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Company Law Reform Bill [HL] (537-543)


Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 38 — Companies: interpretation

537

 

1127    

Parent and subsidiary undertakings

(1)   

This section (together with Schedule 8) defines “parent undertaking” and

“subsidiary undertaking” for the purposes of the Companies Acts.

(2)   

An undertaking is a parent undertaking in relation to another undertaking, a

subsidiary undertaking, if—

5

(a)   

it holds a majority of the voting rights in the undertaking, or

(b)   

it is a member of the undertaking and has the right to appoint or

remove a majority of its board of directors, or

(c)   

it has the right to exercise a dominant influence over the undertaking—

(i)   

by virtue of provisions contained in the undertaking’s articles,

10

or

(ii)   

by virtue of a control contract, or

(d)   

it is a member of the undertaking and controls alone, pursuant to an

agreement with other shareholders or members, a majority of the

voting rights in the undertaking.

15

(3)   

For the purposes of subsection (2) an undertaking shall be treated as a member

of another undertaking—

(a)   

if any of its subsidiary undertakings is a member of that undertaking,

or

(b)   

if any shares in that other undertaking are held by a person acting on

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behalf of the undertaking or any of its subsidiary undertakings.

(4)   

An undertaking is also a parent undertaking in relation to another

undertaking, a subsidiary undertaking, if—

(a)   

it has the power to exercise, or actually exercises, dominant influence or

control over it, or

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(b)   

it and the subsidiary undertaking are managed on a unified basis.

(5)   

A parent undertaking shall be treated as the parent undertaking of

undertakings in relation to which any of its subsidiary undertakings are, or are

to be treated as, parent undertakings; and references to its subsidiary

undertakings shall be construed accordingly.

30

(6)   

Schedule 8 contains provisions explaining expressions used in this section and

otherwise supplementing this section.

(7)   

In this section and that Schedule references to shares, in relation to an

undertaking, are to allotted shares.

Other definitions

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1128    

Meaning of “banking company” and “banking group”

(1)   

This section defines “banking company” and “banking group” for the purposes

of the Companies Acts.

(2)   

“Banking company” means a person who has permission under Part 4 of the

Financial Services and Markets Act 2000 (c. 8) to accept deposits, other than—

40

(a)   

a person who is not a company, and

(b)   

a person who has such permission only for the purpose of carrying on

another regulated activity in accordance with permission under that

Part.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 38 — Companies: interpretation

538

 

(3)   

The definition in subsection (2) must be read with section 22 of that Act, any

relevant order under that section and Schedule 2 to that Act.

(4)   

References to a banking group are to a group where the parent company is a

banking company or where—

(a)   

the parent company’s principal subsidiary undertakings are wholly or

5

mainly credit institutions, and

(b)   

the parent company does not itself carry on any material business apart

from the acquisition, management and disposal of interests in

subsidiary undertakings.

   

“Group” here means a parent undertaking and its subsidiary undertakings.

10

(5)   

For the purposes of subsection (4)—

(a)   

a parent company’s principal subsidiary undertakings are the

subsidiary undertakings of the company whose results or financial

position would principally affect the figures shown in the group

accounts, and

15

(b)   

the management of interests in subsidiary undertakings includes the

provision of services to such undertakings.

1129    

Meaning of “insurance company” and related expressions

(1)   

This section defines “insurance company”, “authorised insurance company”,

“insurance group” and “insurance market activity” for the purposes of the

20

Companies Acts.

(2)   

An “authorised insurance company” means a person (whether incorporated or

not) who has permission under Part 4 of the Financial Services and Markets Act

2000 (c. 8) to effect or carry out contracts of insurance.

(3)   

An “insurance company” means—

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(a)   

an authorised insurance company, or

(b)   

any other person (whether incorporated or not) who—

(i)   

carries on insurance market activity, or

(ii)   

may effect or carry out contracts of insurance under which the

benefits provided by that person are exclusively or primarily

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benefits in kind in the event of accident to or breakdown of a

vehicle.

(4)   

Neither expression includes a friendly society within the meaning of the

Friendly Societies Act 1992 (c. 40).

(5)   

References to an insurance group are to a group where the parent company is

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an insurance company or where—

(a)   

the parent company’s principal subsidiary undertakings are wholly or

mainly insurance companies, and

(b)   

the parent company does not itself carry on any material business apart

from the acquisition, management and disposal of interests in

40

subsidiary undertakings.

   

“Group” here means a parent undertaking and its subsidiary undertakings.

(6)   

For the purposes of subsection (5)—

(a)   

a parent company’s principal subsidiary undertakings are the

subsidiary undertakings of the company whose results or financial

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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 38 — Companies: interpretation

539

 

position would principally affect the figures shown in the group

accounts, and

(b)   

the management of interests in subsidiary undertakings includes the

provision of services to such undertakings.

(7)   

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

5

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

(8)   

References in this section to contracts of insurance and to the effecting or

carrying out of such contracts must be read with section 22 of that Act, any

relevant order under that section and Schedule 2 to that Act.

