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

House of Commons

Session 2002 - 03
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Companies (Audit, Investigations and Community Enterprise) Bill [HL]

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 2 — Community interest companies
36

(a)
must make provision requiring community interest company reports to
include information about the remuneration of directors,
(b)
may make provision as to the form of, and other information to be
included in, community interest company reports, and
(c)
may apply provisions of the Companies Act 1985 relating to directors’
5
reports to community interest company reports (with any appropriate
modifications).
(4)
The registrar of companies must forward to the Regulator a copy of each
community interest company report delivered to the registrar by virtue of this
section.
10
35
Community interest test and excluded companies
(1)
This section has effect for the purposes of this Part.
(2)
A company satisfies the community interest test if a reasonable person might
consider that its activities are being carried on for the benefit of the community.
(3)
An object stated in the memorandum of a company is a community interest
15
object of the company if a reasonable person might consider that the carrying
on of activities by the company in furtherance of the object is for the benefit of
the community.
(4)
Regulations may provide that activities of a description prescribed by the
regulations are to be treated as being, or as not being, activities which a
20
reasonable person might consider are activities carried on for the benefit of the
community.
(5)
“Community” includes a section of the community (whether in Great Britain or
anywhere else); and regulations may make provision about what does, does
not or may constitute a section of the community.
25
(6)
A company is an excluded company if it is a company of a description
prescribed by regulations.
Becoming a community interest company
36
New companies
(1)
If a company is to be formed as a community interest company, the documents
30
delivered to the registrar of companies under section 10 of the Companies Act
1985 (c. 6) (memorandum, articles and statement of names and particulars of
directors and secretary) must be accompanied by the prescribed formation
documents.
(2)
“The prescribed formation documents” means such statutory declarations or
35
other declarations or statements as are required by regulations to accompany
the documents delivered under that section, in such form as may be approved
in accordance with the regulations.
(3)
On receiving the documents delivered under that section and the prescribed
formation documents the registrar of companies must (instead of registering
40
the memorandum and articles)—
(a)
forward a copy of each of the documents to the Regulator, and
(b)
retain the documents pending the Regulator’s decision.

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 2 — Community interest companies
37

(4)
The Regulator must decide whether the company is eligible to be formed as a
community interest company.
(5)
A company is eligible to be formed as a community interest company if—
(a)
the memorandum and articles comply with the requirements imposed
by and by virtue of section 32 and the company’s name complies with
5
section 33, and
(b)
the Regulator, having regard to the documents delivered under section
10 of the Companies Act 1985, the prescribed formation documents and
any other relevant considerations, considers that the company will
satisfy the community interest test and is not an excluded company.
10
(6)
The Regulator must give notice of the decision to the registrar of companies
(but the registrar is not required to record it).
(7)
If the Regulator gives notice of a decision that the company is eligible to be
formed as a community interest company, section 12 of the Companies Act
1985 (registration of memorandum and articles) applies; and if the registrar
15
registers the memorandum and articles he must also retain and record the
prescribed formation documents.
(8)
The certificate of incorporation under section 13 of the Companies Act 1985
(c. 6) (effect of registration) is to contain a statement that the company is a
community interest company.
20
(9)
The fact that the certificate of incorporation contains such a statement is
conclusive evidence that the company is a community interest company.
(10)
If the Regulator decides that the company is not eligible to be formed as a
community interest company, any subscriber to the memorandum may appeal
to the Appeal Officer against the decision.
25
37
Existing companies: requirements
(1)
If a company is to become a community interest company, the company
must—
(a)
by special resolution alter its memorandum to state that it is to be a
community interest company,
30
(b)
by special resolutions under the Companies Act 1985 make such
alterations of its memorandum and articles as it considers necessary to
comply with requirements imposed by and by virtue of section 32 or
otherwise appropriate in connection with becoming a community
interest company, and
35
(c)
by special resolution change its name to comply with section 33.
(2)
Section 380(1) of the Companies Act 1985 (forwarding of copies of special
resolutions to registrar of companies) must be complied with in relation to each
of the special resolutions at the same time.
(3)
If the special resolutions include one under section 4 or 17 of the Companies
40
Act 1985 (alterations of memorandum)—
(a)
copies of the special resolutions must not be forwarded to the registrar
of companies before the relevant date, and
(b)
section 380(1) has effect in relation to them as if it referred to 15 days
after the relevant date.
45

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 2 — Community interest companies
38

