Clause 124 - Submission to regulator

279.     This clause replaces paragraphs 16(5) to 16(8) of Schedule 1 to the 1996 Act. It requires all non-profit registered providers to send a copy of their accounts to the regulator within six months of the end of the year to which they relate. These accounts must be accompanied by an auditor's report, or, if an enactment requires a report other than an auditor's report, a report of the kind that is so specified. The report must specify whether the accounts comply with any relevant directions under clause 123.

Clause 125 - Non-audited industrial and provident society

280.     This clause replaces paragraph 17 of Schedule 1 to the 1996 Act. Subsection (1) provides that this clause applies only to industrial and provident societies. Subsection (2) provides that an accountant's report is required even where the society's turnover does not exceed a sum specified in the Friendly and Industrial and Provident Societies Act 1968, that would otherwise allow the society to disapply the requirement for an accountant's report.

281.     Subsections (3) and (4) give the regulator a power to require the society to appoint a qualified auditor to audit their accounts, and to send to the regulator a copy of the auditor's report, when the society has disapplied the requirement to appoint a qualified auditor under section 4A of the Friendly and Industrial and Provident Societies Act 1968. The regulator may only use this power in the year following the year to which the accounts relate.

282.     Subsection (5) defines "qualified auditor" and "year of account" for the purposes of this clause.

Clause 126 - Charity

283.     This clause replaces part of paragraph 18 of Schedule 1 to the 1996 Act

284.     Subsection (1) specifies that this clause relates to non-profit registered providers that are registered charities. Subsection (2) requires such providers to keep accounting records and maintain systems of control in relation to housing activities.

285.     Subsection (3) requires such providers to prepare a revenue account giving a true and fair view of its housing activities and a balance sheet giving a true and fair view of its activities as a whole for each accounting period. Subsection (4) requires that the reports specified in subsection (3) must be signed by at least two of the provider's directors or trustees.

286.     Subsection (5) defines "period of account" for the purposes of this clause.

287.     Subsection (6) specifies that this clause does not override other provisions relating to charity accounts in Charities Act 1993.

Clause 127 - Charity: audit

288.     This clause replaces part of paragraph 18 of Schedule 1 to the 1996 Act (as amended by paragraph 20(4) of Schedule 11 to the Housing Act 2004).

289.     The purpose of this clause is to define whether a charity must appoint an auditor to produce a report under clause 128 or a reporting accountant to produce a report under clause 129 on the accounts required under subsection (3) of clause 126.

290.     Subsection (2) specifies that if either of the conditions specified in subsection (4) or subsection (5) are met, then the requirements for an auditor's report under clause 128 apply. Otherwise, the requirements for an accountant's report under clause 129 apply.

291.     Subsection (4) is the first condition which is that the charity's gross income in relation to housing activities for a period exceeds the amount specified in section 43(1)(a) of the Charities Act 1993.

292.     Subsection (5) is the second condition which is that the charity's gross income in relation to housing activities for a period is greater than the amount specified in section 43(1) of the Charities Act 1993, and that, at the end of that period, the aggregate value of assets (before deduction of liabilities) that relate to housing is greater than the sum specified in section 43(1)(b) of the Charities Act 1993.

293.     Subsections (6) and (7) define "gross income" and "qualified person" for the purposes of this clause.

Clause 128 - Charity: auditor's report

294.     This clause replaces part of paragraph 18 of schedule 1 to the 1996 Act.

295.     Where an auditor has been appointed under either clause 127 or 130, the auditor's report on the charity's accounts must meet the requirements of this clause.

296.     Subsection (2) requires that the report must state whether the revenue account gives a true and fair view of the charity's income and expenditure in relation to its housing activities, and whether the balance sheet also gives a true and fair view of the charity's state of affairs at the end of the period to which it relates.

297.     Subsection (3) requires the report to give the auditor's name and for it to be signed.

298.     Subsection (4) specifies that the auditor will carry out such investigations as are necessary to reach an opinion on whether the charity has complied with clause 126 (2), and whether the accounts are consistent with the accounting records that the charity is required to keep.

299.     Subsection (5) requires the auditor to state in the auditor's report if the opinion arising from investigations under subsection (4) is that the requirements specified there have not been complied with.

300.     Subsection (6) requires that where the auditor has not obtained all of the information or explanations that the auditor thinks necessary for the purposes of the audit, this must be stated in the auditor's report.

Clause 129 - Charity: accountant's report

301.     This clause replaces paragraph 18A of Schedule 1 to the 1996 Act.

302.     The clause specifies the requirements for an accountant's report on the charity's accounts as required by clause 126(3).