1130    

“Employees’ share scheme”

10

For the purposes of the Companies Acts an employees’ share scheme is a

scheme for encouraging or facilitating the holding of shares in or debentures of

a company by or for the benefit of—

(a)   

the bona fide employees or former employees of—

(i)   

the company,

15

(ii)   

any subsidiary of the company, or

(iii)   

the company’s holding company or any subsidiary of the

company’s holding company, or

(b)   

the spouses, civil partners, surviving spouses, surviving civil partners,

or minor children or step-children of such employees or former

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employees.

1131    

Meaning of “prescribed”

In the Companies Acts “prescribed” means prescribed (by order or by

regulations) by the Secretary of State.

1132    

Hard copy and electronic form and related expressions

25

(1)   

The following provisions apply for the purposes of the Companies Acts.

(2)   

A document or information is sent or supplied in hard copy form if it is sent or

supplied in a paper copy or similar form capable of being read.

   

References to hard copy have a corresponding meaning.

(3)   

A document or information is sent or supplied in electronic form if it is sent or

30

supplied—

(a)   

by electronic means (for example, by e-mail or fax), or

(b)   

by any other means while in an electronic form (for example, sending a

disk by post).

   

References to electronic copy have a corresponding meaning.

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(4)   

A document or information is sent or supplied by electronic means if it is—

(a)   

sent initially and received at its destination by means of electronic

equipment for the processing (which expression includes digital

compression) or storage of data, and

(b)   

entirely transmitted, conveyed and received by wire, by radio, by

40

optical means or by other electromagnetic means.

   

References to electronic means have a corresponding meaning.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 38 — Companies: interpretation

540

 

(5)   

A document or information authorised or required to be sent or supplied in

electronic form must be sent or supplied in a form, and by a means, that the

sender or supplier reasonably considers will enable the recipient—

(a)   

to read it, and

(b)   

to retain a copy of it.

5

(6)   

For the purposes of this section, a document or information can be read only

if—

(a)   

it can be read with the naked eye, or

(b)   

to the extent that it consists of images (for example photographs,

pictures, maps, plans or drawings), it can be seen with the naked eye.

10

(7)   

The provisions of this section apply whether the provision of the Companies

Acts in question uses the words “sent” or “supplied” or uses other words (such

as “deliver”, “provide”, “produce” or, in the case of a notice, “give”) to refer to

the sending or supplying of a document or information.

1133    

Classes of shares

15

(1)   

For the purpose of the Companies Acts shares are of one class if the rights

attached to them are in all respects uniform.

(2)   

For this purpose the rights attached to shares are not regarded as different from

those attached to other shares by reason only that they do not carry the same

rights to dividends in the twelve months immediately following their

20

allotment.

1134    

Dormant companies

(1)   

For the purposes of the Companies Acts a company is “dormant” during any

period in which it has no significant accounting transaction.

(2)   

A “significant accounting transaction” means a transaction that is required by

25

section 392 to be entered in the company’s accounting records.

(3)   

In determining whether or when a company is dormant, there shall be

disregarded—

(a)   

any transaction arising from the taking of shares in the company by a

subscriber to the memorandum as a result of an undertaking of his in

30

connection with the formation of the company;

(b)   

any transaction consisting of the payment of—

(i)   

a fee to the registrar on a change of the company’s name,

(ii)   

a fee to the registrar on the re-registration of the company,

(iii)   

a penalty under section 461 (penalty for failure to file accounts),

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or

(iv)   

a fee to the registrar for the registration of an annual return.

(4)   

Any reference in the Companies Acts to a body corporate other than a

company being dormant has a corresponding meaning.

1135    

Meaning of “EEA State” and related expressions

40

   

In the Companies Acts—

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 38 — Companies: interpretation

541

 

“EEA State” means a state which is a Contracting Party to the Agreement

on the European Economic Area signed at Oporto on 2nd May 1992 (as

it has effect from time to time);

“EEA company” and “EEA undertaking” mean a company or

undertaking governed by the law of an EEA State.

5

1136    

The former Companies Acts

   

In the Companies Acts—

“the former Companies Acts” means—

(a)   

the Joint Stock Companies Acts, the Companies Act 1862 (c. 89),

the Companies (Consolidation) Act 1908 (c. 69), the Companies

10

Act 1929 (c. 23), the Companies Act (Northern Ireland) 1932 (c. 7

(N.I.)), the Companies Acts 1948 to 1983, the Companies Act

(Northern Ireland) 1960 (c. 22 (N.I.)), the Companies (Northern

Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) and the Companies

Consolidation (Consequential Provisions) (Northern Ireland)

15

Order 1986 (S.I. 1986/1035 (N.I. 9)), and

(b)   

the provisions of the Companies Act 1985 (c. 6) and the

Companies Consolidation (Consequential Provisions) Act 1985

(c. 9) that are no longer in force;

“the Joint Stock Companies Acts” means the Joint Stock Companies Act

20

1856 (c. 47), the Joint Stock Companies Acts 1856, 1857 (20 & 21 Vict.

c. 14), the Joint Stock Banking Companies Act 1857 (c. 49), and the Act

to enable Joint Stock Banking Companies to be formed on the principle

of limited liability (1858 c. 91), but does not include the Joint Stock

Companies Act 1844 (c. 110).

