Company Law Reform Bill [HL] (221-227)

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL] (221-227)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
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465
Other persons authorised to apply to the court
(1)
The Secretary of State may by order (an “authorisation order”) authorise for the
purposes of section 464 any person appearing to him—
(a)
to have an interest in, and to have satisfactory procedures directed to
securing, compliance by companies with the requirements of this Act
5
(or, where applicable, of Article 4 of the IAS Regulation) relating to
accounts and directors’ reports,
(b)
to have satisfactory procedures for receiving and investigating
complaints about companies’ annual accounts and directors’ reports,
and
10
(c)
otherwise to be a fit and proper person to be authorised.
(2)
A person may be authorised generally or in respect of particular classes of case,
and different persons may be authorised in respect of different classes of case.
(3)
The Secretary of State may refuse to authorise a person if he considers that his
authorisation is unnecessary having regard to the fact that there are one or
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more other persons who have been or are likely to be authorised.
(4)
If the authorised person is an unincorporated association, proceedings brought
in, or in connection with, the exercise of any function by the association as an
authorised person may be brought by or against the association in the name of
a body corporate whose constitution provides for the establishment of the
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association.
(5)
An authorisation order may contain such requirements or other provisions
relating to the exercise of functions by the authorised person as appear to the
Secretary of State to be appropriate.

No such order is to be made unless it appears to the Secretary of State that the
25
person would, if authorised, exercise his functions as an authorised person in
accordance with the provisions proposed.
(6)
Where authorisation is revoked, the revoking order may make such provision
as the Secretary of State thinks fit with respect to pending proceedings.
(7)
An order under this section is subject to negative resolution procedure.
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466
Disclosure of information by tax authorities
(1)
The Commissioners for Her Majesty’s Revenue and Customs may disclose
information to a person authorised under section 465 for the purpose of
facilitating—
(a)
the taking of steps by that person to discover whether there are grounds
35
for an application to the court under section 464 (application in respect
of defective accounts etc), or
(b)
a decision by the authorised person whether to make such an
application.
(2)
This section applies despite any statutory or other restriction on the disclosure
40
of information.

Provided that, in the case of personal data within the meaning of the Data
Protection Act 1998 (c. 29), information is not to be disclosed in contravention
of that Act.
(3)
Information disclosed to an authorised person under this section—
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(a)
may not be used except in or in connection with—

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Part 16 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
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(i)
taking steps to discover whether there are grounds for an
application to the court under section 464, or
(ii)
deciding whether or not to make such an application,