(4)
If an application is made under section 5 of the Companies Act 1985 (objection
to alteration of memorandum under section 4 or 17), the relevant date is—
(a)
the date on which the court determines the application (or, if there is
more than one application, the date on which the last to be determined
by the court is determined), or
5
(b)
such later date as the court may order.
(5)
If there is no application under section 5 of that Act, the relevant date is the end
of the period for making such an application.
(6)
The copies of the special resolutions forwarded to the registrar of companies
must be accompanied by—
10
(a)
a copy of the memorandum and articles of the company as altered by
the special resolutions, and
(b)
the prescribed conversion documents.
(7)
“The prescribed conversion documents” means such statutory declarations or
other declarations or statements as are required by regulations to accompany
15
the copies of the special resolutions, in such form as may be approved in
accordance with the regulations.
38
Existing companies: decisions etc.
(1)
On receiving under section 37 the copies of the special resolutions, the
memorandum and articles as altered by the special resolutions and the
20
prescribed conversion documents, the registrar of companies must (instead of
recording the special resolutions and entering a new name on the register)—
(a)
forward a copy of each of the documents to the Regulator, and
(b)
retain the documents pending the Regulator’s decision.
(2)
The alterations of the memorandum and articles made by the special
25
resolutions are to take effect only as provided by this section.
(3)
The Regulator must decide whether the company is eligible to become a
community interest company.
(4)
A company is eligible to become a community interest company if—
(a)
the memorandum and articles as altered by the special resolutions
30
comply with the requirements imposed by and by virtue of section 32
and the company’s name as so altered complies with section 33, and
(b)
the Regulator, having regard to the special resolutions, the
memorandum and articles as altered, the prescribed conversion
documents and any other relevant considerations, considers that the
35
company will satisfy the community interest test and is not an excluded
company.
(5)
The Regulator must give notice of the decision to the registrar of companies
(but the registrar is not required to record it).
(6)
If the Regulator gives notice of a decision that the company is eligible to
40
become a community interest company, section 28(6) of the Companies Act
1985 (c. 6) (registration of new name) applies; and if the registrar of companies
enters the new name of the company on the register the registrar must also
retain and record the special resolutions and the prescribed conversion
documents.
45

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 2 — Community interest companies
39

(7)
On the special resolutions being recorded, the alterations to the company’s
articles and memorandum made by the special resolutions take effect.
(8)
The certificate of incorporation under section 28(6) of the Companies Act 1985
is to contain a statement that the company is a community interest company.
(9)
The fact that the certificate of incorporation contains such a statement is
5
conclusive evidence that the company is a community interest company.
(10)
If the Regulator decides that the company is not eligible to become a
community interest company, the company may appeal to the Appeal Officer
against the decision.
39
Existing companies: charities
10
(1)
A charitable company may not by special resolution change its name to comply
with section 33 without the prior written consent of the Charity
Commissioners.
(2)
If a charitable company contravenes subsection (1), the Charity Commissioners
may apply to the High Court for an order quashing any altered certificate of
15
incorporation issued under section 28(6) of the Companies Act 1985 (c. 6).
(3)
If a charitable company becomes a community interest company, that does not
affect the application of—
(a)
any property acquired under any disposition or agreement previously
made otherwise than for full consideration in money or money’s worth,
20
or any property representing property so acquired,
(b)
any property representing income which has previously accrued, or
(c)
the income from any such property.
(4)
“Charitable company” means a company which is a charity, other than one to
which section 40 applies.
25
40
Existing companies: Scottish charities
(1)
A Scottish charitable company may not become a community interest
company.
(2)
If a Scottish charitable company purports by special resolution to change its
name to comply with section 33, the Commissioners of Inland Revenue may
30
apply to the Court of Session for an order quashing any altered certificate of
incorporation issued under section 28(6) of the Companies Act 1985.
(3)
Regulations may repeal subsections (1) and (2); and subsections (4) to (7) have
effect on and after the day on which regulations under this subsection come
into force.
35
(4)
A Scottish charitable company may not by special resolution change its name
to comply with section 33 without the prior written consent—
(a)
if the company’s registered office is situated in Scotland, of the Scottish
Charity Regulator, or
(b)
if the company’s registered office is situated in England and Wales (or
40
Wales), of both the Scottish Charity Regulator and the Charity
Commissioners.

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 2 — Community interest companies
40

(5)
If a Scottish charitable company contravenes subsection (4)(a), the Scottish
Charity Regulator may apply to the Court of Session for an order quashing any
altered certificate of incorporation issued under section 28(6) of the Companies
Act 1985.
(6)
If a Scottish charitable company contravenes subsection (4)(b), the Scottish
5
Charity Regulator or the Charity Commissioners may apply to the High Court
for such an order.
(7)
If a Scottish charitable company becomes a community interest company, that
does not affect the application of—
(a)
any property acquired under any disposition or agreement previously
10
made otherwise than for full consideration in money or money’s worth,
or any property representing property so acquired,
(b)
any property representing income which has previously accrued, or
(c)
the income from any such property.
(8)
In this section “Scottish charitable company” means a company which—
15
(a)
is a Scottish charity, or
(b)
not being a Scottish charity, is registered in Scotland and established for
charitable purposes only.
(9)
Regulations under subsection (3) may define the expression “the Scottish
Charity Regulator” for the purposes of this section.
20
Supervision by Regulator
41
Conditions for exercise of supervisory powers
(1)
In deciding whether and how to exercise the powers conferred by sections 42
to 51 the Regulator must adopt an approach which is based on the principle
that those powers should be exercised only to the extent necessary to maintain
25
confidence in community interest companies.
(2)
No power conferred on the Regulator by—
(a)
section 45 (appointment of director),
(b)
section 46 (removal of director),
(c)
section 47 (appointment of manager), or
30
(d)
section 48 (property),

