Companies (Audit, Investigations and Community Enterprise) Bill [HL]

House of Commons

Session 2002 - 03
Internet Publications
Other Bills before Parliament

Companies (Audit, Investigations and Community Enterprise) Bill [HL]

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports
15

253E  Restrictions on use and further disclosure of information disclosed
under Article 253D
(1)
Information that is disclosed to an authorised person under Article
253D may not be used except in or in connection with—
(a)
taking steps to discover whether there are grounds for an
5
application to the court as mentioned in Article 253D(3)(a);
(b)
determining whether or not to make such an application; or
(c)
proceedings on any such application.
(2)
Information that is disclosed to an authorised person under Article
253D may not be further disclosed except—
10
(a)
to the person to whom the information relates; or
(b)
in or in connection with proceedings on any such application to
the court.
(3)
A person who contravenes paragraph (1) or (2) is guilty of an offence
and liable to imprisonment or a fine, or both.
15
(4)
It is a defence for a person charged with an offence under paragraph (3)
to prove—
(a)
that he did not know, and had no reason to suspect, that the
information had been disclosed under Article 253D; or
(b)
that he took all reasonable steps and exercised all due diligence
20
to avoid the commission of the offence.
(5)
Articles 680 (restriction on prosecutions), 680A (liability of individuals
for corporate default) and 680B (criminal proceedings against
unincorporated bodies) apply to offences under this Article.”
12
Power of person authorised to require documents, information and
25
explanations
(1)
After section 245E of the Companies Act 1985 (c. 6) (as inserted by clause 11)
insert—
“245F
  Power of authorised persons to require documents, information and
explanations
30
(1)
This section applies where it appears to a person who is authorised
under section 245C of this Act that there is, or may be, a question
whether the annual accounts of a company comply with the
requirements of this Act.
(2)
The authorised person may require any of the persons mentioned in
35
subsection (3) to produce any document, or to provide him with any
information or explanations, that he may reasonably require for the
purpose of—
(a)
discovering whether there are grounds for an application to the
court under section 245B; or
40
(b)
determining whether or not to make such an application.
(3)
Those persons are—
(a)
the company;
(b)
any officer, employee, or auditor of the company;

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports
16

(c)
any persons who fell within paragraph (b) at a time to which the
document or information required by the authorised person
relates.
(4)
If a person fails to comply with a requirement under subsection (2), the
authorised person may apply to the court for an order under subsection
5
(5).
(5)
If on such an application the court decides that the person has failed to
comply with the requirement under subsection (2), it may order the
person to take such steps as it directs for securing that the documents
are produced or the information or explanations are provided.
10
(6)
A statement made by a person in response to a requirement under
subsection (2) or an order under subsection (5) may not be used in
evidence against him in any criminal proceedings.
(7)
Nothing in this section compels any person to disclose documents or
information in respect of which in an action in the High Court a claim
15
to legal professional privilege, or in an action in the Court of Session a
claim to confidentiality of communications, could be maintained.
(8)
In this section “document” includes information recorded in any form.
245G  Restrictions on further disclosure of information obtained under
section 245F
20
(1)
This section applies to information (in whatever form) which—
(a)
has been obtained in pursuance of a requirement or order under
section 245F, and
(b)
relates to the private affairs of an individual or to any particular
business.
25
(2)
No such information may, during the lifetime of that individual or so
long as that business continues to be carried on, be disclosed without
the consent of that individual or the person for the time being carrying
on that business.
(3)
Subsection (2) does not apply to any disclosure of information which—
30
(a)
is made for the purpose of facilitating the carrying out by a
person authorised under section 245C of his functions under
section 245B;
(b)
is made to a person specified in Part 1 of Schedule 7B;
(c)
is of a description specified in Part 2 of that Schedule; or
35
(d)
is made in accordance with Part 3 of that Schedule.
(4)
The Secretary of State may by order amend Schedule 7B.
(5)
An order under subsection (4) must not—
(a)
amend Part 1 of Schedule 7B by specifying a person unless the
person exercises functions of a public nature (whether or not he
40
exercises any other function);
(b)
amend Part 2 of Schedule 7B by adding or modifying a
description of disclosure unless the purpose for which the
disclosure is permitted is likely to facilitate the exercise of a
function of a public nature;
45

