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Offences under the Companies Act 1985
Clause 777: Amendments of the Companies Act 1985
1369. This provision introduces Schedule 4, which contains amendments to the 1985 Act relating to offences.
1370. The changes in Schedule 4 clarify the wording of the offences and, in some cases, introduce substantive changes. A number of the offences refer to fines "not exceeding level 3" on the standard scale. The standard scale for fines imposed on summary conviction of an offence has been set at the following levels since 1 October 1992:
The statutory maximum has also been set at £5000 since that date.
1371. The table below sets out the substantive changes made by Schedule 4 to sections to the 1985 Act.
| Sec. 1985 | Subject Matter | Change |
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| 1 | 110(2) and 110(3) | Misleading, false or deceptive statement in connection with valuation of non-cash consideration etc | Provides that the penalty on summary conviction in England and Wales is 12 months or the statutory maximum fine; or both. |
| 2 | 111 | Valuation procedures: matters to be communicated to registrar | Gives person right to apply to courts for relief. Court has power to extend delivery time.
Provides that the penalty for the offence in s.111 (2) on summary conviction is a fine not exceeding level 3 and a daily default fine not exceeding one-tenth of level 3. |
| 3 | 114 | Contravention of certain provisions relating to the amount to be paid for shares and means of payment | This amendment makes no substantive change. |
| 4 | 122(2) | Failure to give notice to registrar of reorganisation of share capital | Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
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| 5 | 128(5) | Failure to send registrar statement or notice of newly created class rights | Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
| 6 | 129(4) | Failure to deliver to registrar statement or notice of newly created class rights | Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
| 7 | 141 | Concealment of name of creditor entitled to object to reduction of capital, or wilful misrepresentation of nature or amount of claim, etc | This amendment makes no substantive change. |
| 8 | 142(2) | Director authorising or permitting non-compliance with requirement to convene company meeting to consider serious loss of capital | This amendment makes no substantive change. |
| 9 | 143(2) | Unlawful acquisition by company of its own shares | Provides that the penalty for the offence on summary conviction in England and Wales 12 months' imprisonment or the statutory maximum fine; or both. In Scotland and Northern Ireland six months' imprisonment or the statutory maximum fine; or both. |
| 10 | 149(2) | Failure to cancel own shares acquired by company or to apply for re-registration as private company | Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
| 11 | 162G | Contravention of provisions dealing with treasury shares | Extends potential liability to company in addition to officers |
| 12 | 169(6) | Failure to comply with disclosure obligations in connection with purchase of own shares | This amendment makes no substantive change. |
| 13 | 169A(4) | Failure to deliver to registrar return of cancellation or disposal of treasury shares | This amendment makes no substantive change. |
| 14 | 175(7) | Refusal of inspection of directors' statement and auditors' report relating to payment out of capital | Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
| 15 | 176(4) | Failure to give notice to registrar of application to court or to deliver copy of court order | Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
| 16 | 185(5) | Failure to make ready certificates following allotment or transfer of shares | Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
| 17 | 189(1) and (2) | Offences in connection with share warrants (Scotland) | This amendment makes no substantive change. |
| 18 | 399(3) | Failure to send to registrar particulars of charge or of issue of debentures (England and Wales) | This amendment makes no substantive change. |
| 19 | 400(4) | Failure to send to registrar particulars of charge on property acquired (England and Wales) | This amendment makes no substantive change. |
| 20 | 402(3) | Delivery of debenture etc without endorsement of certificate of registration of charge (England and Wales) | Provides that the penalty for the offence is a fine not exceeding level 3. |
| 21 | 405(4) | Failure to give notice of appointment of receiver or manager, or of his ceasing to act (England and Wales) | Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
| 22 | 407(3) | Omission of entry from company's register of charges (England and Wales) | This amendment makes no substantive change. |
| 23 | 408(3) | Refusal of inspection of charging instrument or of register of charges (England and Wales) | Extends potential liability to company in addition to officers. Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
| 24 | 415(3) | Failure to send to registrar particulars of charge or issue of debentures (Scotland) | This amendment makes no substantive change. |
| 25 | 416(3) | Failure to send to registrar particulars of charge on property acquired (Scotland) | This amendment makes no substantive change. |
| 26 | 422(3) | Omissions of entry from company's register of charges (Scotland) | This amendment makes no substantive change. |
| 27 | 423(3) | Refusal of inspection of charging instrument or of register of charges (Scotland) | Extends potential liability to the company and provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
| 28 | 425(4) | Failure to annex to memorandum court order sanctioning compromise or arrangement with creditors | Provides that the penalty for the offence is a fine not exceeding level 3. |
| 29 | 426(6) | Failure to comply with requirements to inform members and creditors about compromise or arrangement | This amendment makes no substantive change. |
| 30 | 426(7) | Failure to comply with requirements to inform members and creditors about compromise or arrangement | Provides that the penalty for the offence is a fine not exceeding level 3. |
| 31 | 427(5) | Failure to deliver to registrar copy of order for company reconstruction or amalgamation | Provides that the penalty for the offence is a fine not exceeding level 3. |
| 32 | 429(6) | Failure to send notice etc relating to buy-out of minority shareholders | Provides that the penalty for the offence on summary conviction in England and Wales is 12 months' imprisonment or the statutory maximum fine (or both), and a daily fine not exceeding one-fiftieth of the statutory maximum.