is exercisable in relation to a community interest company unless the company
default condition is satisfied in relation to the power and the company.
(3)
The company default condition is satisfied in relation to a power and a
company if it appears to the Regulator necessary to exercise the power in
35
relation to the company because—
(a)
there has been misconduct or mismanagement in the administration of
the company,
(b)
there is a need to protect the company’s property or to secure the
proper application of that property,
40
(c)
the company is not satisfying the community interest test, or
(d)
if the company has community interest objects, the company is not
carrying on any activities in pursuit of those objects.

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 2 — Community interest companies
41

(4)
The power conferred on the Regulator by section 49 (transfer of shares etc.) is
not exercisable in relation to a community interest company unless it appears
to the Regulator that the company is an excluded company.
42
Investigation
(1)
The Regulator may—
5
(a)
investigate the affairs of a community interest company, or
(b)
appoint any person (other than a member of the Regulator’s staff) to
investigate the affairs of a community interest company on behalf of the
Regulator.
(2)
Subsection (1)(b) is in addition to paragraph 5 of Schedule 3 (powers of
10
Regulator exercisable by authorised members of staff) and does not affect the
application of that paragraph to the Regulator’s power under subsection (1)(a).
(3)
Schedule 7 (further provision about investigations under this section) has
effect.
43
Audit
15
(1)
The Regulator may by order require a community interest company to allow
the annual accounts of the company to be audited by a qualified auditor
appointed by the Regulator.
(2)
A person is a qualified auditor if he is eligible for appointment as a company
auditor under section 25 of the Companies Act 1989 (c. 40) (eligibility for
20
appointment as auditor).
(3)
Sections 389A and 389B of the Companies Act 1985 (c. 6) (auditor’s rights to
information) apply in relation to an auditor appointed under this section as in
relation to an auditor appointed under Chapter 5 of Part 11 of that Act.
(4)
On completion of the audit the auditor must make a report to the Regulator on
25
such matters and in such form as the Regulator specifies.
(5)
The expenses of the audit, including the remuneration of the auditor, are to be
paid by the Regulator.
(6)
An audit under this section is in addition to, and does not affect, any audit
required by or by virtue of any other enactment.
30
44
Civil proceedings
(1)
The Regulator may bring civil proceedings in the name and on behalf of a
community interest company.
(2)
Before instituting proceedings under this section the Regulator must give
written notice to the company stating—
35
(a)
the cause of action,
(b)
the remedy sought, and
(c)
a summary of the facts on which the proceedings are to be based.
(3)
Any director of the company may apply to the court for an order—
(a)
that proposed proceedings are not to be instituted under this section, or
40
(b)
that proceedings instituted under this section are to be discontinued.

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 2 — Community interest companies
42

(4)
On an application under subsection (3) the court may make such order as it
thinks fit.
(5)
In particular the court may (as an alternative to ordering that proposed
proceedings are not to be instituted under this section or that proceedings
instituted under this section are to be discontinued) order—
5
(a)
that the proposed proceedings may be instituted under this section, or
the proceedings instituted under this section may be continued, on
such terms and conditions as the court thinks fit,
(b)
that any proceedings instituted by the company are to be discontinued,
or
10
(c)
that any proceedings instituted by the company may be continued on
such terms and conditions as the court thinks fit.
(6)
The Regulator must indemnify the company against any costs (or expenses)
incurred by it in connection with proceedings brought under this section.
(7)
Any costs (or expenses)—
15
(a)
awarded to the company in connection with proceedings brought
under this section, or
(b)
incurred by the company in connection with the proceedings and
which it is agreed should be paid by a defendant (or defender),

are to be paid to the Regulator.
20
45
Appointment of director
(1)
The Regulator may by order appoint a director of a community interest
company.
(2)
The person appointed may be anyone whom the Regulator thinks appropriate,
other than a member of the Regulator’s staff.
25
(3)
A person may be appointed as a director of a company under this section—
(a)
whether or not the person is a member of the company, and
(b)
irrespective of any provision made by the memorandum or articles of
the company or a resolution of the company in general meeting.
(4)
An order appointing a person to be a director of a company under this section
30
must specify the terms on which the director is to hold office; and those terms
have effect as if contained in a contract between the director and the company.
(5)
The terms specified must include the period for which the director is to hold
office, and may include terms as to the remuneration of the director by the
company.
35
(6)
A director appointed under this section has all the powers of the directors
appointed by the company (including powers exercisable only by a particular
director or class of directors).
(7)
A director appointed under this section may not be removed by the company,
but may be removed by the Regulator at any time.
40
(8)
Where—
(a)
a person is appointed to be a director of the company under this section,
or
(b)
a person so appointed ceases to be a director of the company,