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Company Law Reform Bill [HL] (228-234)


Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 12 — Supplementary provisions

228

 

(6)   

In relation to the aggregate figures for turnover and balance sheet total—

“net” means after any set-offs and other adjustments made to eliminate

group transactions—

(a)   

in the case of Companies Act accounts, in accordance with

regulations under section 410,

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(b)   

in the case of IAS accounts, in accordance with international

accounting standards; and

“gross” means without those set-offs and other adjustments.

   

A company may satisfy the relevant requirements on the basis of either the net

or the gross figure.

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(7)   

The figures for each subsidiary undertaking shall be those included in its

individual accounts for the relevant financial year, that is—

(a)   

if its financial year ends with that of the parent company, that financial

year, and

(b)   

if not, its financial year ending last before the end of the financial year

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of the parent company.

   

If those figures cannot be obtained without disproportionate expense or undue

delay, the latest available figures shall be taken.

475     

Companies excluded from being treated as medium-sized

(1)   

A company is not entitled to take advantage of any of the provisions of this Part

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relating to companies qualifying as medium-sized if it was at any time within

the financial year in question—

(a)   

a public company,

(b)   

a company that—

(i)   

has permission under Part 4 of the Financial Services and

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Markets Act 2000 (c. 8) to carry on a regulated activity, or

(ii)   

carries on insurance market activity, or

(c)   

a member of an ineligible group.

(2)   

A group is ineligible if any of its members is—

(a)   

a public company,

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(b)   

a body corporate (other than a company) whose shares are admitted to

trading on a regulated market, or

(c)   

a person who—

(i)   

has permission under Part 4 of the Financial Services and

Markets Act 2000 to carry on a regulated activity, or

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(ii)   

carries on insurance market activity.

General power to make further provision about accounts and reports

476     

General power to make further provision about accounts and reports

(1)   

The Secretary of State may make provision by regulations about—

(a)   

the accounts and reports that companies are required to prepare;

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(b)   

the categories of companies required to prepare accounts and reports

of any description;

(c)   

the form and content of the accounts and reports that companies are

required to prepare;

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 12 — Supplementary provisions

229

 

(d)   

the obligations of companies and others as regards—

(i)   

the approval of accounts and reports,

(ii)   

the sending of accounts and reports to members and others,

(iii)   

the laying of accounts and reports before the company in

general meeting,

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(iv)   

the delivery of copies of accounts and reports to the registrar,

and

(v)   

the publication of accounts and reports.

(2)   

The regulations may amend this Part by adding, altering or repealing

provisions.

10

(3)   

But they must not amend (other than consequentially)—

(a)   

section 399 (accounts to give true and fair view), or

(b)   

the provisions of Chapter 11 (revision of defective accounts and

reports).

(4)   

The regulations may create criminal offences in cases corresponding to those

15

in which an offence is created by an existing provision of this Part.

   

The maximum penalty for any such offence may not be greater than is

provided in relation to an offence under the existing provision.

(5)   

The regulations may provide for civil penalties in circumstances

corresponding to those within section 461(1) (civil penalty for failure to file

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accounts and reports).

   

The provisions of section 461(2) to (5) apply in relation to any such penalty.

Other supplementary provisions

477     

Preparation and filing of accounts in euros

(1)   

The amounts set out in the annual accounts of a company may also be shown

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in the same accounts translated into euros.

(2)   

When complying with section 449 (duty to file accounts and reports), the

directors of a company may deliver to the registrar an additional copy of the

company’s annual accounts in which the amounts have been translated into

euros.

30

(3)   

In both cases—

(a)   

the amounts must have been translated at the exchange rate prevailing

on the date to which the balance sheet is made up, and

(b)   

that rate must be disclosed in the notes to the accounts.

(4)   

For the purposes of sections 442 and 443 (requirements in connection with

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published accounts) any additional copy of the company’s annual accounts

delivered to the registrar under subsection (2) above shall be treated as

statutory accounts of the company.

   

In the case of such a copy, references in those sections to the auditor’s report

on the company’s annual accounts shall be read as references to the auditor’s

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report on the annual accounts of which it is a copy.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 12 — Supplementary provisions

230

 

478     

Power to apply provisions to banking partnerships

(1)   

The Secretary of State may by regulations apply to banking partnerships,

subject to such exceptions, adaptations and modifications as he considers

appropriate, the provisions of this Part (and of regulations made under this

Part) applying to banking companies.

5

(2)   

A “banking partnership” means a partnership which has permission under

Part 4 of the Financial Services and Markets Act 2000 (c. 8).

   

But a partnership is not a banking partnership if it has permission to accept

deposits only for the purpose of carrying on another regulated activity in

accordance with that permission.

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(3)   

Expressions used in this section that are also used in the provisions regulating

activities under the Financial Services and Markets Act 2000 have the same

meaning here as they do in those provisions.

