New
Clause
284Distributions
by investment companies out of accumulated revenue
profits ‘(1) An investment
company may make a distribution out of its accumulated, realised
revenue profits if the following conditions are
met. (2) It may make such a
distribution only if, and to the extent that, its accumulated, realised
revenue profits, so far as not previously utilised by a distribution or
capitalisation, exceed its accumulated revenue losses (whether realised
or unrealised), so far as not previously written off in a reduction or
reorganisation of capital duly
made. (3) It may make such a
distribution only— (a)
if the amount of its assets is at least equal to one and a half times
the aggregate of its liabilities,
and (b) if, and to the extent
that, the distribution does not reduce that amount to less than one and
a half times that
aggregate. (4) For this purpose
a company’s liabilities
include— (a) in the case
of Companies Act accounts, provisions of a kind specified for the
purposes of this subsection by regulations under section
378; (b) in the case of IAS
accounts, provisions of any
kind. (5) The following
conditions must also be
met— (a) the
company’s shares must be listed on a recognised UK investment
exchange; (b) during the
relevant period it must not
have— (i) distributed
any capital profits otherwise than by way of the redemption or purchase
of any of the company’s own shares in accordance with Chapter
(Redeemable shares) or (Purchase of own shares) of Part (Acquisition by
limited company of its own shares),
or (ii) applied any unrealised
profits or any capital profits (realised or unrealised) in paying up
debentures or amounts unpaid on its issued
shares; (c) it must have given
notice to the registrar under section (Meaning of “investment
company”)(1) (notice of intention to carry on business as an
investment company)—
(i) before the beginning of the relevant period,
or (ii) as soon as reasonably
practicable after the date of its
incorporation. (6) For the
purposes of this
section— (a)
“recognised UK investment exchange” means a recognised
investment exchange within the meaning of Part 18 of the Financial
Services and Markets Act 2000 (c. 8), other than an overseas investment
exchange within the meaning of that Part;
and (b) the “relevant
period” is the period beginning
with— (i) the first day
of the accounting reference period immediately preceding that in which
the proposed distribution is to be made,
or (ii) where the distribution
is to be made in the company’s first accounting reference
period, the first day of that
period, and ending
with the date of the distribution. (7) The
company must not include any uncalled share capital as an asset in any
accounts relevant for purposes of this
section.’.—[Margaret
Hodge.] Brought up, and added to the Bill.
New
Clause
285Meaning
of “investment
company” ‘(1) In this
Part an “investment company” means a public company
that— (a) has given
notice (which has not been revoked) to the registrar of its intention
to carry on business as an investment company,
and (b) since the date of that
notice has complied with the following
requirements. (2) Those
requirements are— (a)
that the business of the company consists of investing its funds mainly
in securities, with the aim of spreading investment risk and giving
members of the company the benefit of the results of the management of
its funds; (b) that the
condition in section (Investment company: condition as to holdings in
other companies) is met as regards holdings in other
companies; (c) that
distribution of the company’s capital profits is prohibited by
its articles of
association; (d) that the
company has not retained, otherwise than in compliance with this Part,
in respect of any accounting reference period more than 15% of the
income it derives from
securities. (3) Subsection
(2)(c) does not require an investment company to be prohibited by its
articles from redeeming or purchasing its own shares in accordance with
Chapter (Redeemable shares) or (Purchase of own shares) of Part
(Acquisition by limited company of its own shares) out of its capital
profits.) (4) Notice to the
registrar under this section may be revoked at any time by the company
on giving notice to the registrar that it no longer wishes to be an
investment company within the meaning of this
section. (5) On giving such a
notice, the company ceases to be such a
company.’.—[Margaret
Hodge.] Brought up, and added to the Bill.
New Clause
286Investment
company: condition as to holdings in other
companies ‘(1) The condition
referred to in section (Meaning of “investment
company”)(2)(b) (requirements to be complied with by investment
company) is that none of the company’s holdings in companies
(other than those that are for the time being investment companies)
represents more than 15% by value of the company’s
investments. (2) For this
purpose— (a) holdings in
companies that— (i) are
members of a group (whether or not including the investing company),
and (ii) are not for the time
being investment
companies, are
treated as holdings in a single company;
and (b) where the investing company is a
member of a group, money owed to it by another member of the
group— (i) is treated as
a security of the latter held by the investing company,
and (ii) is accordingly treated
as, or as part of, the holding of the investing company in the company
owing the money. (3) The
condition does not
apply— (a) to a holding
in a company acquired before 6th April 1965 that on that date
represented not more than 25% by value of the investing
company’s investments,
or (b) to a holding in a
company that, when it was acquired, represented not more than 15% of
the investing company’s
investments, so long as no
addition is made to the
holding. (4) For the purposes
of subsection (3)— (a)
“holding” means the shares or securities (whether or one
class or more than one class) held in any one
company; (b) an addition is
made to a holding whenever the investing company acquires shares or
securities of that one company, otherwise than by being allotted shares
or securities without becoming liable to give any consideration, and if
an addition is made to a holding that holding is acquired when the
addition or latest addition is made to the holding;
and (c) where in connection
with a scheme of reconstruction a company issues shares or securities
to persons holding shares or securities in a second company in respect
of and in proportion to (or as nearly as may be in proportion to) their
holdings in the second company, without those persons becoming liable
to give any consideration, a holding of the shares or securities in the
second company and a corresponding holding of the shares or securities
so issued shall be regarded as the same
holding. (5) In this
section— “company”
and “shares” shall be construed in accordance with
sections 99 and 288 of the Taxation of Chargeable Gains Act 1992 (c.
