| Company Law Reform Bill [Lords] - continued | House of Commons |
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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.’. Realised profits and losses of long term insurance business Margaret Hodge NC295 To move the following Clause:— ‘(1) The provisions of this section have effect for the purposes of this Part as it applies in relation to an authorised insurance company carrying on long term business. (2) An amount included in the relevant part of the company’s balance sheet that— (a) represents a surplus in the fund or funds maintained by it in respect of its long term business, and (b) has not been allocated to
policy holders or, as the case may be, carried forward unappropriated
in accordance with asset identification rules made under section 142(2)
of the is treated as a realised profit. (3) For the purposes of subsection (2)— (a) the relevant part of the balance sheet is that part of the balance sheet that represents accumulated profit or loss; (b) a surplus in the fund or funds maintained by the company in respect of its long term business means an excess of the assets representing that fund or those funds over the liabilities of the company attributable to its long term business, as shown by an actuarial investigation. (4) A deficit in the fund or funds maintained by the company in respect of its long term business is treated as a realised loss. For this purpose a deficit in any such fund or funds means an excess of the liabilities of the company attributable to its long term business over the assets representing that fund or those funds, as shown by an actuarial investigation. (5) Subject to subsections (2) and (4), any profit or loss arising in the company’s long term business is to be left out of account. (6) For the purposes of this section an “actuarial investigation” means an investigation made into the financial condition of an authorised insurance company in respect of its long term business— (a) carried out once in every
period of twelve months in accordance with rules made under Part 10
of the (b) carried out in accordance with a requirement imposed under section 166 of that Act,] by an actuary appointed as actuary to the company. (7) In this section “long term business” means business that consists of effecting or carrying out contracts of long term insurance. This definition must be read with section 22 of the Treatment of development costs Margaret Hodge NC296 To move the following Clause:— ‘(1) Where development costs are shown as an asset in a company’s accounts, any amount shown in respect of those costs is treated— (a) for the purposes of section (Distributions to be made only out of profits available for the purpose) (distributions to be made out of profits available for the purpose) as a realised loss, and (b) for the purposes of section (Distributions by investment companies out of accumulated revenue profits) (distributions by investment companies out of accumulated revenue profits) as a realised revenue loss. This is subject to the following exceptions. (2) Subsection (1) does not apply to any part of that amount representing an unrealised profit made on revaluation of those costs. (3) Subsection (1) does not apply if— (a) there are special circumstances in the company’s case justifying the directors in deciding that the amount there mentioned is not to be treated as required by subsection (1), (b) it is stated— (i) in the case of Companies Act accounts, in the note required by regulations under section 378 as to the reasons for showing development costs as an asset, or (ii) in the case of IAS accounts, in any note to the accounts, that the amount is not to be so treated, and (c) the note explains the circumstances relied upon to justify the decision of the directors to that effect.’. Distributions in kind: determination of amount Margaret Hodge NC297 To move the following Clause:— ‘(1) This section applies for determining the amount of a distribution consisting of or including, or treated as arising in consequence of, the sale, transfer or other disposition by a company of a non-cash asset where— (a) at the time of the distribution the company has profits available for distribution, and (b) if the amount of the distribution were to be determined in accordance with this section, the company could make the distribution without contravening this Part. (2) The amount of the distribution (or the relevant part of it) is taken to be— (a) in a case where the amount or value of the consideration for the disposal is not less than the book value of the asset, zero; (b) in any other case, the amount by which the book value of the asset exceeds the amount or value of any consideration for the disposal. (3) The company’s profits available for distribution are treated as increased by the amount (if any) by which the amount or value of any consideration for the disposition exceeds the book value of the asset. (4) In this section “book value”, in relation to an asset, means— (a) the amount at which the asset is stated in the relevant accounts, or (b) where the asset is not stated in those accounts at any amount, zero. (5) The provisions of Chapter (Justification of distribution by reference to accounts) (justification of distribution by reference to accounts) have effect subject to this section.’. Distributions in kind: treatment of unrealised profits Margaret Hodge NC298 To move the following Clause:— ‘(1) This section applies where— (a) a company makes a distribution consisting of or including, or treated as arising in consequence of, the sale, transfer or other disposition by the company of a non-cash asset, and (b) any part of the amount at which that asset is stated in the relevant accounts represents an unrealised profit. (2) That profit is treated as a realised profit— (a) for the purpose of determining the lawfulness of the distribution in accordance with this Part (whether before or after the distribution takes place), and (b) for the purpose of the application, in relation to anything done with a view to or in connection with the making of the distribution, of any provision of regulations under section 378 under which only realised profits are to be included in or transferred to the profit and loss account.’. Consequences of unlawful distribution Margaret Hodge NC299 To move the following Clause:— ‘(1) This section applies where a distribution, or part of one, made by a company to one of its members is made in contravention of this Part. (2) If at the time of the distribution the member knows or has reasonable grounds for believing that it is so made, he is liable— (a) to repay it (or that part of it, as the case may be) to the company, or (b) in the case of a distribution made otherwise than in cash, to pay the company a sum equal to the value of the distribution (or part) at that time. (3) This is without prejudice to any obligation imposed apart from this section on a member of a company to repay a distribution unlawfully made to him. (4) This section does not apply in relation to— (a) financial assistance given by a 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), or (b) any payment made by a company in respect of the redemption or purchase by the company of shares in itself. Saving for certain older provisions in articles Margaret Hodge NC300 To move the following Clause:— ‘(1) Where immediately before the relevant date a company was authorised by a provision of its articles to apply its unrealised profits in paying up in full or in part unissued shares to be allotted to members of the company as fully or partly paid bonus shares, that provision continues (subject to any alteration of the articles) as authority for those profits to be so applied after that date. (2) For this purpose the relevant date is— (a) for companies registered in Great Britain, 22nd December 1980; (b) for companies registered in Northern Ireland, 1st July 1983.’. Restriction on application of unrealised profits Margaret Hodge NC301 To move the following Clause:— ‘A company must not apply an unrealised profit in paying up debentures or any amounts unpaid on its issued shares.’. Treatment of certain older profits or losses Margaret Hodge NC302 To move the following Clause:— ‘(1) Where the directors of a company are, after making all reasonable enquiries, unable to determine whether a particular profit made before the relevant date is realised or unrealised, they may treat the profit as realised. (2) Where the directors of a company, after making all reasonable enquiries, are unable to determine whether a particular loss made before the relevant date is realised or unrealised, they may treat the loss as unrealised. (3) For the purposes of this section the relevant date is— (a) for companies registered in Great Britain, 22nd December 1980; (b) for companies registered in Northern Ireland, 1st July 1983.’. Application of rules of law restricting distributions Margaret Hodge NC303 To move the following Clause:— ‘(1) Except as provided in this section, the provisions of this Part are without prejudice to any rule of law restricting the sums out of which, or the cases in which, a distribution may be made. (a) section (Distributions in kind: determination of amount) (distributions in kind: determination of amount) applies to determine the amount of any distribution or return of capital consisting of or including, or treated as arising in consequence of the sale, transfer or other disposition by a company of a non-cash asset; and (b) section (Distributions in kind: treatment of unrealised profits) (distributions in kind: treatment of unrealised profits) applies as it applies for the purposes of this Part. (3) In this section references to distributions are to amounts regarded as distributions for the purposes of any such rule of law as is referred to in subsection (1).’. |
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| © Parliamentary copyright 2006 | Prepared: 20 July 2006 |