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports
17

(c)
amend Part 3 of Schedule 7B so as to have the effect of
permitting disclosures to be made to a body other than one that
exercises functions of a public nature in a country or territory
outside the United Kingdom.
(6)
An order under subsection (4) shall be made by statutory instrument
5
which shall be subject to annulment in pursuance of a resolution of
either House of Parliament.
(7)
A person who discloses any information in contravention of this
section—
(a)
is guilty of an offence, and
10
(b)
is liable on conviction to imprisonment or a fine, or both.
(8)
However, it is a defence for a person charged with an offence under
subsection (7) to prove—
(a)
that he did not know, and had no reason to suspect, that the
information had been disclosed under section 245F; or
15
(b)
that he took all reasonable steps and exercised all due diligence
to avoid the commission of the offence.
(9)
Sections 732 (restriction on prosecutions), 733 (liability of individuals
for corporate default) and 734 (criminal proceedings against
unincorporated bodies) apply to offences under this section.
20
(10)
This section does not prohibit the disclosure of information if the
information is or has been available to the public from any other source.
(11)
Nothing in this section authorises the making of a disclosure in
contravention of the Data Protection Act 1998.”
(2)
Schedule 1 (which inserts Schedule 7B in the Companies Act 1985 (c. 6)) has
25
effect.
Directors’ reports
13
Power to specify bodies who may issue reporting standards
In section 257 of the Companies Act 1985 (power of Secretary of State to alter
accounting requirements), after subsection (4) insert—
30
“(4A)
Regulations under this section may also make provision—
(a)
for the issuing, by such body or bodies as may be specified, of
standards in relation to matters to be contained in reports which
are required by this Part to be prepared by the directors of a
company;
35
(b)
for directors of a company who have complied with any such
standard, or any of its provisions, in relation to any such report,
to be presumed (unless the contrary is proved) to have
complied with any requirements of this Part relating to the
contents of the report to which the standard or provision
40
relates.
(4B)
In subsection (4A) “specified” means specified in an order made by the
Secretary of State; and such an order—

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports
18

(a)
shall be made by statutory instrument which shall be subject to
annulment in pursuance of a resolution of either House of
Parliament;
(b)
may contain such transitional provisions as the Secretary of
State thinks fit.”
5
Supervision of accounts and reports
14
Supervision of periodic accounts and reports of issuers of listed securities
(1)
The Secretary of State may make an order appointing a body (“the prescribed
body”) to exercise the functions mentioned in subsection (2).
(2)
The functions are—
10
(a)
keeping under review periodic accounts and reports that are produced
by issuers of listed securities and are required to comply with any
accounting requirements imposed by listing rules; and
(b)
if the prescribed body thinks fit, informing the Financial Services
Authority of any conclusions reached by the body in relation to any
15
such accounts or report.
(3)
A body may be appointed under this section if it is a body corporate or an
unincorporated association which appears to the Secretary of State—
(a)
to have an interest in, and to have satisfactory procedures directed to,
monitoring compliance by issuers of listed securities with accounting
20
requirements imposed by listing rules in relation to periodic accounts
and reports produced by such issuers; and
(b)
otherwise to be a fit and proper body to be appointed.
(4)
But where the order is to contain any requirements or other provisions
specified under subsection (8), the Secretary of State may not appoint a body
25
unless, in addition, it appears to him that the body would, if appointed,
exercise its functions as a prescribed body in accordance with any such
requirements or provisions.
(5)
A body may be appointed either generally or in respect of any of the following,
namely—
30
(a)
any particular class or classes of issuers,
(b)
any particular class or classes of periodic accounts or reports,

