| Company Law Reform Bill [Lords] - continued | House of Commons |
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Distributions by investment companies out of accumulated revenue profits Margaret Hodge NC284 To move the following Clause:— ‘(1) An investment company may make a distribution out of its accumulated, realised revenue profits if the following conditions are met. (2) It may make such a distribution only if, and to the extent that, its accumulated, realised revenue profits, so far as not previously utilised by a distribution or capitalisation, exceed its accumulated revenue losses (whether realised or unrealised), so far as not previously written off in a reduction or reorganisation of capital duly made. (3) It may make such a distribution only— (a) if the amount of its assets is at least equal to one and a half times the aggregate of its liabilities, and (b) if, and to the extent that, the distribution does not reduce that amount to less than one and a half times that aggregate. (4) For this purpose a company’s liabilities include— (a) in the case of Companies Act accounts, provisions of a kind specified for the purposes of this subsection by regulations under section 378; (b) in the case of IAS accounts, provisions of any kind. (5) The following conditions must also be met— (a) the company’s shares must be listed on a recognised UK investment exchange; (b) during the relevant period it must not have— (i) distributed any capital profits otherwise than by way of the redemption or purchase of any of the company’s own shares in accordance with Chapter (Redeemable shares) or (Purchase of own shares) of Part (Acquisition by limited company of its own shares), or (ii) applied any unrealised profits or any capital profits (realised or unrealised) in paying up debentures or amounts unpaid on its issued shares; (c) it must have given notice to the registrar under section (Meaning of “investment company”)(1) (notice of intention to carry on business as an investment company)— (i) before the beginning of the relevant period, or (ii) as soon as reasonably practicable after the date of its incorporation. (6) For the purposes of this section— (a) “recognised UK investment
exchange” means a recognised investment exchange within the meaning
of Part 18 of the (b) the “relevant period” is the period beginning with— (i) the first day of the accounting reference period immediately preceding that in which the proposed distribution is to be made, or (ii) where the distribution is to be made in the company’s first accounting reference period, the first day of that period, and ending with the date of the distribution. (7) The company must not include any uncalled share capital as an asset in any accounts relevant for purposes of this section.’. Meaning of “investment company” Margaret Hodge NC285 To move the following Clause:— ‘(1) In this Part an “investment company” means a public company that— (a) has given notice (which has not been revoked) to the registrar of its intention to carry on business as an investment company, and (b) since the date of that notice has complied with the following requirements. (2) Those requirements are— (a) that the business of the company consists of investing its funds mainly in securities, with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds; (b) that the condition in section (Investment company: condition as to holdings in other companies) is met as regards holdings in other companies; (c) that distribution of the company’s capital profits is prohibited by its articles of association; (d) that the company has not retained, otherwise than in compliance with this Part, in respect of any accounting reference period more than 15% of the income it derives from securities. (3) Subsection (2)(c) does not require an investment company to be prohibited by its articles from redeeming or purchasing its own shares in accordance with Chapter (Redeemable shares) or (Purchase of own shares) of Part (Acquisition by limited company of its own shares) out of its capital profits.) (4) Notice to the registrar under this section may be revoked at any time by the company on giving notice to the registrar that it no longer wishes to be an investment company within the meaning of this section. (5) On giving such a notice, the company ceases to be such a company.’. Investment company: condition as to holdings in other companies Margaret Hodge NC286 To move the following Clause:— ‘(1) The condition referred to in section (Meaning of “investment company”)(2)(b) (requirements to be complied with by investment company) is that none of the company’s holdings in companies (other than those that are for the time being investment companies) represents more than 15% by value of the company’s investments. (2) For this purpose— (a) holdings in companies that— (i) are members of a group (whether or not including the investing company), and (ii) are not for the time being investment companies, are treated as holdings in a single company; and (b) where the investing company is a member of a group, money owed to it by another member of the group— (i) is treated as a security of the latter held by the investing company, and (ii) is accordingly treated as, or as part of, the holding of the investing company in the company owing the money. (3) The condition does not apply— (a) to a holding in a company acquired before 6th April 1965 that on that date represented not more than 25% by value of the investing company’s investments, or (b) to a holding in a company that, when it was acquired, represented not more than 15% of the investing company’s investments, so long as no addition is made to the holding. (4) For the purposes of subsection (3)— (a) “holding” means the shares or securities (whether or one class or more than one class) held in any one company; (b) an addition is made to a holding whenever the investing company acquires shares or securities of that one company, otherwise than by being allotted shares or securities without becoming liable to give any consideration, and if an addition is made to a holding that holding is acquired when the addition or latest addition is made to the holding; and (c) where in connection with a scheme of reconstruction a company issues shares or securities to persons holding shares or securities in a second company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings in the second company, without those persons becoming liable to give any consideration, a holding of the shares or securities in the second company and a corresponding holding of the shares or securities so issued shall be regarded as the same holding. (5) In this section— “company” and “shares” shall be