Provides that the penalty for the offence on summary conviction in Scotland and Northern Ireland is 6 months' imprisonment or the statutory maximum fine (or both), and a daily fine not exceeding one-fiftieth of the statutory maximum. |
| 33 | 430A(6) | Failure to give notice of rights to minority shareholder | This amendment makes no substantive change. |
| 34 | 444(3) | Failure to give information about interests in shares etc | Provides that the penalty for the offence on summary conviction in England and Wales is 12 months' imprisonment or the statutory maximum fine (or both), and a daily fine not exceeding one-fiftieth of the statutory maximum.
Provides that the penalty for the offence on summary conviction in Scotland and Northern Ireland is 6 months' imprisonment or the statutory maximum fine (or both), and a daily fine not exceeding one-fiftieth of the statutory maximum. |
| 35 | 448(7) | Obstruction of rights conferred by a warrant or failure to comply with requirement under section 448 | This amendment makes no substantive change. |
| 36 | 449 | Wrongful disclosure of information to which section 449 applies | Provides that the penalty for the offence on summary conviction in England and Wales is 12 months' imprisonment or the statutory maximum fine; or both.
Provides that the penalty for the offence on summary conviction in Scotland and Northern Ireland is six months' imprisonment or the statutory maximum fine; or both. |
| 37 | 450(3) | Destruction, mutilation etc of company documents | Provides that the penalty for the offence on summary conviction in England and Wales is 12 months' imprisonment or the statutory maximum fine; or both.
Provides that the penalty for the offence on summary conviction in Scotland and Northern Ireland is six months' imprisonment or the statutory maximum fine; or both. |
| 38 | 451(2) | Provision of false information in purported compliance with section 447 | Provides that the penalty for the offence on summary conviction in England and Wales is 12 months' imprisonment or the statutory maximum fine; or both.
Provides that the penalty for the offence on summary conviction in Scotland and Northern Ireland is six months' imprisonment or the statutory maximum fine; or both. |
| 39 | 453A | Obstruction of inspector, etc exercising power to enter and remain on premises | This amendment makes no substantive change. |
| 40 | 455(1) | Attempted evasion of restrictions under Part 15 | This amendment makes no substantive change. |
| 41 | 458 | Fraudulent trading | Provides that the penalty for the offence on indictment is 10 years' imprisonment or a fine; or both.
Provides that the penalty for the offence on summary conviction in England and Wales is 12 months' imprisonment or the statutory maximum fine; or both.
Provides that the penalty for the offence on summary conviction in Scotland and Northern Ireland is six months' imprisonment or the statutory maximum fine; or both. |
| 42 | 461(5) | Failure to register court order in case of unfair prejudice to company members | Provides that the penalty for the offence is a fine not exceeding level 3, or a daily fine not exceeding one-tenth of level 3. |
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| 43 | 652E(1) and (2) | Breach of duty etc in connection with application to strike company off register | Provides that the penalty for the offence on summary conviction in England and Wales is 12 months' imprisonment or the statutory maximum fine; or both.
Provides that the penalty for the offence on summary conviction in Scotland and Northern Ireland is six months' imprisonment or the statutory maximum fine; or both. |
| 44 | 652F(2) | Making unauthorised application to strike off company | This amendment makes no substantive change. |
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General provisions
Clause 778: Meaning of "daily default fine"
1372. This clause defines "daily default fine." It replaces provision currently in section 730(4) of the 1985 Act.
Clause 779: Consents required for certain prosecutions
1373. This clause provides that certain proceedings can only be brought with the consent of the Secretary of State or (in some circumstances) the Director of Public Prosecutions. It replaces section 732(1) and (2) of the 1985 Act.
