Company Law Reform Bill [Lords]


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New Clause 290

Requirements where interim accounts used
‘(1) Interim accounts must be accounts that enable a reasonable judgment to be made as to the amounts of the items mentioned in section (Justification of distribution by reference to relevant accounts)(1)
(2) Where interim accounts are prepared for a proposed distribution by a public company, the following requirements apply.
(3) The accounts must have been properly prepared, or have been so prepared subject 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.
(4) “Properly prepared” means prepared in accordance with sections 377 to 379 (requirements for company individual accounts), applying those requirements with such modifications as are necessary because the accounts are prepared otherwise than in respect of an accounting reference period.
(5) The balance sheet comprised in the accounts must have been signed in accordance with section 396.
(6) A copy of the accounts must have been delivered to the registrar of companies.
Any requirement of Part 29 of this Act as to the delivery of a certified translation into English of any document forming part of the accounts must also have been met.’.—[Margaret Hodge.]
Brought up, and added to the Bill.

New Clause 291

Requirements where initial accounts used
‘(1) Initial accounts must be accounts that enable a reasonable judgment to be made as to the amounts of the items mentioned in section (Justification of distribution by reference to relevant accounts)(1).
(2) Where initial accounts are prepared for a proposed distribution by a public company, the following requirements apply.
(3) The accounts must have been properly prepared, or have been so prepared subject 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.
(4) “Properly prepared” means prepared in accordance with sections 377 to 379 (requirements for company individual accounts), applying those requirements with such modifications as are necessary because the accounts are prepared otherwise than in respect of an accounting reference period.
(5) The company’s auditor must have made a report stating whether, in his opinion, the accounts have been properly prepared.
(6) If that report was qualified—
(a) the auditor must have stated in writing (either at the time of his 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.
(7) A copy of the accounts, of the auditor’s report and of any auditor’s statement must have been delivered to the registrar.
Any requirement of Part 29 of this Act as to the delivery of a certified translation into English of any of those documents must also have been met.’.—[Margaret Hodge.]
Brought up, and added to the Bill.

New Clause 292

Successive distributions etc by reference to the same accounts
‘(1) In determining whether a proposed distribution may be made by a company in a case where—
(a) one or more previous distributions have been made in pursuance of a determination made by reference to the same relevant accounts, or
(b) relevant financial assistance has been given, or other relevant payments have been made, since those accounts were prepared,
the provisions of this Part apply as if the amount of the proposed distribution was increased by the amount of the previous distributions, financial assistance and other payments.
(2) The financial assistance and other payments that are relevant for this purpose are—
(a) financial assistance lawfully given by the company out of its distributable profits;
Brought up, and added to the Bill.

New Clause 293

Realised losses and profits and revaluation of fixed assets
‘(1) The following provisions have effect for the purposes of this Part.
(2) The following are treated as realised losses—
(a) in the case of Companies Act accounts, provisions of a kind specified for the purposes of this paragraph by regulations under section 378 (except revaluation provisions);
(b) in the case of IAS accounts, provisions of any kind (except revaluation provisions).
(3) A “revaluation provision” means a provision in respect of a diminution in value of a fixed asset appearing on a revaluation of all the fixed assets of the company, or of all of its fixed assets other than goodwill.
(4) Where—
(a) on the revaluation of a fixed asset, an unrealised profit is shown to have been made, and
(b) on or after the revaluation, a sum is written off or retained for depreciation of that asset over a period,
an amount equal to the amount by which that sum exceeds the sum which would have been so written off or retained for the depreciation of that asset over that period, if that profit had not been made, is treated as a realised profit made over that period.
Brought up, and added to the Bill.

New Clause 294

Determination of profit or loss in respect of asset where records incomplete
In determining for the purposes of this Part whether a company has made a profit or loss in respect of an asset where—
(a) there is no record of the original cost of the asset, or
(b) a record cannot be obtained without unreasonable expense or delay, then,
its cost is taken to be the value ascribed to it in the earliest available record of its value made on or after its acquisition by the company.’.—[Margaret Hodge.]
Brought up, read the First time and Second time, and added to the Bill.

New Clause 295

Realised profits and losses of long term insurance business
‘(1) The provisions of this section have effect for the purposes of this Part as it applies in relation to an authorised insurance company carrying on long term business.
(2) An amount included in the relevant part of the company’s balance sheet that—
(a) represents a surplus in the fund or funds maintained by it in respect of its long term business, and
(b) has not been allocated to policy holders or, as the case may be, carried forward unappropriated in accordance with asset identification rules made under section 142(2) of the Financial Services and Markets Act 2000 (c. 8),
is treated as a realised profit.
(3) For the purposes of subsection (2)—
(a) the relevant part of the balance sheet is that part of the balance sheet that represents accumulated profit or loss;
(b) a surplus in the fund or funds maintained by the company in respect of its long term business means an excess of the assets representing that fund or those funds over the liabilities of the company attributable to its long term business, as shown by an actuarial investigation.
Brought up, and added to the Bill.

New Clause 296

Treatment of development costs
‘(1) Where development costs are shown as an asset in a company’s accounts, any amount shown in respect of those costs is treated—
(a) for the purposes of section (Distributions to be made only out of profits available for the purpose) (distributions to be made out of profits available for the purpose) as a realised loss, and
(b) for the purposes of section (Distributions by investment companies out of accumulated revenue profits) (distributions by investment companies out of accumulated revenue profits) as a realised revenue loss.
This is subject to the following exceptions.
(2) Subsection (1) does not apply to any part of that amount representing an unrealised profit made on revaluation of those costs.
(3) Subsection (1) does not apply if—
(a) there are special circumstances in the company’s case justifying the directors in deciding that the amount there mentioned is not to be treated as required by subsection (1),
(b) it is stated—
(i) in the case of Companies Act accounts, in the note required by regulations under section 378 as to the reasons for showing development costs as an asset, or
(ii) in the case of IAS accounts, in any note to the accounts,
that the amount is not to be so treated, and
(c) the note explains the circumstances relied upon to justify the decision of the directors to that effect.’.—[Margaret Hodge.]
Brought up, and added to the Bill.
 
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Prepared 21 July 2006