construed in accordance with sections 99 and 288 of the “group” means a company and all companies that
are its 51% subsidiaries (within the meaning of section 838 of the “scheme of reconstruction” has the same meaning
as in section 136 of the Power to extend provisions relating to investment companies Margaret Hodge NC287 To move the following Clause:— ‘(1) The Secretary of State may by regulations extend the provisions of sections (Distributions by investment companies out of accumulated revenue profits) to (Investment company: condition as to holdings in other companies) (distributions by investment companies out of accumulated profits), with or without modifications, to other companies whose principal business consists of investing their funds in securities, land or other assets with the aim of spreading investment risk and giving their members the benefit of the results of the management of the assets. (2) Regulations under this section are subject to affirmative resolution procedure.’. Justification of distribution by reference to relevant accounts Margaret Hodge NC288 To move the following Clause:— ‘(1) Whether a distribution may be made by a company without contravening this Part, and the amount of a distribution that may be so made, is determined by reference to the following items as stated in the relevant accounts— (a) profits, losses, assets and liabilities; (b) provisions of the following kinds— (i) where the relevant accounts are Companies Act accounts, provisions of a kind specified for the purposes of this subsection by regulations under section 378; (ii) where the relevant accounts are IAS accounts, provisions of any kind; (c) share capital and reserves (including undistributable reserves). (2) The relevant accounts are the company’s last annual accounts, except that— (a) where the distribution would be found to contravene this Part by reference to the company’s last annual accounts, it may be justified by reference to interim accounts, and (b) where the distribution is proposed to be declared during the company’s first accounting reference period, or before any accounts have been circulated in respect of that period, it may be justified by reference to initial accounts. (3) The requirements of— section (Requirements where last annual accounts used) (as regards the company’s last annual accounts), section (Requirements where interim accounts used) (as regards interim accounts), and section (Requirements where initial accounts used) (as regards initial accounts), must be complied with, as and where applicable. (4) If any applicable requirement of those sections is not complied with, the accounts may not be relied on for the purposes of this Part and the distribution is accordingly treated as contravening this Part.’. Requirements where last annual accounts used Margaret Hodge NC289 To move the following Clause:— ‘(1) The company’s last annual accounts means the company’s individual accounts— (a) that were last circulated to members in accordance with section 405 (duty to circulate copies of annual accounts and reports), or (b) if in accordance with section 408 the company provided a summary financial statement instead, that formed the basis of that statement. (2) The accounts must have been properly prepared in accordance with this Act, or have been so prepared subject only to matters that are not material for determining (by reference to the items mentioned in section (Justification of distribution by reference to relevant accounts)(1)) whether the distribution would contravene this Part. (3) Unless the company is exempt from audit and the directors take advantage of that exemption, the auditor must have made his report on the accounts. (4) If that report was qualified— (a) the auditor must have stated in writing (either at the time of their report or subsequently) whether in his opinion the matters in respect of which his report is qualified are material for determining whether a distribution would contravene this Part, and (b) a copy of that statement must— (i) in the case of a private company, have been circulated to members in accordance with section 405, or (ii) in the case of a public company have been laid before the company in general meeting. (5) An auditor’s statement is sufficient for the purposes of a distribution if it relates to distributions of a description that includes the distribution in question, even if at the time of the statement it had not been proposed.’. Requirements where interim accounts used Margaret Hodge NC290 To move the following Clause:— ‘(1) Interim accounts must be accounts that enable a reasonable judgment to be made as to the amounts of the items mentioned in section (Justification of distribution by reference to relevant accounts)(1) (2) Where interim accounts are prepared for a proposed distribution by a public company, the following requirements apply. (3) The accounts must have been properly prepared, or have been so prepared subject to matters that are not material for determining (by reference to the items mentioned in section (Justification of distribution by reference to relevant accounts)(1)) whether the distribution would contravene this Part. (4) “Properly prepared” means prepared in accordance with sections 377 to 379 (requirements for company individual accounts), applying those requirements with such modifications as are necessary because the accounts are prepared otherwise than in respect of an accounting reference period. (5) The balance sheet comprised in the accounts must have been signed in accordance with section 396. (6) A copy of the accounts must have been delivered to the registrar of companies. Any requirement of Part 29 of this Act as to the delivery of a certified translation into English of any document forming part of the accounts must also have been met.’