and different bodies may be appointed in respect of different classes within
either or both of paragraphs (a) and (b).
(6)
In relation to the appointment of a body in respect of any such class or classes,
35
subsections (2) and (3) are to be read as referring to issuers, or (as the case may
be) to periodic accounts or reports, of the class or classes concerned.
(7)
Where—
(a)
a body is so appointed, but
(b)
the Financial Services Authority requests the body to exercise its
40
functions under subsection (2) in relation to any particular issuer of
listed securities in relation to whom those functions would not
otherwise be exercisable,

the body is to exercise those functions in relation to that issuer as well.

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports
19

(8)
An order under this section may contain such requirements or other provisions
relating to the exercise of functions by the prescribed body as appear to the
Secretary of State to be appropriate.
(9)
If the prescribed body is an unincorporated association, any relevant
proceedings may be brought by or against that body in the name of any body
5
corporate whose constitution provides for the establishment of the body.

For this purpose “relevant proceedings” means proceedings brought in or in
connection with the exercise of any function by the body as a prescribed body.
(10)
Where an appointment is revoked, the revoking order may make such
provision as the Secretary of State thinks fit with respect to pending
10
proceedings.
(11)
The power to make an order under this section is exercisable by statutory
instrument subject to annulment in pursuance of a resolution of either House
of Parliament.
(12)
In this section—
15

“issuer”, “listing rules” and “security” have the meaning given by section
103(1) of the Financial Services and Markets Act 2000 (c. 8)
(interpretation of Part 6);

“periodic” accounts and reports means accounts and reports which are
required by listing rules to be produced periodically.
20
15
Application of provisions inserted by sections 11 and 12 to bodies appointed
under section 14
(1)
The following provisions apply, in accordance with this section, in relation to
prescribed bodies and their functions under section 14 of this Act—
(a)
sections 245D and 245E of the Companies Act 1985 (c. 6) (as inserted by
25
section 11(1) of this Act),
(b)
Articles 253D and 253E of the Companies (Northern Ireland) Order
1986 (S.I. 1986/1032 (N.I. 6)) (as inserted by section 11(2) of this Act),
and
(c)
sections 245F and 245G and Schedule 7B of the Companies Act 1985 (as
30
inserted by section 12 of this Act).
(2)
Sections 245D and 245E apply in relation to prescribed bodies and their
functions as they apply in relation to persons authorised under section 245C of
that Act and persons authorised under Article 253C of the Companies
(Northern Ireland) Order 1986 and the functions of such persons mentioned in
35
sections 245D(3) and 245E(1).

But section 245E so applies as if subsection (2)(b) of that section were omitted.
(3)
Articles 253D and 253E apply in relation to prescribed bodies and their
functions as they apply in relation to persons authorised under Article 253C of
that Order and persons authorised under section 245C of the Companies Act
40
1985 and the functions of such persons mentioned in Articles 253D(3) and
253E(1).

But Article 253E so applies as if paragraph (2)(b) of that Article were omitted.
(4)
Sections 245F and 245G and Schedule 7B apply in relation to prescribed bodies
and their functions as they apply in relation to persons authorised under
45
section 245C of that Act and the functions of such persons mentioned in section
245F(2), section 245G(3)(a) and paragraph 16 of Schedule 7B.