303.     Subsection (2) specifies that the report must say whether the accounts are consistent with the accounting records of the charity. Subsection (3) specifies that the report must say whether, on the basis of the accounting records, the accounts comply with the requirements of the Charities Act 1993 and that the basis on which an accountant's report rather than an auditor's report is permitted, as set out in clause 127, has been correctly established.

304.     Subsection (4) requires the report to give the reporting accountant's name and for it to be signed.

305.     Subsection (5) requires that where the reporting accountant has not obtained all of the information or explanations that the reporting accountant thinks necessary for the purposes of the report, this must be stated in the report.

Clause 130 - Charity: extraordinary audit

306.     Where under clause 127(3) the charity is required to appoint a reporting accountant, this clause provides that the regulator has the power to require the charity also to appoint a qualified auditor to audit the accounts, and to send to the regulator a copy of the auditor's report. The regulator may only use this power in the year following the year to which the accounts relate.

307.     Subsection (4) defines "qualified auditor" and "year of account" for the purposes of this clause.

Clause 131 - Charity: auditor's powers

308.     This clause requires that a charity must give a person appointed to prepare a report on the charity's accounts under clause 126, whether they are an auditor or a reporting accountant, access to documents that relate to the charity's social housing activities, and must provide to that person such information or explanation as they require.

Clause 132 - Offences

309.     This clause replaces certain subsections of paragraph 19 of Schedule 1 to the 1996 Act.

310.     Subsection (1) specifies that the following are offences committed by a registered provider if it has no reasonable excuse:

• failing to comply with a regulator's direction under clause 123

• failing to submit accounts in accordance with clause 124

• failing to comply with provisions of clause 125 which relates to the disapplication of audit requirements for industrial and provident societies, and the regulator's powers where there has been such disapplication

• failing to comply with requirements on charities in subsections (2) and (3) of clause 126 to maintain proper accounting records and systems of control, and to prepare a report on accounts

• failing to comply with the provisions of clause 127 in respect of the appointment of qualified persons to audit or report on the accounts of charities.

• failing to either appoint a qualified auditor to audit and prepare a report on accounts or to provide a copy of that report to the regulator by the specified date as required by clause 130.

311.     Subsection (4) specifies that where one of the offences in subsection (1) is committed by a registered provider, then every officer of the registered provider is guilty of that offence. Subsection (5) specifies that it is a defence for an officer to show that he or she has done everything that could be reasonably expected to ensure compliance by the registered provider.

312.     Subsection (6) provides that a person guilty of an offence in subsection (1) is liable on summary conviction to a fine not exceeding level 5 (currently £5000) on the standard scale.

313.     Subsection (7) provides that proceedings for the offences in subsection (1) may only be brought by, or with the consent of, either the regulator or the Director of Public Prosecutions.

Clause 133 - High Court

314.     This clause replaces subparagraph (5) of paragraph 19 of Schedule 1 to the 1996 Act.

315.     Where a registered provider has failed to do one of the things listed in clause 132(1), the regulator may apply to the High Court for an order for the purpose of remedying the failure. A High Court order for this purpose may make provision for costs.

Clause 134 - Disclosure

316.     This clause replaces paragraph 19A of Schedule the 1996 Act, concerning the disclosure of information by auditors and reporting accountants.

317.     Subsection (1) specifies that this clause applies to information that a person has received while acting either as an auditor or a reporting accountant of a non-profit registered provider.

318.     Subsection (2) permits persons in receipt of information as described in subsection (1) to disclose that information to the regulator for a purpose connected with the regulator's functions even if there is otherwise a duty of confidentiality on those persons, and regardless of whether or not the regulator has requested the information.

319.     Subsection (3) clarifies that disclosure of information in this way includes expression of an opinion on that information.

320.     Subsection (4) defines "reporting accountant" for the purposes of this clause.

Insolvency etc.

321.     These clauses replace the provisions in sections 39 to 45 of the 1996 Act.

Clause 135 - Non-profit providers only

322.     This specifies that clauses 135 to 149 apply only to non-profit registered providers.

Clause 136 - Preparatory steps: notice

323.     This clause provides that specified steps are effective only if the person specified in respect of those steps has given the regulator written notice. The steps and the persons who must give notice in respect of those steps are set out in the table in this clause. This clause replaces the provisions of sections 40(1) to 40(5) of the 1996 Act.