Clause 780: Summary proceedings: venue
1374. This clause restates section 731(1) of the 1985 Act. It specifies the possible venues for summary proceedings for any breach of Companies Acts requirements. For a body corporate the venue may be any place at which the body corporate has a place of business, and for any other person, it may be at any place that the person is.
Clause 781: Summary proceedings: time limit for proceedings
1375. This clause restates section 731(2) to (4) of the 1985 Act. It sets out time limits for summary proceedings. The prosecution must be commenced within 3 years of the offence being committed, and within one year of the prosecuting authorities receiving sufficient evidence to justify the prosecution.
Clause 782: Legal professional privilege
1376. This clause restates section 732(3) of the 1985 Act and applies its provisions to all offences under the Companies Acts. It provides that the Companies Acts provisions on offences are not to be read as requiring any person to disclose information that is protected by legal professional privilege.
Clause 783: Proceedings against unincorporated bodies
1377. This clause restates section 734(1) to (4) of the 1985 Act. It provides for proceedings for offences under the Companies Acts committed by unincorporated bodies to be brought against such bodies as if they were corporate bodies.
Clause 784: Imprisonment on summary conviction in England and Wales: transitory provision
1378. This clause provides for the period before the commencement of section 154(1) of the Criminal Justice Act 2003, which makes new provision about the powers of magistrates' courts in England and Wales to impose sentences of imprisonment on summary conviction. In the interim, the maximum term of imprisonment in England and Wales for a person guilty of an offence on summary conviction under the Companies Acts is to be 6 months (as it is at present) instead of 12 months.
Supplementary
Clause 785: Transitional provision
1379. This clause provides that this Part of the Bill does not apply to offences committed before the commencement of the provision relevant to the offence.
PART 31: COMPANIES: SUPPLEMENTARY PROVISIONS
Company records
Clause 786: Meaning of "company records"
1380. This clause is a new provision and defines the scope of the clauses that follow.
Clause 787: Form of company records
1381. This clause replaces sections 722(1) and 723 of the 1985 Act. It enables a company to use electronic storage or paper for its records provided that there can be paper printouts of electronic records. Clause 789 also applies if the records are not kept in bound books.
Clause 788: Regulations about inspection of records and provision of copies
1382. This clause replaces section 723A of the 1985 Act. The amendments, combined with clause 786, do not change the effect of the existing provision.
Clause 789: Duty to take precautions against falsification
1383. This clause replaces section 722(2) of the 1985 Act. It makes it an offence not to take measures that protect records from falsification or help trace any falsification. This provision applies to records that are not kept in bound books, whether or not they are kept electronically, but does not apply either to the company's copy of the director's service contract or to its copy of any qualifying third party indemnity provisions benefiting a director.
Service addresses
Clause 790: Service of documents on company
1384. This clause replaces sections 694A, 695 and 725 of the 1985 Act. It ensures that there is a place at which a document may be served for all companies registered in the UK (including registered overseas companies).
Clause 791: Service of documents on directors, secretaries and others
1385. This clause is a new provision. It ensures that the address on the public record for any director or secretary is effective for the service of documents on that person. Subsection (3) provides that the address is effective even if the document has no bearing on the person's responsibilities as director or secretary. This provision also applies to the address on the public record of various other persons for whom the the Bill requires an address on the public record.
Clause 792: Service addresses
1386. This clause replaces part of section 723C(7) of the 1985 Act (as amended by the Criminal Justice and Police Act 2001, section 45). It defines "service address" and provides a power for regulations to specify conditions with which a service address must comply.
Clause 793: Requirement to give service address
1387. This clause is a new provision. It glosses requirements elsewhere to give an "address". Unless the requirement is for a particular kind of address (say, the usual residential address), the clause makes clear that a service address (as defined in the previous clause) is enough.
Sending or supplying documents or information
1388. Clauses 794 to 800 and Schedules 5 to 7 make new provision for how companies may communicate, typically with their members but also with debenture-holders and others. Specific requirements as to what information must be communicated are contained within relevant individual provisions of the Bill.
1389. The Companies Act 1985 (Electronic Communications) Order 2000 facilitated the use of electronic and website communications in certain contexts, but there has been uncertainty as to whether other provisions under the 1985 Act for information to be communicated 'in writing' required the use of paper or could be satisfied by electronic communications. This Part makes new general provisions about communications, including electronic and website communications, for the Act as a whole.