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports
20

(5)
But section 245F so applies as if—
(a)
subsection (1) of that section provided that the section applies where it
appears to a prescribed body that there is, or may be, a question
whether any relevant accounts or reports produced by an issuer of
listed securities comply with any accounting requirements imposed by
5
listing rules;
(b)
the references in section 245F(3)(a) and (b) to “the company” were
references to that issuer; and
(c)
the references in section 245F(4) and (5) to “the court” were to the High
Court or, in Scotland, the Court of Session.
10
(6)
In subsection (5)—
(a)
“relevant accounts or reports” means accounts or reports in relation to
which the prescribed body has functions under section 14; and
(b)
“issuer”, “listing rules” and “security” have the same meanings as in
section 14.
15
(7)
In this section “prescribed body” has the same meaning as in section 14.
Bodies concerned with accounting standards etc.
16
Grants to bodies concerned with accounting standards etc.
(1)
The Secretary of State may make grants to any body carrying on activities
concerned with any of the matters set out in subsection (2).
20
(2)
The matters are—
(a)
issuing accounting standards;
(b)
issuing standards in respect of matters to be contained in reports
required to be produced by auditors or company directors;
(c)
investigating departures from standards within paragraph (a) or (b) or
25
from the accounting requirements of the Companies Act 1985 (c. 6) or
any requirements of directly applicable Community legislation relating
to company accounts;
(d)
taking steps to secure compliance with such standards or requirements;
(e)
keeping under review periodic accounts and reports that are produced
30
by issuers of listed securities and are required to comply with any
accounting requirements imposed by listing rules;
(f)
establishing, maintaining or carrying out arrangements within
paragraph 17, 18, 19(1) or 20(1) of Schedule 11 to the Companies Act
1989 (c. 40);
35
(g)
exercising functions of the Secretary of State under Part 2 of that Act;
(h)
carrying out investigations into public interest cases arising in
connection with the performance of accountancy functions by members
of professional accountancy bodies;
(i)
holding disciplinary hearings relating to members of such bodies
40
following the conclusion of such investigations;
(j)
deciding whether (and, if so, what) disciplinary action should be taken
against members of such bodies to whom such hearings related;
(k)
supervising the exercise by such bodies of regulatory functions in
relation to their members;
45
(l)
overseeing or directing any of the matters mentioned above.

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports
21

(3)
A grant may be made to a body within subsection (1) in respect of any of its
activities.
(4)
For the purposes of this section—
(a)
a body is to be regarded as carrying on any subsidiary activities of the
body; and
5
(b)
a body’s “subsidiary activities” are activities carried on by any of its
subsidiaries or by any body established under its constitution or under
the constitution of such a subsidiary.
(5)
In this section—

“accountancy functions” means functions performed as an accountant,
10
whether in the capacity of auditor or otherwise;

“company” means a company within the meaning of the Companies Act
1985 (c. 6);

“issuer”, “listing rules” and “security” have the meaning given by section
103(1) of the Financial Services and Markets Act 2000 (c. 8)
15
(interpretation of Part 6);

“professional accountancy body” means—
(a)
a supervisory body which is recognised for the purposes of Part
2 of the Companies Act 1989 (c. 40), or
(b)
a qualifying body, as defined by section 32 of that Act, which
20
enforces rules as to the performance of accountancy functions
by its members,

and references to the members of professional accountancy bodies
include persons who, although not members of such bodies, are subject
to their rules in performing accountancy functions;
25

“public interest cases” means matters which raise or appear to raise
important issues affecting the public interest;

“regulatory functions”, in relation to professional accountancy bodies,
means any of the following functions—
(a)
investigatory or disciplinary functions exercised by such bodies
30
in relation to the performance by their members of accountancy
functions,
(b)
the setting by such bodies of standards in relation to the
performance by their members of accountancy functions, and
(c)
the determining by such bodies of requirements in relation to
35
the education and training of their members;

“subsidiary” has the meaning given by section 736 of the Companies Act
1985.
(6)
In their application to Scotland—
(a)
subsection (2)(a) is to be read as referring only to accounting standards
40
applying in relation to the accounts of companies or bodies (other than
companies) established for the purpose of carrying on any kind of
business, whether or not for profit;
(b)
subsection (2)(h) to (j) are to be read as referring only to accountancy
functions performed in relation to companies or such bodies, and
45
(c)
subsection (2)(k) is to be read as referring only to regulatory functions
exercised in relation to the performance of such accountancy functions;

and in paragraph (a) above “business” includes the provision of benefits to
members of the body concerned.