
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(b) |
in deciding what would be
most likely to promote that success, take |
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account in good faith of all
the material factors that it is practicable in |
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the circumstances for him
to identify; and |
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(c) |
take all reasonable steps
to minimise the impact of the company’s |
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impact on the communities
it affects and on the environment. |
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(2) |
In this section “the
material factors” means— |
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(a) |
the likely consequences (short
and long term) of the actions open to the |
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director, so far as a person
of care and skill would consider relevant; |
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(b) |
all such other factors as
a person of care and skill would consider |
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relevant, including such of
the matters in subsection (3) below as he |
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(a) |
the
company’s need to foster its business relationships, including
those |
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with its employees and suppliers
and the customers for its products or |
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(b) |
its need to have regard to
the impact of its operations on the |
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communities affected and on
the environment; |
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(c) |
its need to maintain a reputation
for high standards of business |
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(d) |
its need to achieve outcomes
that are fair as between its members. |
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(4) |
In subsection (2) a “person
of care and skill” means a person exercising the care, |
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skill and diligence required
by section 11. |
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(5) |
A director’s decision
as to what constitutes the success of the company for the |
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benefit of its members as
a whole must accord with the constitution and any |
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decision mentioned in section
8. |
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10 |
Delegation
and independence of judgement |
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(1) |
A director of a company
must not, except where authorised to do so by the |
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company’s consitution
or any decisions as mentioned in section 8— |
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(a) |
delegate any of his powers;
or |
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(b) |
fail to exercise his independent
judgement in relation to any exercise of |
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(2) |
Where a director has, in
accordance with this section, entered into an |
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agreement which restricts
his power to exercise independent judgement later, |
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this section does not prevent
him from acting as the agreement requires where |
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(in his independent judgement,
and according to the other provisions of this |
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11 |
Care,
skill and diligence |
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A director of a company must exercise
the care, skill and diligence which |
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would be exercised by a reasonably
diligent person with both— |
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(a) |
the knowledge, skill and
experience which may reasonably be expected |
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of a director in his position;
and |
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(b) |
any additional knowledge,
skill and experience which he has. |
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12 |
Citation,
commencement and extent |
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(1) |
This Act shall be known
as the Performance of Companies and Government |
|
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Departments (Reporting) Act
2004. |
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(2) |
This Act shall come into
force on a day determined by order by the Secretary |
|
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of State, but no later than
18 months after the passing of this Act. |
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(3) |
This Act shall apply to the
whole of the United Kingdom. |
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