or in, or in connection with, proceedings on such an application; and
(b)
must not be further disclosed except—
5
(i)
to the person to whom the information relates, or
(ii)
in, or in connection with, proceedings on any such application
to the court.
(4)
A person who contravenes subsection (3) commits an offence unless—
(a)
he did not know, and had no reason to suspect, that the information
10
had been disclosed under this section, or
(b)
he took all reasonable steps and exercised all due diligence to avoid the
commission of the offence.
(5)
A person guilty of an offence under subsection (4) is liable—
(a)
on conviction on indictment, to imprisonment for a term not exceeding
15
two years or a fine (or both);
(b)
on summary conviction—
(i)
in England and Wales, to imprisonment for a term not
exceeding twelve months or to a fine not exceeding the
statutory maximum (or both);
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(ii)
in Scotland or Northern Ireland, to imprisonment for a term not
exceeding six months, or to a fine not exceeding the statutory
maximum (or both).
Power of authorised person to require documents etc
467
Power of authorised person to require documents, information and
25
explanations
(1)
This section applies where it appears to a person who is authorised under
section 465 that there is, or may be, a question whether a company’s annual
accounts or directors’ report comply with the requirements of this Act (or,
where applicable, of Article 4 of the IAS Regulation).
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(2)
The authorised person may require any of the persons mentioned in subsection
(3) to produce any document, or to provide him with any information or
explanations, that he may reasonably require for the purpose of—
(a)
discovering whether there are grounds for an application to the court
under section 464, or
35
(b)
deciding whether to make such an application.
(3)
Those persons are—
(a)
the company;
(b)
any officer, employee, or auditor of the company;
(c)
any persons who fell within paragraph (b) at a time to which the
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document or information required by the authorised person relates.
(4)
If a person fails to comply with such a requirement, the authorised person may
apply to the court.
(5)
If it appears to the court that the person has failed to comply with a
requirement under subsection (2), it may order the person to take such steps as
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Part 16 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
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it directs for securing that the documents are produced or the information or
explanations are provided.
(6)
A statement made by a person in response to a requirement under subsection
(2) or an order under subsection (5) may not be used in evidence against him
in any criminal proceedings.
5
(7)
Nothing in this section compels any person to disclose documents or
information in respect of which a claim to legal professional privilege (in
Scotland, to confidentiality of communications) could be maintained in legal
proceedings.
(8)
In this section “document” includes information recorded in any form.
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468
Restrictions on disclosure of information obtained under compulsory powers
(1)
This section applies to information (in whatever form) obtained in pursuance
of a requirement or order under section 467 (power of authorised person to
require documents etc) that relates to the private affairs of an individual or to
any particular business.
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(2)
No such information may, during the lifetime of that individual or so long as
that business continues to be carried on, be disclosed without the consent of
that individual or the person for the time being carrying on that business.
(3)
This does not apply—
(a)
to disclosure permitted by section 469 (permitted disclosure of
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information obtained under compulsory powers), or
(b)
to the disclosure of information that is or has been available to the
public from another source.
(4)
A person who discloses information in contravention of this section commits
an offence, unless—
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(a)
he did not know, and had no reason to suspect, that the information
had been disclosed under section 467, or
(b)
he took all reasonable steps and exercised all due diligence to avoid the
commission of the offence.
(5)
A person guilty of an offence under this section is liable—
30
(a)
on conviction on indictment, to imprisonment for a term not exceeding
two years or a fine (or both);
(b)
on summary conviction—
(i)
in England and Wales, to imprisonment for a term not
exceeding twelve months or to a fine not exceeding the
35
statutory maximum (or both);
(ii)
in Scotland or Northern Ireland, to imprisonment for a term not
exceeding six months, or to a fine not exceeding the statutory
maximum (or both).
469
Permitted disclosure of information obtained under compulsory powers
40
(1)
The prohibition in section 468 of the disclosure of information obtained in
pursuance of a requirement or order under section 467 (power of authorised
person to require documents etc) that relates to the private affairs of an
individual or to any particular business has effect subject to the following
exceptions.
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Part 16 — Accounts and reports
Chapter 11 — Revision of defective accounts and reports
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(2)
It does not apply to the disclosure of information for the purpose of facilitating
the carrying out by the authorised person of his functions under section 464.
(3)
It does not apply to disclosure to—
(a)
the Secretary of State,
(b)
the Department of Enterprise, Trade and Investment for Northern
5
Ireland,
(c)
the Treasury,
(d)
the Bank of England,
(e)
the Financial Services Authority, or
(f)
the Commissioners for Her Majesty’s Revenue and Customs.
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(4)
It does not apply to disclosure—
(a)
for the purpose of assisting a body designated by an order under
section 46 of the Companies Act 1989 (c. 40) (delegation of functions of
the Secretary of State) to exercise its functions under Part 2 of that Act;
(b)
with a view to the institution of, or otherwise for the purposes of,
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disciplinary proceedings relating to the performance by an accountant
or auditor of his professional duties;
(c)
for the purpose of enabling or assisting the Secretary of State or the
Treasury to exercise any of their functions under any of the following—
(i)
the Companies Acts,
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(ii)
the insider dealing legislation,
(iii)
the Insolvency Act 1986 (c. 45) or the Insolvency (Northern
Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)),
(iv)
the Company Directors Disqualification Act 1986 (c. 46) or the
Company Directors Disqualification (Northern Ireland) Order
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2002 (S.I. 2002/3150 (N.I. 4)),
(v)
the Financial Services and Markets Act 2000 (c. 8);
(d)
for the purpose of enabling or assisting the Department of Enterprise,
Trade and Investment for Northern Ireland to exercise any powers
conferred on it by the enactments relating to companies, directors’
30
disqualification or insolvency;
(e)
for the purpose of enabling or assisting the Bank of England to exercise
its functions;
(f)
for the purpose of enabling or assisting the Commissioners for Her
Majesty’s Revenue and Customs to exercise their functions;
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(g)
for the purpose of enabling or assisting the Financial Services Authority
to exercise its functions under any of the following—
(i)
the legislation relating to friendly societies or to industrial and
provident societies,
(ii)
the Building Societies Act 1986 (c. 53),
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(iii)
Part 7 of the Companies Act 1989,
(iv)
the Financial Services and Markets Act 2000; or
(h)
in pursuance of any Community obligation.
(5)
It does not apply to disclosure to a body exercising functions of a public nature
under legislation in any country or territory outside the United Kingdom that
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appear to the authorised person to be similar to his functions under section 464
for the purpose of enabling or assisting that body to exercise those functions.

