Company Law Reform Bill [HL]

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Company Law Reform Bill [HL]

Company Law Reform Bill [HL]
Part 36 — Transparency obligations and related matters
444

Other matters
898
Corporate governance rules
In Part 6 of the Financial Services and Markets Act 2000 (c. 8), after the sections
inserted by section 897 above insert—
“Corporate governance
5
89M
Corporate governance rules
(1)
The competent authority may make rules (“corporate governance
rules”)—
(a)
for the purpose of implementing, enabling the implementation
of or dealing with matters arising out of or related to, any
10
Community obligation relating to the corporate governance of
issuers who have requested or approved admission of their
securities to trading on a regulated market;
(b)
about corporate governance in relation to such issuers for the
purpose of implementing, or dealing with matters arising out of
15
or related to, any Community obligation.
(2)
“Corporate governance”, in relation to an issuer, includes—
(a)
the nature, constitution or functions of the organs of the issuer;
(b)
the manner in which organs of the issuer conduct themselves;
(c)
the requirements imposed on organs of the issuer;
20
(d)
the relationship between the different organs of the issuer;
(e)
the relationship between the organs of the issuer and the
members of the issuer or holders of the issuer’s securities.
(3)
The burdens and restrictions imposed by rules under this section on
foreign-traded issuers must not be greater than the burdens and
25
restrictions imposed on UK-traded issuers by—
(a)
rules under this section, and
(b)
listing rules.
(4)
For this purpose—
“foreign-traded issuer” means an issuer who has requested or
30
approved admission of the issuer’s securities to trading on a
regulated market situated or operating outside the United
Kingdom;
“UK-traded issuer” means an issuer who has requested or
approved admission of the issuer’s securities to trading on a
35
regulated market situated or operating in the United Kingdom.
(5)
This section is without prejudice to any other power conferred by this
Part to make Part 6 rules.”.
899
Liability for false or misleading statements in certain publications
In Part 6 of the Financial Services and Markets Act 2000, after section 90
40

Company Law Reform Bill [HL]
Part 36 — Transparency obligations and related matters
445

insert—
“90A
Compensation for statements in certain publications
(1)
The publications to which this section applies are any reports and
statements published in response to a requirement imposed by a
provision implementing Article 4, 5 or 6 of the transparency obligations
5
directive.
(2)
The issuer of securities traded on a regulated UK market is liable to pay
compensation to a person who has—
(a)
acquired such securities issued by it, and
(b)
suffered loss in respect of them as a result of—
10
(i)
any untrue or misleading statement in a publication to
which this section applies, or
(ii)
the omission from any such publication of any matter
required to be included in it.
(3)
The issuer is so liable only if a person discharging managerial
15
responsibilities within the issuer in relation to the publication—
(a)
knew the statement to be untrue or misleading or was reckless
as to whether it was untrue or misleading, or
(b)
knew the omission to be dishonest concealment of a material
fact.
20
(4)
A loss is not regarded as suffered as a result of the statement or
omission in the publication unless the person suffering it acquired the
relevant securities—
(a)
in reliance on the information in the publication, and
(b)
at a time when, and in circumstances in which, it was
25
reasonable for him to rely on that information.
(5)
Except as mentioned in subsection (7)—
(a)
the issuer is not subject to any other liability than that provided
for by this section in respect of any such loss as is mentioned in
subsection (2), and
30
(b)
a person other than the issuer is not subject to any liability, other
than to the issuer, in respect of any such loss.
(6)
Any reference in subsection (5) to a person being subject to a liability
includes a reference to another person being entitled as against him to
be granted any civil remedy or to rescind or repudiate an agreement.
35
(7)
This section does not affect—
(a)
the powers conferred by section 382 and 384 (powers of the
court to make a restitution order and of the Authority to require
restitution);
(b)
liability for a civil penalty;
40
(c)
liability for a criminal offence.
(8)
For the purposes of this section—
(a)
the following are persons “discharging managerial
responsibilities” in relation to a publication—
(i)
any director of the issuer (or person occupying the
45
position of director, by whatever name called),

Company Law Reform Bill [HL]
Part 36 — Transparency obligations and related matters
446

(ii)
in the case of an issuer whose affairs are managed by its
members, any member of the issuer,
(iii)
any senior executive of the issuer having responsibilities
in relation to the publication;
(b)
“regulated UK market” means a regulated market situated or
5
operating in the United Kingdom;
(c)
references to the acquisition by a person of securities include his
contracting to acquire them or any interest in them.”.
900
Exercise of powers where UK is host member state
In Part 6 of the Financial Services and Markets Act 2000 (c. 8), after section 100
10
insert—
“100A
   Exercise of powers where UK is host member state
(1)
This section applies to the exercise by the competent authority of any
power under this Part exercisable in case of infringement of—
(a)
a provision of prospectus rules or any other provision made in
15
accordance with the prospectus directive, or
(b)
a provision of transparency rules or any other provision made
in accordance with the transparency obligations directive,

in relation to an issuer whose home state is a member state other than
the United Kingdom.
20
(2)
The competent authority may act in such a case only in respect of the
infringement of a provision required by the relevant directive.

