Joint Committee on Statutory Instruments Twentieth Report


Memorandum by the Department of Trade and Industry


1.The Committee considered the above instrument at its meeting on 13 January 1998 and has requested a memorandum on the following points.

(1)  Article 2 defines "business" as meaning any undertaking (or part) which is ­

    (a)  carried on as a going concern "for gain or reward"; or

    (b)  carried on as a going concern in the course of which goods or services are "supplied otherwise than free of charge".

Explain what sort of case is covered by (b) which is not covered by (a)?

(2)  Article 2 includes in the definition of "unincorporated business" the assets of a company.  Is the meaning of "business" (as being "carried on") applicable to this definition? If it is not applicable and the definition of "unincorporated business" is only required in the context of article 3(a)(ii) (its purchase and sale), could not the effect of the definition be spelt out in this context?

(3)  Article 3, in describing what is a non­notifiable agreement in the case dealt with by sub­paragraph (b), ie, where the agreement is for the sale and purchase of shares in a company or companies which are members of the same group, prescribes as a condition (iii) that the equity bought and sold is equity in one company or companies which are members of one group. Given the case dealt with by sub­paragraph (b), explain what condition (iii) adds to the description of the case.

2.  In relation to the definition of "business" in Article 2, we consider that paragraph (b) would cover situations where goods and services are supplied otherwise than to make without making a profit. These might not fall within paragraph (a).

3.  A similar definition of "business" was used in the 1989 Restrictive Trade Practices (Sale and Purchase and Share Subscription Agreements) (Goods) Order (SI 1989/1081) and the definition stems originally from section 137(2) 1973 Fair Trading Act. When the Fair Trading Bill was introduced into Parliament the definition of "business" was simply stated to include "any undertaking in the course of which goods and services are supplied otherwise than free of charge".  This definition was expanded by Government amendment to include in addition any undertaking "carried on for gain or reward". It had been suggested that the definition, as introduced, excluded concerns, such as insurance brokers, which provide services without charge and derive their income from commission. The amendment aimed to remove any doubt as to whether such concerns were covered.

4.  In relation to the definition of "unincorporated business", our view is that the definition meaning of "business" as defined in Article 2 is applicable to the use of the word "business" in the definition of "unincorporated business" but is not applicable to the word "business" in the phrase "unincorporated business" itself. In each case the definition applies to the expression in the inverted commas.  The meaning of "unincorporated business" includes assets of a company, and in the case of such transfers the assets need not constitute an undertaking carried on as a going concern. The definition of "unincorporated business" is also applicable to the definition of "acquired enterprise" also in Article 2. The location of these definitions in Article 2 was a drafting choice. The Order has only five Articles and this is not the sole example of a term, which appears in a single substantive Article, being defined in Article 2. The choice was made to locate all definitions in one Article rather than include those relevant to only one Article within the relevant Article. We accept that it would have been possible to define "unincorporated business" and "acquired enterprise" in Article 3, where the phrases are used, as the Committee suggests.

5.  In relation to Article 3(b), the words "a company or companies which are members of the same group" refer back to 3(a)(i). The intention is that in order for a sale and purchase agreement to be non­notifiable one condition is that the agreement must be for the sale of shares in the same company or of companies which are members of the same group. This is to avoid making non­notifiable, for example, agreements which are reciprocal sale and purchase agreements or for shares in a number of unconnected companies. Applying the Interpretation Act 1978, the word "company" in the first line of Article 3(b) could be interpreted as including the plural "companies". Condition (iii) was therefore included to make clear that the shares the subject of the agreement must be in the same "one" company or group.

19th January 1998

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