324.     The steps and the relevant persons who must give notice are as follows.

325.     Any step to enforce security over land held by a registered provider must be notified by the person taking that step. The description of this step provides that steps of this kind are prescribed for the purposes of this clause by the Secretary of State by order. This provision for order making replaces section 39(3) of the 1996 Act.

326.     The presenting of a petition for the winding up of a registered provider that is either a registered company or an industrial and provident society must be notified by the petitioner.

327.     The passing of a resolution for the winding up of a registered provider that is a registered company or an industrial and provident society must be notified by the registered provider. The exception to this is the passing of a resolution for winding up that requires the regulator's consent under clauses 152 or 154. This exception replaces section 40(5) of the 1996 Act.

328.     An application for an administration order in respect of a registered provider that is a registered company under paragraph 12 of Schedule B1 to the Insolvency Act 1986 must be notified by the applicant for the administration order.

329.     The appointment of an administrator in respect of a registered provider that is a registered company, under paragraph 14 (i.e. the holder of a qualifying floating charge) or paragraph 22 (i.e. the company itself or its directors) of Schedule B1 to the Insolvency Act 1986 must be notified by the person making the appointment.

330.     The filing with the court of a copy of a notice of intention to appoint an administrator in respect of a registered provider that is a registered company under paragraph 14 or paragraph 22 of Schedule B1 to the Insolvency Act 1986 must be notified by the person filing the notice.

Clause 137 - Moratorium

331.      Subsection (1) of this clause and clause 138 provide that a moratorium on the disposal of land by a registered provider begins when one of the specified steps is taken in respect of that registered provider. This replaces the provision of section 42(1) of the 1996 Act.

332.     The steps and the person taking them are set out in a table in this clause. This table replaces the provisions of section 42(2) to 42(4) of the 1996 Act.

333.     Subsection (2) requires that where a step specified in the table in this clause is taken in respect of a registered provider, the person specified in the table for that kind of step must give the regulator written notice that they have taken that step as soon as reasonably practicable. This replaces the provision of section 41(1) of the 1996 Act.

334.     Subsection (3) provides that the step taken is not itself invalidated if the notice required in subsection (2) is not given to the regulator but that the end of the moratorium period specified in clause 138(2) depends upon the notice being given to the regulator. This subsection replaces the provision of section 41(5) of the 1996 Act.

335.     The steps and the relevant persons who must give notice are as follows.

336.     Any step to enforce security over land held by a registered provider must be notified by the person taking that step. The description of this step provides that steps of this kind are prescribed for the purposes of this clause by the Secretary of State by order. This provision for order making replaces section 39(3) of the 1996 Act.

337.     The making of an order for the winding up of a registered provider that is a registered company or an industrial and provident society must be notified by the petitioner.

338.     The passing of a resolution for the winding up of a registered provider that is a registered company or an industrial and provident society must be notified by the registered provider.

339.     The making of an administration order in respect of a registered provider that is a registered company in accordance with paragraph 13 of Schedule B1 to the Insolvency Act 1986 must be notified by the person who applied for the administration order.

340.     The appointment of an administrator in respect of a registered provider that is a registered company, under paragraph 14 (i.e. the holder of a qualifying floating charge) or paragraph 22 (i.e. the company itself or its directors) of Schedule B1 to the Insolvency Act 1986 must be notified by the person making the appointment.

Clause 138 - Duration of moratorium

341.     This clause replaces the provisions of sections 43(1) to 43(6) of the 1996 Act.

342.     Subsection (1) specifies that the moratorium begins when one of the steps specified in clause 137 is taken.

343.     Subsection (2) specifies that the moratorium ends 28 days after the regulator has received notice under clause 137(2) unless the moratorium is extended as provided for in subsection (3) of this clause or cancelled as provided for in subsection (5) of this clause.

344.     Subsection (3) allows the regulator to extend the moratorium for a specified period provided that all of the registered provider's secured creditors (as defined in clause 238) have consented to the extension. There is no limit to the number of extensions that may occur provided the secured creditors consent to those extensions.

345.     Subsection (4) requires that, when the moratorium is extended, the regulator must notify the registered provider, and any liquidator, administrator, administrative receiver or receiver appointed in respect of the registered provider or its land.

346.     Subsection (5) allows the regulator to cancel the moratorium if it is satisfied that it is unnecessary to make proposals under clause 142.

347.     Subsection (6) requires the regulator to consult the person who took the step specified in clause 137 that triggered the moratorium before cancelling the moratorium as provided for in subsection (5).

348.     Subsection (7) requires the regulator to give notice to the registered provider and its secured creditors when the moratorium ends and to provide an explanation of the effects of clause 139. The latter requirement does not apply where the regulator has cancelled the moratorium under subsection (5).

