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| | Wednesday 18th October 2006 |
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| | Company Law Reform Bill [Lords]
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| | NEW CLAUSES RELATING TO CHAPTER 5 OF PART 16 |
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| | | Contents of directors’ report: business review (No. 2) |
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| | To move the following Clause:— |
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| | | ‘(1) | Unless the company is subject to the small companies’ regime, the directors’ |
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| | | report must contain a business review. |
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| | | (2) | The purposes of the business review are to inform members of the company, help |
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| | | them assess how the directors have performed their duty under section 173 (duty |
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5 | | to promote the success of the company), and assist potential investors to decide |
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| | | whether to invest in the company. |
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| | | (3) | The business review must contain— |
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| | | (a) | a fair review of the company’s business, and |
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| | | (b) | a description of the principal risks and uncertainties facing the company. |
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10 | | (4) | The review required is a balanced and comprehensive analysis of— |
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| | | (a) | the development and performance of the company’s business during the |
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| | | (b) | the position of the company’s business at the end of that year, |
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| | | | consistent with the size and complexity of the business. |
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15 | | (5) | The business review must, in a manner consistent with the size and complexity of |
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| | | (a) | the main trends and factors likely to affect the future development, |
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| | | performance and position of the company’s business, and |
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20 | | (i) | environmental matters (including the impact of the company’s |
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| | | business on the environment), |
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| | | (ii) | the company’s employees, |
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| | | (iii) | social and community issues, and |
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| | | (iv) | persons with whom the company has contractual or other |
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25 | | arrangements which are essential to the business of the company, |
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| | | | including information about any policies of the company in relation to |
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| | | those matters and the effectiveness of those policies. |
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| | | | If the review does not contain information of each kind mentioned in paragraph |
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| | | (b)(i), (ii), (iii) and (iv), it must state which of those kinds of information it does |
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| | | (6) | The review must, in a manner consistent with the size and complexity of the |
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| | | (a) | analysis using financial key performance indicators, and |
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| | | (b) | where appropriate, analysis using other key performance indicators, |
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35 | | including information relating to environmental matters, employee |
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| | | matters, supplier matters and social and community issues. |
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| | | | “Key performance indicators” means factors by reference to which the |
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| | | development, performance or position of the company’s business can be |
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40 | | (7) | The review must, where appropriate, include references to, and additional |
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| | | explanations of, amounts included in the company’s annual accounts. |
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| | | (8) | In relation to a group directors’ report this section has effect as if the references |
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| | | to the company were references to the company and its subsidiary undertakings |
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| | | included in the consolidation. |
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45 | | (9) | Nothing in this section requires the disclosure of information about impending |
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| | | developments or matters in the course of negotiation if the disclosure would, in |
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| | | the opinion of the directors, be seriously prejudicial to the interests of the |
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| | | As an Amendment to Jon Trickett’s proposed New Clause (Contents of directors’ |
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| | | report: business review (No. 2)) (NC1):— |
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| | Line 6, at end insert ‘and potential customers to decide whether to purchase the |
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| | company’s goods or services.’. |
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| | To move the following Clause:— |
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| | | ‘(1) | A business review must— |
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| | | (a) | state whether it has been prepared in accordance with relevant reporting |
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| | | (b) | contain particulars of, and reasons for, any departure from such |
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| | | (2) | In this section, “reporting standards” means statements of standard reporting |
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| | | practice which the Secretary of State shall ensure are issued and which— |
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| | | (a) | relate to business reviews, and |
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| | | (b) | shall be issued by a body or bodies specified in an order made by the |
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| | | (3) | References in this section to relevant reporting standards, in relation to a |
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| | | company’s business review, are to such standards as are, in accordance with their |
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| | | terms, applicable to the company’s circumstances and to the review. |
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| | | (4) | Where or the extent that the directors of a company have complied with a |
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| | | reporting standard, they are presumed (unless the contrary is proved) to have |
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| | | complied with the corresponding requirements of this Part relating to the contents |
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| | | Requirement for audit of business review |
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| | | Negatived on division NC75 |
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| | To move the following Clause:— |
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| | | ‘The auditors must state in their report— |
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| | | (a) | whether in their opinion the information given in the business review for |
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| | | the financial year for which the annual accounts are prepared is consistent |
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| | | (b) | whether any matters have come to their attention, in the performance of |
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| | | their functions as auditors of the company, which in their opinion are |
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| | | inconsistent with the information given in the business review.’. |
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| | amendmentS RELATING TO CHAPTER 5 OF PART 16 |
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| | Page 196, line 30, leave out Clause 423. |
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| | Page 197, line 2 [Clause 423], leave out ‘In the case of a quoted company’. |
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| | Page 197, line 6 [Clause 423], after ‘business’, insert ‘, including— |
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| | | (i) | a description of the business and the external environment in |
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| | | which it operates, including its main products, services, |
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| | | customers, business processes and distribution methods, |
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| | | (ii) | information about the company’s major markets and its |
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| | | competitive position within those markets, and |
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| | | (iii) | any further marketing information which in the opinion of the |