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Part 16 — Accounts and reports
Chapter 12 — Supplementary provisions
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(6)
In determining whether to disclose information to a body in accordance with
subsection (6), the authorised person must have regard to the following
considerations—
(a)
whether the use which the body is likely to make of the information is
sufficiently important to justify making the disclosure;
5
(b)
whether the body has adequate arrangements to prevent the
information from being used or further disclosed other than—
(i)
for the purposes of carrying out the functions mentioned in that
subsection, or
(ii)
for other purposes substantially similar to those for which
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information disclosed to the authorised person could be used or
further disclosed.
(7)
Nothing in this section authorises the making of a disclosure in contravention
of the Data Protection Act 1998 (c. 29).
470
Power to amend categories of permitted disclosure
15
(1)
The Secretary of State may by order amend section 469(4), (5) and (6).
(2)
An order under this section must not—
(a)
amend subsection (4) of that section (UK public authorities) by
specifying a person unless the person exercises functions of a public
nature (whether or not he exercises any other function);
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(b)
amend subsection (5) of that section (purposes for which disclosure
permitted) by adding or modifying a description of disclosure unless
the purpose for which the disclosure is permitted is likely to facilitate
the exercise of a function of a public nature;
(c)
amend subsection (6) of that section (overseas regulatory authorities)
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so as to have the effect of permitting disclosures to be made to a body
other than one that exercises functions of a public nature in a country
or territory outside the United Kingdom.
(3)
An order under this section is subject to negative resolution procedure.
Chapter 12
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Supplementary provisions
Liability for false or misleading statements in reports
471
Liability for false or misleading statements in reports
(1)
The reports to which this section applies are—
(a)
the directors’ report,
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(b)
the directors’ remuneration report, and
(c)
a summary financial statement so far as it is derived from either of
those reports.
(2)
A director of a company is liable to compensate the company for any loss
suffered by it as a result of—
40
(a)
any untrue or misleading statement in a report to which this section
applies, or

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(b)
the omission from a report to which this section applies of anything
required to be included in it.
(3)
He is so liable only if—
(a)
he knew the statement to be untrue or misleading or was reckless as to
whether it was untrue or misleading, or
5
(b)
he knew the omission to be dishonest concealment of a material fact.
(4)
No person shall be subject to any liability to a person other than the company
resulting from reliance, by that person or another, on information in a report to
which this section applies.
(5)
The reference in subsection (4) to a person being subject to a liability includes
10
a reference to another person being entitled as against him to be granted any
civil remedy or to rescind or repudiate an agreement.
(6)
This section does not affect—
(a)
liability for a civil penalty, or
(b)
liability for a criminal offence.
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Accounting and reporting standards
472
Accounting standards
(1)
In this Part “accounting standards” means statements of standard accounting
practice issued by such body or bodies as may be prescribed by regulations.
(2)
References in this Part to accounting standards applicable to a company’s
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annual accounts are to such standards as are, in accordance with their terms,
relevant to the company’s circumstances and to the accounts.
(3)
Regulations under this section may contain such transitional and other
supplementary and incidental provisions as appear to the Secretary of State to
be appropriate.
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Companies qualifying as medium-sized
473
Companies qualifying as medium-sized: general
(1)
A company qualifies as medium-sized in relation to its first financial year if the
qualifying conditions are met in that year.
(2)
A company qualifies as medium-sized in relation to a subsequent financial
30
year—
(a)
if the qualifying conditions are met in that year and the preceding
financial year;
(b)
if the qualifying conditions are met in that year and the company
qualified as medium-sized in relation to the preceding financial year;
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(c)
if the qualifying conditions were met in the preceding financial year
and the company qualified as medium-sized in relation to that year.
(3)
The qualifying conditions are met by a company in a year in which it satisfies
two or more of the following requirements—

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1. Turnover
Not more than £22.8 million

2. Balance sheet total
Not more than £11.4 million

3. Number of employees
Not more than 250

(4)
For a period that is a company’s financial year but not in fact a year the
maximum figures for turnover must be proportionately adjusted.
5
(5)
The balance sheet total means the aggregate of the amounts shown as assets in
the company’s balance sheet.
(6)
The number of employees means the average number of persons employed by
the company in the year, determined as follows—
(a)
find for each month in the financial year the number of persons
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employed under contracts of service by the company in that month
(whether throughout the month or not),
(b)
add together the monthly totals, and
(c)
divide by the number of months in the financial year.
(7)
This section is subject to section 474 (companies qualifying as medium-sized:
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parent companies).
474
Companies qualifying as medium-sized: parent companies
(1)
A parent company qualifies as a medium-sized company in relation to a
financial year only if the group headed by it qualifies as a medium-sized group.
(2)
A group qualifies as medium-sized in relation to the parent company’s first
20
financial year if the qualifying conditions are met in that year.
(3)
A group qualifies as medium-sized in relation to a subsequent financial year of
the parent company—
(a)
if the qualifying conditions are met in that year and the preceding
financial year;
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(b)
if the qualifying conditions are met in that year and the group qualified
as medium-sized in relation to the preceding financial year;
(c)
if the qualifying conditions were met in the preceding financial year
and the group qualified as medium-sized in relation to that year.
(4)
The qualifying conditions are met by a group in a year in which it satisfies two
30
or more of the following requirements—

1. Aggregate turnover
Not more than £22.8 million net (or

£27.36 million gross)

2. Aggregate balance sheet total
Not more than £11.4 million net (or

£13.68 million gross)

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3. Aggregate number of employees
Not more than 250

(5)
The aggregate figures are ascertained by aggregating the relevant figures
determined in accordance with section 388 for each member of the group.