   

See section 22 of that Act, orders made under that section and Schedule 2 to

that Act.

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(4)   

Regulations under this section are subject to affirmative resolution procedure.

479     

Meaning of “annual accounts” and related expressions

(1)   

In this Part a company’s “annual accounts”, in relation to a financial year,

means—

(a)   

the company’s individual accounts for that year (see section 400), and

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(b)   

any group accounts prepared by the company for that year (see sections

404 and 405).

   

This is subject to section 414 (option to omit individual profit and loss account

from annual accounts where information given in group accounts).

(2)   

In the case of an unquoted company, its “annual accounts and reports” for a

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financial year are—

(a)   

its annual accounts,

(b)   

the directors’ report, and

(c)   

the auditor’s report on those accounts and the directors’ report (unless

the company is exempt from audit).

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(3)   

In the case of a quoted company, its “annual accounts and reports” for a

financial year are—

(a)   

its annual accounts,

(b)   

the directors’ remuneration report,

(c)   

the directors’ report, and

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(d)   

the auditor’s report on those accounts, on the auditable part of the

directors’ remuneration report and on the directors’ report.

(4)   

Where the directors of a company take advantage of the exemption conferred

by section 490 (small charities: independent examiner’s report in lieu of audit),

the references in this section to the auditor’s report shall be read as references

40

to the report made for the purposes of section 490.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 16 — Accounts and reports
Chapter 12 — Supplementary provisions

231

 

480     

Notes to the accounts

(1)   

Information required by this Part to be given in notes to a company’s annual

accounts may be contained in the accounts or in a separate document annexed

to the accounts.

(2)   

References in this Part to a company’s annual accounts, or to a balance sheet or

5

profit and loss account, include notes to the accounts giving information which

is required by any provision of this Act or international accounting standards,

and required or allowed by any such provision to be given in a note to

company accounts.

481     

Parliamentary procedure for certain regulations under this Part

10

(1)   

This section applies to regulations under the following provisions of this

Part—

section 402 (Companies Act individual accounts),

section 410 (Companies Act group accounts),

section 415 (information about related undertakings),

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section 418 (information about directors’ benefits: remuneration,

pensions and compensation for loss of office),

section 422 (contents of directors’ report: general),

section 427 (contents of directors’ remuneration report),

section 452 (filing obligations of companies subject to small companies

20

regime),

section 453 (filing obligations of medium-sized companies),

section 476 (general power to make further provision about accounts and

reports).

(2)   

Any such regulations may make consequential amendments or repeals in other

25

provisions of this Act, or in other enactments.

(3)   

Regulations that—

(a)   

restrict the classes of company which have the benefit of any

exemption, exception or special provision,

(b)   

require additional matter to be included in a document of any class, or

30

(c)   

otherwise render the requirements of this Part more onerous,

   

are subject to affirmative resolution procedure.

(4)   

Otherwise, the regulations are subject to negative resolution procedure.

482     

Minor definitions

(1)   

In this Part—

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“group” means a parent undertaking and its subsidiary undertakings;

“IAS Regulation” means EC Regulation No. 1606/2002 of the European

Parliament and of the Council of 19 July 2002 on the application of

international accounting standards;

“included in the consolidation”, in relation to group accounts, or

40

“included in consolidated group accounts”, means that the undertaking

is included in the accounts by the method of full (and not proportional)

consolidation, and references to an undertaking excluded from

consolidation shall be construed accordingly;

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 1 — Requirement for audited accounts

232

 

“insurance market activity” has the meaning given in section 316(3) of the

Financial Services and Markets Act 2000 (c. 8);

“international accounting standards” means the international accounting

standards, within the meaning of the IAS Regulation, adopted from

time to time by the European Commission in accordance with that

5

Regulation;

“listing rules” has the same meaning as in Part 6 of the Financial Services

and Markets Act 2000 (see section 73A of that Act);

“profit and loss account”, in relation to a company that prepares IAS

accounts, includes an income statement or other equivalent financial

10

statement required to be prepared by international accounting

standards;

“regulated activity” has the meaning given in section 22 of the Financial

Services and Markets Act 2000, except that it does not include activities

of the kind specified in any of the following provisions of the Financial

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Services and Markets Act 2000 (Regulated Activities) Order 2001—

(a)   

article 25A (arranging regulated mortgage contracts),

(b)   

article 39A (assisting administration and performance of a

contract of insurance),

(c)   

article 53A (advising on regulated mortgage contracts), or

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(d)   

article 21 (dealing as agent), article 25 (arranging deals in

investments) or article 53 (advising on investments) where the

activity concerns relevant investments that are not contractually

based investments (within the meaning of article 3 of that

Order);

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“turnover”, in relation to a company, means the amounts derived from the

provision of goods and services falling within the company’s ordinary

activities, after deduction of—

(a)   

trade discounts,

(b)   

value added tax, and

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(c)   

any other taxes based on the amounts so derived.