12); “group”
means a company and all companies that are its 51% subsidiaries (within
the meaning of section 838 of the Income and Corporation Taxes Act 1988
(c.1);
and “scheme of
reconstruction” has the same meaning as in section 136 of the
Taxation of Chargeable Gains Act 1992
(c.12).’.—[Margaret
Hodge.] Brought up, and added to the Bill.
New Clause
287Power
to extend provisions relating to investment
companies ‘(1) The Secretary
of State may by regulations extend the provisions of sections
(Distributions by investment companies out of accumulated revenue
profits) to (Investment company: condition as to holdings in other
companies) (distributions by investment companies out of accumulated
profits), with or without modifications, to other companies whose
principal business consists of investing their funds in securities,
land or other assets with the aim of spreading investment risk and
giving their members the benefit of the results of the management of
the assets. (2) Regulations
under this section are subject to affirmative resolution
procedure.’.—[Margaret
Hodge.] Brought up, and added to the Bill.
New
Clause
288Justification
of distribution by reference to relevant
accounts ‘(1) Whether a
distribution may be made by a company without contravening this Part,
and the amount of a distribution that may be so made, is determined by
reference to the following items as stated in the relevant
accounts— (a) profits,
losses, assets and
liabilities; (b) provisions of
the following kinds— (i)
where the relevant accounts are Companies Act accounts, provisions of a
kind specified for the purposes of this subsection by regulations under
section 378; (ii) where the
relevant accounts are IAS accounts, provisions of any
kind; (c) share capital and
reserves (including undistributable
reserves). (2) The relevant
accounts are the company’s last annual accounts, except
that— (a) where the
distribution would be found to contravene this Part by reference to the
company’s last annual accounts, it may be justified by reference
to interim accounts, and (b)
where the distribution is proposed to be declared during the
company’s first accounting reference period, or before any
accounts have been circulated in respect of that period, it may be
justified by reference to initial
accounts. (3) The requirements
of— section
(Requirements where last annual accounts used) (as regards the
company’s last annual
accounts), section
(Requirements where interim accounts used) (as regards interim
accounts), and section
(Requirements where initial accounts used) (as regards initial
accounts), must be complied
with, as and where
applicable. (4) If any
applicable requirement of those sections is not complied with, the
accounts may not be relied on for the purposes of this Part and the
distribution is accordingly treated as contravening this
Part.’.—[Margaret
Hodge.] Brought up, and added to the Bill.
New Clause
289Requirements
where last annual accounts
used ‘(1) The
company’s last annual accounts means the company’s
individual accounts— (a)
that were last circulated to members in accordance with section 405
(duty to circulate copies of annual accounts and reports),
or (b) if in accordance with
section 408 the company provided a summary financial statement instead,
that formed the basis of that
statement. (2) The accounts
must have been properly prepared in accordance with this Act, or have
been so prepared subject only to matters that are not material for
determining (by reference to the items mentioned in section
(Justification of distribution by reference to relevant accounts)(1))
whether the distribution would contravene this
Part. (3) Unless the company is
exempt from audit and the directors take advantage of that exemption,
the auditor must have made his report on the
accounts. (4) If that report
was qualified— (a) the
auditor must have stated in writing (either at the time of their report
or subsequently) whether in his opinion the matters in respect of which
his report is qualified are material for determining whether a
distribution would contravene this Part,
and (b) a copy of that
statement must— (i) in
the case of a private company, have been circulated to members in
accordance with section 405,
or (ii) in the case of a public
company have been laid before the company in general
meeting. (5) An
auditor’s statement is sufficient for the purposes of a
distribution if it relates to distributions of a description that
includes the distribution in question, even if at the time of the
statement it had not been proposed.’.—[Margaret
Hodge.] Brought up, and added to the Bill.
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