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| | | directors would contribute to a clearer picture of the company’s |
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| | | position and performance’. |
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| | | Agreed to on division 821 |
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| | Page 197, line 13 [Clause 423], at end insert ‘; and |
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| | | (c) | information about persons with whom the company has contractual or |
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| | | other arrangements which are essential to the business of the company.’. |
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| | | Agreed to on division 822 |
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| | Page 197, line 15 [Clause 423], leave out ‘paragraph (b)(i), (ii) and (iii)’ and insert |
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| | ‘paragraphs (b)(i), (ii) and (iii) and (c)’. |
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| | AMENDMENTS RELATING TO CHAPTERS 1 TO 4 AND 6 TO 12 OF PART 16 |
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| | | Agreed to on division 712 |
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| | Page 177, line 11 [Clause 389], leave out ‘the relevant requirements’ and insert |
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| | ‘any relevant requirement’. |
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| | | Agreed to on division 530 |
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| | Page 177, line 26 [Clause 390], leave out sub-paragraph (i) and insert— |
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| | | ‘(i) | is an authorised insurance company, a banking company, an e- |
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| | | money issuer, an ISD investment firm or a UCITS management |
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| | | Agreed to on division 531 |
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| | Page 177, line 33 [Clause 390], leave out ‘or’. |
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| | | Agreed to on division 532 |
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| | Page 177, line 34 [Clause 390], leave out paragraph (c) and insert— |
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| | | ‘(c) | a person (other than a small company) who has permission under Part 4 |
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| | | of the Financial Services and Markets Act 2000 (c. 8) to carry on a |
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| | | (d) | a small company that is an authorised insurance company, a banking |
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| | | company, an e-money issuer, an ISD investment firm or a UCITS |
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| | | (e) | a person who carries on insurance market activity.’. |
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| | | Agreed to on division 533 |
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| | Page 177, line 37 [Clause 390], at end insert— |
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| | | ‘(3) | A company is a small company for the purposes of subsection (2) if it qualified |
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| | | as small in relation to its last financial year ending on or before the end of the |
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| | | financial year to which the accounts relate.’. |
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| | Page 184, line 11 [Clause 402], at end insert ‘, and |
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| | | (c) | the tax paid by the company under the legislation of any country or |
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| | | territory in which the company may operate, having apportioned income |
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| | | in accordance with best accounting practice to that country or territory.’. |
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| | Page 189, line 15 [Clause 410], at end insert ‘, and |
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| | | (c) | the tax paid by the parent company and its subsidiary undertakings under |
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| | | the legislation of any country or territory in which the company may |
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| | | operate, having apportioned income in accordance with best accounting |
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| | | practice to that country or territory.’. |
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| | Page 191, line 15 [Clause 415], at end insert ‘, and |
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| | | (c) | may require companies to publish details of their transfer pricing policies |
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| | | and a declaration by directors that arm’s length prices have been used in |
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| | | Agreed to on division 311 |
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| | Page 192, line 2 [Clause 416], at end insert ‘under section 411(3) (undertakings |
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| | excluded on grounds other than materiality)’. |
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| | Page 192, line 27 [Clause 417], at end insert ‘and |
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| | | (c) | the highest and the lowest annual earnings paid by the company; the |
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| | | number of UK based workers on the UK national minimum wage; the |
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| | | gap between the average male and female annual earnings in the UK and |
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| | | the steps taken to reduce it.’. |
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| | | Agreed to on division 303 |
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| | Page 201, line 4 [Clause 430], leave out ‘not later than 21 days before’ and insert |
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| | ‘at least 21 days before the date of’. |
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| | | Agreed to on division 340 |
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| | Page 201, line 32 [Clause 432], leave out ‘by’ and insert ‘in accordance with’. |
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| | | Agreed to on division 341 |
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| | Page 202, line 2 [Clause 432], at end insert— |
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| | | ‘(4A) | This section applies to copies of accounts and reports required to be sent out by |
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| | | virtue of section 146 to a person nominated to enjoy information rights as it |
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| | | applies to copies of accounts and reports required to be sent out in accordance |
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| | | with section 429 to a member of the company.’. |
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| | | Agreed to on division 312 |
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| | Page 204, line 23 [Clause 436], leave out subsection (2) and insert— |
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| | | ‘( ) | The annual accounts and reports must be made available on a website that— |
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| | | (a) | is maintained by or on behalf of the company, and |
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| | | (b) | identifies the company in question. |
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| | | ( ) | Access to the annual accounts and reports on the website, and the ability to obtain |
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| | | a hard copy of the annual accounts and reports from the website, must not be— |
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| | | (a) | conditional on the payment of a fee, or |
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| | | (b) | otherwise restricted, except so far as necessary to comply with any |
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| | | enactment or regulatory requirement (in the United Kingdom or |
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| | | ( ) | The annual accounts and reports— |
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| | | (a) | must be made available as soon as reasonably practicable, and |
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| | | (b) | must be kept available throughout the period specified in subsection |
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| | | ( ) | A failure to make the annual accounts and reports available on a website |
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| | | throughout that period is disregarded if— |
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| | | (a) | the annual accounts and reports are made available on the website for part |
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| | | (b) | the failure is wholly attributable to circumstances that it would not be |
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| | | reasonable to have expected the company to prevent or avoid.’ |
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| | | Agreed to on division 313 |
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| | Page 204, line 24 [Clause 436], leave out from ‘section’ to ‘, an’ in line 25. |
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| | | Agreed to on division 314 |
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| | Page 204, line 29, leave out Clause 437. |
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| | | Agreed to on division 315 |
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| | Page 205, line 12, leave out Clause 438. |
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