(2)   

In the case of an undertaking not trading for profit, any reference in this Part

to a profit and loss account is to an income and expenditure account.

   

References to profit and loss and, in relation to group accounts, to a

consolidated profit and loss account shall be construed accordingly.

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Part 17

Audit

Chapter 1

Requirement for audited accounts

40

Requirement for audited accounts

483     

Requirement for audited accounts

(1)   

A company’s annual accounts for a financial year must be audited in

accordance with this Part unless the company—

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 1 — Requirement for audited accounts

233

 

(a)   

is exempt from audit under—

section 485 (small companies),

section 488 (dormant companies), or

section 490 (charities: independent examiner’s report in lieu of

audit);

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or

(b)   

is exempt from the requirements of this Part under section 496 (non-

profit-making companies subject to public sector audit).

(2)   

A company is not entitled to any such exemption unless its balance sheet

contains a statement by the directors to that effect.

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(3)   

A company is not entitled to exemption under any of the provisions mentioned

in subsection (1)(a) unless its balance sheet contains a statement by the

directors to the effect that—

(a)   

the members have not required the company to obtain an audit of its

accounts for the year in question in accordance with section 484, and

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(b)   

the directors acknowledge their responsibilities for complying with the

requirements of this Act with respect to accounting records and the

preparation of accounts.

(4)   

The statement required by subsection (2) or (3) must appear on the balance

sheet above the signature required by section 420.

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484     

Right of members to require audit

(1)   

The members of a company that would otherwise be entitled to exemption

from audit under any of the provisions mentioned in section 483(1)(a) may by

notice under this section require it to obtain an audit of its accounts for a

financial year.

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(2)   

The notice must be given by—

(a)   

members holding not less in total than 10% in nominal value of the

company’s issued share capital, or any class of it, or

(b)   

if the company does not have a share capital, not less than 10% in

number of the members of the company.

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(3)   

The notice may not be given before the financial year to which it relates and

must be given not later than one month before the end of that year.

Exemption from audit: small companies

485     

Small companies: conditions for exemption from audit

(1)   

A company that meets the following conditions in respect of a financial year is

35

exempt from the requirements of this Act relating to the audit of accounts for

that year.

(2)   

The conditions are—

(a)   

that the company qualifies as a small company in relation to that year,

(b)   

that its turnover in that year is not more than £5.6 million, and

40

(c)   

that its balance sheet total for that year is not more than £2.8 million.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 1 — Requirement for audited accounts

234

 

(3)   

In relation to a company that is a charity, for the condition in subsection (2)(b)

substitute the condition that its gross income for the year is not more than

£90,000.

(4)   

For a period which is a company’s financial year but not in fact a year the

maximum figures for turnover or gross income shall be proportionately

5

adjusted.

(5)   

For the purposes of this section—

(a)   

whether a company qualifies as a small company shall be determined

in accordance with section 388(1) to (6),

(b)   

“balance sheet total” has the same meaning as in that section, and

10

(c)   

“gross income” means the company’s income from all sources, as

shown in the company’s income and expenditure account.

(6)   

This section has effect subject to—

section 483(2) and (3) (requirements as to statements to be contained in

balance sheet),

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section 484 (right of members to require audit),

section 486 (companies excluded from small companies exemption), and

section 487 (availability of small companies exemption in case of group

company).

486     

Companies excluded from small companies exemption

20

A company is not entitled to the exemption conferred by section 485 (small

companies) if it was at any time within the financial year in question—

(a)   

a public company,

(b)   

a company that—

(i)   

has permission under Part 4 of the Financial Services and

25

Markets Act 2000 (c. 8) to carry on a regulated activity,

(ii)   

carries on insurance market activity, or

(iii)   

is an appointed representative within the meaning of section 39

of that Act (other than an appointed representative whose scope

of appointment is limited to activities that are not regulated

30

activities for the purposes of this Part), or

(c)   

a special register body as defined in section 117(1) of the Trade Union

and Labour Relations (Consolidation) Act 1992 (c. 52) or an employers’

association as defined in section 122 of that Act or Article 4 of the

Industrial Relations (Northern Ireland) Order 1992 (S.I. 1992/807 (N.I.

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5)).

487     

Availability of small companies exemption in case of group company

(1)   

A company is not entitled to the exemption conferred by section 485 (small

companies) in respect of a financial year during any part of which it was a

group company unless—

40

(a)   

the conditions specified in subsection (2) below are met, or

(b)   

subsection (3) applies.

(2)   

The conditions are—

(a)   

that the group—

(i)   

qualifies as a small group in relation to that financial year, and

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