349.     Subsection (8) specifies that any further steps specified in the table in clause 137 do not have the effect of either starting a new moratorium or of altering the existing moratorium's duration as defined in this clause.

Clause 139 - Further moratorium

350.     This clause replaces the provisions of sections 43(7) to 43(8) of the 1996 Act.

351.     Subsection (1) of the clause defines when the provisions of this clause apply. It applies if a moratorium ends other than by cancellation by the regulator under clause 138(5), and a further step specified in clause 137 is taken in relation to the same registered provider within 3 years from the end of that moratorium.

352.     Subsection (2) provides that a further step of this kind does not automatically trigger a further moratorium.

353.     Subsection (3) allows the regulator to impose a further moratorium for a specified period but only if all of the registered providers' secured creditors consent to that further moratorium.

354.     Subsection (4) requires the regulator to notify the registered provider, and any liquidator, administrator, administrative receiver or receiver appointed in respect of the registered provider or its land if it imposes a further moratorium under subsection (3).

355.     Subsection (5) provides that all of the provisions in clauses 135 to 149 apply to a further moratorium imposed by the regulator under this clause as they would to a first moratorium, except for clause 138(2).

Clause 140 - Effect of moratorium

356.     This clause together with clause 141 replaces the provisions of section 42(2) to 42(6) of the 1996 Act.

357.     Subsection (1) provides that the registered provider's land may not be disposed of without the regulator's prior written consent during a moratorium.

358.     Subsection (2) provides that clause 141 sets out the exceptions to subsection (1), and are therefore disposals which do not require the regulator's prior written consent during a moratorium.

359.     Subsection (3) provides that the regulator's consent may be given before the moratorium begins and may be subject to conditions.

360.     Subsection (4) provides that the requirement for the regulator's prior written consent under this clause does not prevent a liquidator from disclaiming land as onerous property during a moratorium.

361.     Subsection (5) includes within the definition of "land" in this clause any present or future interest in rent or other receipts arising from land.

Clause 141 - Exempted disposals

362.     Subsection (1) provides that the list of exceptions set out in this clause do not require the regulator's prior written consent under clause 140. This replaces the provision of section 42(3) of the 1996 Act.

363.     Subsections (2) to (8) set out the seven exceptions as follows:

• a letting under an assured tenancy or an assured agricultural occupancy

• a letting under what would be an assured tenancy or an assured agricultural occupancy but for the provisions of paragraphs 4 to 8 and 12(1)(h) of Schedule 1 to the Housing Act 1988 (this schedule sets out tenancies which cannot be assured tenancies)

• a letting under a secure tenancy

• a letting under what would be a secure tenancy but for any of paragraphs 2-12 of Schedule 1 to the Housing Act 1985 (this schedule sets out tenancies which are not secure tenancies)

• a disposal to which section 81 or 133 of the Housing Act 1988 applies (which are disposals that require the Secretary of State's consent)

• a disposal under Part V of the Housing Act 1985 (which relates to the right to buy)

• a disposal under the right conferred by section 16 of the 1996 Act (which relates to a tenant's right to acquire social housing).

364.     This list of exceptions replicates the effect of section 42(3) of the 1996 Act.

Clause 142 - Proposals

365.     Subsection (1) gives the regulator the power to make proposals about the future ownership and management of the registered provider's property during a moratorium with the objective of ensuring that the property will be properly managed by a registered provider. This replaces the provision of section 44(1) of the 1996 Act.

366.     Subsection (2) specifies that, when making proposals, the regulator must:

• have regard to the interests of all of the registered providers' creditors (replaces section 44(2)(b) of the 1996 Act),

• as far as reasonably possible, avoid making the position of unsecured creditors worse (replaces section 44(5) of the 1996 Act).

367.     Subsection (3) allows the proposals to include the appointment of a manager as described in clause 145 to implement some or all of the regulator's proposals.

368.     Subsection (4) specifies things that the regulator's proposals must not include. This replaces section 44(4) of the 1996 Act. The things that may not be included in proposals are:

• a preferential debt being paid other than in priority to a non-preferential debt,

• any preferential creditor being paid a lesser proportion of their preferential debt than any other preferential creditor.

369.     Subsection (5) provides that where the registered provider is a charity, the regulator's proposals may not require the charity to act outside the terms of its trusts, and that the proposals may provide for the disposal of the registered provider's accommodation only to another charity whose objects are similar to those of the registered provider. This clause replaces the provisions of section 44(6) of the 1996 Act.