Any reference to an applicable provision or applicable transparency
obligation shall be read accordingly.
(3)
If the authority finds that there has been such an infringement, it must
25
give a notice to that effect to the competent authority of the person’s
home state requesting it—
(a)
to take all appropriate measures for the purpose of ensuring
that the person remedies the situation that has given rise to the
notice, and
30
(b)
to inform the authority of the measures it proposes to take or
has taken or the reasons for not taking such measures.
(4)
The authority may not act further unless satisfied—
(a)
that the competent authority of the person’s home state has
failed or refused to take measures for the purpose mentioned in
35
subsection (3)(a), or
(b)
that the measures taken by that authority have proved
inadequate for that purpose.

This does not affect exercise of the powers under section 87K(2), 87L(2)
or (3) or 89J(2) or (3) (powers to protect market).
40
(5)
If the authority is so satisfied, it must, after informing the competent
authority of the person’s home state, take all appropriate measures to
protect investors.
(6)
In such a case the authority must inform the Commission informed of
the measures at the earliest opportunity.”.
45

Company Law Reform Bill [HL]
Part 36 — Transparency obligations and related matters
447

901
Transparency obligations and related matters: minor and consequential
amendments
(1)
Schedule 15 to this Act makes minor and consequential amendments in
connection with the provision made by this Part.
(2)
In that Schedule-
5
Part 1 contains amendments of the Financial Services and Markets Act
2000 (c. 8);
Part 2 contains amendments of the Companies (Audit, Investigations and
Community Enterprise) Act 2004 (c. 27).
902
Corporate governance regulations
10
(1)
The Secretary of State may make regulations—
(a)
for the purpose of implementing, enabling the implementation of or
dealing with matters arising out of or related to, any Community
obligation relating to the corporate governance of issuers who have
requested or approved admission of their securities to trading on a
15
regulated market;
(b)
about corporate governance in relation to such issuers for the purpose
of implementing, or dealing with matters arising out of or related to,
any Community obligation.
(2)
“Corporate governance”, in relation to an issuer, includes—
20
(a)
the nature, constitution or functions of the organs of the issuer;
(b)
the manner in which organs of the issuer conduct themselves;
(c)
the requirements imposed on organs of the issuer;
(d)
the relationship between different organs of the issuer;
(e)
the relationship between the organs of the issuer and the members of
25
the issuer or holders of the issuer’s securities.
(3)
The regulations may—
(a)
make provision by reference to any specified code on corporate
governance that may be issued from time to time by a specified body;
(b)
create new criminal offences (subject to subsection (4));
30
(c)
make provision excluding liability in damages in respect of things done
or omitted for the purposes of, or in connection with, the carrying on,
or purported carrying on, of any specified activities.

“Specified” here means specified in the regulations.
(4)
The regulations may not create a criminal offence punishable by a greater
35
penalty than—
(a)
on indictment, a fine;
(b)
on summary conviction, a fine not exceeding the statutory maximum or
(if calculated on a daily basis) £100 a day.
(5)
Regulations under this section are subject to negative resolution procedure.
40
(6)
In this section “issuer”, “securities” and “regulated market” have the same
meaning as in Part 6 of the Financial Services and Markets Act 2000.

Company Law Reform Bill [HL]
Part 37 — Miscellaneous provisions
448

Part 37
Miscellaneous provisions
Regulation of actuaries etc
903
Grants to bodies concerned with actuarial standards etc
(1)
Section 16 of the Companies (Audit, Investigations and Community
5
Enterprise) Act 2004 (c. 27) (grants to bodies concerned with accounting
standards etc) is amended as follows.
(2)
In subsection (2) (matters carried on by bodies eligible for grants) for
paragraph (l) substitute—
“(l)
issuing standards to be applied in actuarial work;
10
(m)
issuing standards in respect of matters to be contained in
reports or other communications required to be produced or
made by actuaries or in accordance with standards within
paragraph (l);
(n)
investigating departures from standards within paragraph (l)
15
or (m);
(o)
taking steps to secure compliance with standards within
paragraph (l) or (m);
(p)
carrying out investigations into public interest cases arising in
connection with the performance of actuarial functions by
20
members of professional actuarial bodies;
(q)
holding disciplinary hearings relating to members of
professional actuarial bodies following the conclusion of
investigations within paragraph (p);
(r)
deciding whether (and, if so, what) disciplinary action should
25
be taken against members of professional actuarial bodies to
whom hearings within paragraph (q) related;
(s)
supervising the exercise by professional actuarial bodies of
regulatory functions in relation to their members;
(t)
overseeing or directing any of the matters mentioned above.”.
30
(3)
In subsection (5) (definitions) at the appropriate places insert—
““professional actuarial body” means—
(a)
the Institute of Actuaries, or
(b)
the Faculty of Actuaries in Scotland,
and the “members” of a professional actuarial body include
35
persons who, although not members of the body, are subject to
its rules in performing actuarial functions;”
““regulatory functions”, in relation to professional actuarial
bodies, means any of the following—
(a)
investigatory or disciplinary functions exercised by
40
such bodies in relation to the performance by their
members of actuarial functions,
(b)
the setting by such bodies of standards in relation to the
performance by their members of actuarial functions,
and
45