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General

1137    

References to requirements of this Act

References in the company law provisions of this Act to the requirements of

this Act include the requirements of regulations and orders made under it.

1138    

Minor definitions: general

30

(1)   

In the Companies Acts—

“body corporate” and “corporation” include a body incorporated outside

the United Kingdom, but do not include—

(a)   

a corporation sole, or

(b)   

a partnership that is not regarded as a legal person under the

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law by which it is governed;

“credit institution” means a credit institution as defined in Article 1(1)(a)

of Directive 2000/12/EC of the European Parliament and of the

Council of 20 March 2000 relating to the taking up and pursuit of the

business of credit institutions, that is to say an undertaking whose

40

business is to receive deposits or other repayable funds from the public

and to grant credits for its own account;

“financial institution” means a financial institution within the meaning of

Article 1(1) of the Council Directive on the obligations of branches

established in a Member State of credit and financial institutions having

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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 38 — Companies: interpretation

542

 

their head offices outside that Member State regarding the publication

of annual accounting documents (the Bank Branches Directive, 89/

117/EEC);

“firm” means any entity, whether or not a legal person, that is not an

individual and includes a body corporate, a corporation sole and a

5

partnership or other unincorporated association;

“the Gazette” means—

(a)   

as respects companies registered in England and Wales, the

London Gazette,

(b)   

as respects companies registered in Scotland, the Edinburgh

10

Gazette, and

(c)   

as respects companies registered in Northern Ireland, the

Belfast Gazette;

“parent company” means a company that is a parent undertaking (see

section 1127 and Schedule 8);

15

“regulated market” has the same meaning as in Directive 2004/39/EC of

the European Parliament and of the Council on markets in financial

instruments (see Article 4.1(14));

“working day”, in relation to a company, means a day that is not a

Saturday or Sunday, Christmas Day, Good Friday or any day that is a

20

bank holiday in the part of the United Kingdom where the company is

registered.

(2)   

Until such date as may be appointed by order under section 1264(2) for the

definition in subsection (1) of “regulated market” to come into force, the

following definition has effect for the purposes of the Companies Acts—

25

“regulated market” has the same meaning as it has in Council Directive

93/22/EEC on investment services in the securities field.

1139    

Index of defined expressions

(1)   

Schedule 9 contains an index of provisions defining or otherwise explaining

expressions used in the Companies Acts.

30

(2)   

For section 744A of the Companies Act 1985 (c. 6) substitute—    

“744A   

    Index of defined expressions

   

For an index which includes entries for provisions defining or

otherwise explaining expressions used in this Act, see Schedule 9 to the

Company Law Reform Act 2006.”.

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(3)   

At the end of section 63(2) of the Companies (Audit, Investigations and

Community Enterprise) Act 2004 (c. 27) (interpretation) insert—

   

“For an index which includes entries for provisions defining or

otherwise explaining expressions used in that Act, see Schedule 9 to the

Company Law Reform Act 2006.”.

40

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 39 — Companies: minor amendments

543

 

Part 39

Companies: minor amendments

1140    

Power of Secretary of State to bring civil proceedings on company’s behalf

(1)   

Section 438 of the Companies Act 1985 (c. 6) (power of Secretary of State to

bring civil proceedings on company’s behalf) shall cease to have effect.

5

(2)   

In section 439 of that Act (expenses of investigating company’s affairs)—

(a)   

in subsection (2) omit “, or is ordered to pay the whole or any part of the

costs of proceedings brought under section 438”;

(b)   

omit subsections (3) and (7) (which relate to section 438);

(c)   

in subsection (8)—

10

(i)   

for “subsections (2) and (3)” substitute “subsection (2)”, and

(ii)   

omit “; and any such liability imposed by subsection (2) is

(subject as mentioned above) a liability also to indemnify all

persons against liability under subsection (3)”.

(3)   

In section 453(1A) of that Act (investigation of overseas companies: provisions

15

not applicable), omit paragraph (b) (which relates to section 438).

(4)   

Nothing in this section affects proceedings brought under section 438 before

the commencement of this section.

1141    

Repeal of certain provisions about company directors

The following provisions of Part 10 of the Companies Act 1985 shall cease to

20

have effect—

section 311 (prohibition on tax-free payments to directors);

sections 323 and 327 (prohibition on directors dealing in share options);

sections 324 to 326 and 328 to 329, and Parts 2 to 4 of Schedule 13 (register

of directors’ interests);

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sections 343 and 344 (special procedure for disclosure by banks).

1142    

Repeal of requirement that certain companies publish periodical statement

The following provisions shall cease to have effect—

section 720 of the Companies Act 1985 (certain companies to publish

periodical statement), and

30

Schedule 23 to that Act (form of statement under section 720).

1143    

Repeal of requirement that Secretary of State prepare annual report

Section 729 of the Companies Act 1985 (annual report to Parliament by

Secretary of State on matters within the Companies Acts) shall cease to have

effect.

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1144    

Repeal of certain provisions about company charges

Part 4 of the Companies Act 1989 (c. 40) (registration of company charges),

which has not been brought into force, is repealed.

 
 

 
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