1390. The general principle behind the provisions of the Bill is that companies should be able, subject to shareholder approval, to use electronic communications. This is the default position. This will permit but not require companies to use websites and email to communicate with their members. However, since electronic communications will not suit everyone, individuals will be able to request communication on paper if they wish.
Clause 794: The company communications provisions
1391. This clause introduces clauses 795 to 800 and specifies that they apply for the purposes of communications authorised or required to be sent or supplied by or to a company under the Companies Acts. As regards communications between companies and Companies House, they have effect subject to the provisions of Part 29 of the Bill.
Clause 795: Sending or supplying documents or information
1392. This clause introduces three schedules, which apply irrespective of the company's articles:
- ???Schedule 5 deals with documents and information sent or supplied to a company;
- ???Schedule 6 deals with communications by a company other than a traded company;
- ???Schedule 7 deals with communications by a traded company.
1393. These Schedules, described below, use key terms defined in clause 807 (hard copy and electronic form and related expressions), clause 798 (requirement of authentication) and clause 800 (interpretation of company communications provisions).
Schedule 5: Documents and information sent or supplied to a company
1394. This Schedule brings together the rules on communications to a company. In some cases a company will have other companies as members, debenture holders etc, and paragraph 1 of the Schedule makes clear that communications by such members etc is governed by Schedules 6 (communications by a company other than a traded company) and 7 (communications by a traded company).
1395. Part 2 of the Schedule sets out the position for communications sent or supplied in hard copy form. These are very similar to the present position. Part 3 sets out rules for communications in electronic form. Part 4 is a more general provision and means that unless the Companies Acts specify a means of communication, for example under clause 274(3)(a) (circulation of written resolutions proposed by directors), then a communication to the company can be sent or supplied in any way agreed by the company.
Schedule 6: Communications by a company other than a traded company
1396. This Schedule sets out provisions on how most companies are to communicate with their members, debenture holders etc. These rules do not apply to "traded" companies, to whom Schedule 7 applies.
1397. Part 2 of the Schedule sets out standard rules for communications in hard copy. Paragraph 4 lists the addresses to which the company may send or supply documents or information. Where the company has no address for the intended recipient, the company may use the recipient's last known address. This provision does not prevent a company making provision in its articles, for example, not to send notice of general meeting or the annual report and accounts to members for whom the company no longer has a valid address.
1398. Part 3 of the Schedule relates to communications by e-mail or similar methods, and Part 4 to publication on a website. Paragraph 10 allows the company, either by members' resolution or through the articles, to default to website communication if it has asked a member to agree to communications in this way and the member has either agreed or not responded within 28 days of the company's request. Where a member has not agreed to communications in this way, the company may not ask the member again within a period of twelve months. Paragraph 15 enables the company and a member to agree alternative methods of communication, for example other than website communication where a company has defaulted to website communications. In addition, clause 797 (right to hard copy version) gives a member the right to request a hard copy of the communication, unless this is specifically ruled out by legislation. Paragraph 11 and clause 797 make equivalent provision for debenture holders. Paragraph 13 requires companies to notify intended recipients when material is published on a website.
Schedule 7: Communications by a traded company
1399. This Schedule makes separate provision about "traded companies" so that the Bill will not be inconsistent with the Transparency Directive, implementation of which is required by 20 January 2007. A "traded company" is defined in clause 754 (interpretation of company communications provisions) as a company whose securities are admitted to trading in a regulated market ("regulated market" defined in Part 32 (Companies: interpretation). The Transparency Directive (2004/109/EC) sets out in Article 17(3) rules on when issuers whose shares are admitted to trading on a regulated market can use electronic communications with their members. Article 18(4) contains similar provisions in relation to issuers communicating with the holders of certain debt securities admitted to trading on regulated markets. The Directive provisions cover both issuers who are companies and those who are not.
1400. The rules for communications by a traded company are similar to those for companies other than traded companies as set out in Schedule 6. However, the key additional requirement for traded companies is that, as required by the Transparency Directive (2004/109/EC), members or holders of debt securities (defined in paragraph 8(4)) must pass separate resolutions permitting the company to send documents in electronic form, for example by e-mail, and to use website publication before the company begins to use these forms of communication with them. This is set out in paragraphs 7(2), 8(2), and 11(2), and 12(2) of the Schedule. As an alternative, the company's articles, or the instrument constituting the debt securities (as the case may be) may make appropriate provision. In the case of communications with holders of debentures that are not debt securities, that is, not covered by the requirements of the Transparency Directive (2004/109/EC), the requirements for a traded company are the same as for any other company.
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