Company Law Reform Bill [HL]
Part 37 — Miscellaneous provisions
449

(c)
the determining by such bodies of requirements in
relation to the education and training of their
members;”.
904
Levy to pay expenses of bodies concerned with actuarial standards etc
(1)
Section 17 of the Companies (Audit, Investigations and Community
5
Enterprise) Act 2004 (c. 27) (levy to pay expenses of bodies concerned with
accounting standards etc) is amended in accordance with subsections (2) to (5).
(2)
In subsection (3)(a) after “to which” insert “, or persons within subsection (3A)
to whom,”.
(3)
After subsection (3) insert—
10
“(3A)
The following persons are within this subsection—
(a)
the administrators of a public service pension scheme (within
the meaning of section 1 of the Pension Schemes Act 1993);
(b)
the trustees or managers of an occupational or personal pension
scheme (within the meaning of that section).”.
15
(4)
After subsection (4)(b) insert—
“(c)
make different provision for different cases.”.
(5)
After subsection (12) insert—
“(13)
If a draft of any regulations to which subsection (10) applies would,
apart from this subsection, be treated for the purposes of the standing
20
orders of either House of Parliament as a hybrid instrument, it is to
proceed in that House as if it were not such an instrument.”.
(6)
The above amendments have effect in relation to any exercise of the power to
make regulations under section 17 of the Companies (Audit, Investigations
and Community Enterprise) Act 2004 after this section comes into force,
25
regardless of when the expenses to be met by the levy in respect of which the
regulations are made were incurred.
(7)
In Schedule 3 to the Pensions Act 2004 (c. 35) (disclosure of information held
by the Pensions Regulator), in the entry relating to the Secretary of State, in the
second column, for “or” at the end of paragraph (g) substitute—
30
“(ga)
Section 17 of the Companies (Audit, Investigations and
Community Enterprise) Act 2004 (levy to pay expenses of
bodies concerned with accounting standards, actuarial
standards etc), or”.
905
Application of provisions to Scotland and Northern Ireland
35
(1)
Section 16 of the Companies (Audit, Investigations and Community
Enterprise) Act 2004 (grants to bodies concerned with accounting standards
etc) is amended as follows.
(2)
For subsection (6) (application of section to Scotland) substitute—
“(6)
In their application to Scotland, subsection (2)(a) to (t) are to be read as
40
referring only to matters provision relating to which would be outside
the legislative competence of the Scottish Parliament.”.
(3)
In subsection (2) in paragraph (c), after “1985 (c. 6)” insert “or the 1986 Order”.

Company Law Reform Bill [HL]
Part 37 — Miscellaneous provisions
450

(4)
In subsection (5)—
(a)
in the definition of “company” after “1985 (c. 6)” insert “or the 1986
Order”,
(b)
in the definition of “subsidiary” after “1985” insert “or Article 4 of the
1986 Order”, and
5
(c)
after that definition insert—
““the 1986 Order” means the Companies (Northern
Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)).”.
(5)
In section 66 of that Act (extent), in subsection (2) (provisions extending to
Northern Ireland, as well as England and Wales and Scotland) for “17”
10
substitute “16 to 18”.
Disclosure of information under the Enterprise Act 2002
906
Disclosure of information under the Enterprise Act 2002

In Part 9 of the Enterprise Act 2002 (c. 40) (information), after section 241
insert—
15
“241A
Civil proceedings
(1)
A public authority which holds prescribed information to which
section 237 applies may disclose that information to any person—
(a)
for the purposes of, or in connection with, prescribed civil
proceedings (including prospective proceedings) in the United
20
Kingdom, or
(b)
for the purposes of obtaining legal advice in relation to such
proceedings, or
(c)
otherwise for the purposes of establishing, enforcing or
defending legal rights that are or may be the subject of such
25
proceedings.
(2)
Subsection (1) does not apply to—
(a)
information which comes to a public authority in connection
with an investigation under Part 4, 5 or 6 of the 1973 Act or
under section 11 of the Competition Act 1980;
30
(b)
competition information within the meaning of section 351 of
the Financial Services and Markets Act 2000;
(c)
information which comes to a public authority in connection
with an investigation under Part 3 or 4 or section 174 of this Act;
(d)
information which comes to a public authority in connection
35
with an investigation under the Competition Act 1998 (c. 41).
(3)
In subsection (1) “prescribed” means prescribed by order of the
Secretary of State.
(4)
An order under this section—
(a)
may prescribe information, or civil proceedings, for the
40
purposes of this section by reference to such factors as appear to
the Secretary of State to be appropriate;
(b)
may prescribe for the purposes of this section all information, or
civil proceedings, or all information or civil proceedings not
falling within one or more specified exceptions;
45