. Requirements where initial accounts used Margaret Hodge NC291 To move the following Clause:— ‘(1) Initial accounts must be accounts that enable a reasonable judgment to be made as to the amounts of the items mentioned in section (Justification of distribution by reference to relevant accounts)(1). (2) Where initial accounts are prepared for a proposed distribution by a public company, the following requirements apply. (3) The accounts must have been properly prepared, or have been so prepared subject to matters that are not material for determining (by reference to the items mentioned in section (Justification of distribution by reference to relevant accounts)(1)) whether the distribution would contravene this Part. (4) “Properly prepared” means prepared in accordance with sections 377 to 379 (requirements for company individual accounts), applying those requirements with such modifications as are necessary because the accounts are prepared otherwise than in respect of an accounting reference period. (5) The company’s auditor must have made a report stating whether, in his opinion, the accounts have been properly prepared. (6) If that report was qualified— (a) the auditor must have stated in writing (either at the time of his report or subsequently) whether in his opinion the matters in respect of which his report is qualified are material for determining whether a distribution would contravene this Part, and (b) a copy of that statement must— (i) in the case of a private company, have been circulated to members in accordance with section 405, or (ii) in the case of a public company have been laid before the company in general meeting. (7) A copy of the accounts, of the auditor’s report and of any auditor’s statement must have been delivered to the registrar. Any requirement of Part 29 of this Act as to the delivery of a certified translation into English of any of those documents must also have been met.’. Successive distributions etc by reference to the same accounts Margaret Hodge NC292 To move the following Clause:— ‘(1) In determining whether a proposed distribution may be made by a company in a case where— (a) one or more previous distributions have been made in pursuance of a determination made by reference to the same relevant accounts, or (b) relevant financial assistance has been given, or other relevant payments have been made, since those accounts were prepared, the provisions of this Part apply as if the amount of the proposed distribution was increased by the amount of the previous distributions, financial assistance and other payments. (2) The financial assistance and other payments that are relevant for this purpose are— (a) financial assistance lawfully given by the company out of its distributable profits; (b) financial assistance given by the company in contravention of section (Assistance for acquisition of shares in public company) or (Assistance by public company for acquisition of shares in its private holding company) (prohibited financial assistance) in a case where the giving of that assistance reduces the company’s net assets or increases its net liabilities; (c) payments made by the company in respect of the purchase by it of shares in the company, except a payment lawfully made otherwise than out of distributable profits; (d) payments of any description specified in section (Payments apart from purchase price to be made out of distributable profits) (payments apart from purchase price of shares to be made out of distributable profits). (3) In this section “financial assistance” has the same meaning as in Chapter (Financial assistance for purchase of own shares) of Part (Acquisition by limited company of own shares) (see section (Definitions for this Chapter)). (4) For the purpose of applying subsection (2)(b) in relation to any financial assistance— (a) “net assets” means the amount by which the aggregate amount of the company’s assets exceeds the aggregate amount of its liabilities, and (b) “net liabilities” means the amount by which the aggregate amount of the company’s liabilities exceeds the aggregate amount of its assets, taking the amount of the assets and liabilities to be as stated in the company’s accounting records immediately before the financial assistance is given. (5) For this purpose a company’s liabilities include any amount retained as reasonably necessary for the purposes of providing for any liability— (a) the nature of which is clearly defined, and (b) which is either likely to be incurred or certain to be incurred but uncertain as to amount or as to the date on which it will arise. Realised losses and profits and revaluation of fixed assets Margaret Hodge NC293 To move the following Clause:— ‘(1) The following provisions have effect for the purposes of this Part. (2) The following are treated as realised losses— (a) in the case of Companies Act accounts, provisions of a kind specified for the purposes of this paragraph by regulations under section 378 (except revaluation provisions); (b) in the case of IAS accounts, provisions of any kind (except revaluation provisions). (3) A “revaluation provision” means a provision in respect of a diminution in value of a fixed asset appearing on a revaluation of all the fixed assets of the company, or of all of its fixed assets other than goodwill. (4) Where— (a) on the revaluation of a fixed asset, an unrealised profit is shown to have been made, and (b) on or after the revaluation, a sum is written off or retained for depreciation of that asset over a period, an amount equal to the amount by which that sum exceeds the sum which would have been so written off or retained for the depreciation of that asset over that period, if that profit had not been made, is treated as a realised profit made over that period. (5) For the purpose of this section there is treated as having been a revaluation where— (a) the directors have considered the value of fixed assets of the company, without actually revaluing them, and (b) they are satisfied that their aggregate value at the time of their consideration was not less than the aggregate amount at which they were then stated in the company’s accounts. (6) Where the relevant accounts are required to be prepared in accordance with this Act, subsection (5) applies only if it is stated in a note to the accounts— (a) that the directors have considered the value of fixed assets of the company without actually revaluing them, (b) that they are satisfied that the aggregate value of those assets at the time of their consideration was not less than the aggregate amount at which they were then stated in the company’s accounts, and (c) that accordingly, by virtue of that subsection, amounts are stated in the accounts on the basis that a revaluation of fixed assets of the company is treated as having taken place at that time.’. Determination of profit or loss in respect of asset where records incomplete Margaret Hodge NC294 To move the following Clause:— In determining for the purposes of this Part whether a company has made a profit or loss in respect of an asset where— (a) there is no record of the original cost of the asset, or (b) a record cannot be obtained without unreasonable expense or delay, then, its cost is taken to be the value ascribed to it in the earliest available record of its value made on or after its acquisition by the company.’. |
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| © Parliamentary copyright 2006 | Prepared: 18 July 2006 |