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HL Bill 34 54/1

Company Law Reform Bill [HL]

EXPLANATORY NOTES

Explanatory notes to the Bill, prepared by the Department of Trade and Industry, arepublished separately as HL Bill 34—EN.

EUROPEAN CONVENTION ON HUMAN RIGHTS

The Lord Sainsbury of Turville has made the following statement under section19(1)(a) of the Human Rights Act 1998:

In my view the provisions of the Company Law Reform Bill [HL] are compatible withthe Convention rights.

HL Bill 34 54/1


The Bill is divided into two volumes. Volume I contains Clauses 1 to 481.Volume II contains Clauses 482 to 885 and the Schedules to the Bill.

CONTENTS

PART 1

GENERAL INTRODUCTORY PROVISIONS

Companies and Companies Acts1 Companies2 The Companies Acts

Types of company3 Limited and unlimited companies4 Private and public companies5 Companies limited by guarantee and having share capital6 Community interest companies

PART 2

COMPANY FORMATION

General7 Method of forming company8 Memorandum of association

Requirements for registration9 Registration documents

10 Statement of initial shareholdings11 Statement of share capital12 Statement of guarantee13 Statement of proposed officers14 Statement of compliance

Registration and its effect15 Registration16 Issue of certificate of incorporation

Company Law Reform Bill [HL]ii

17 Effect of registration

PART 3

A COMPANY’S CONSTITUTION

CHAPTER 1

INTRODUCTORY

18 A company’s constitution

CHAPTER 2

ARTICLES OF ASSOCIATION

General19 Articles of association20 Power of Secretary of State to prescribe model articles21 Default application of model articles

Alteration of articles22 Alteration of articles23 Entrenched provisions of the articles24 Notice to registrar in case of entrenched provisions25 Notice to registrar of removal of entrenched provisions26 Effect of alteration of articles on company’s members27 Registrar to be sent copy of amended articles28 Registrar’s notice to comply in case of failure with respect to amended articles

Supplementary29 Existing companies: provisions of memorandum treated as provisions of

articles

CHAPTER 3

RESOLUTIONS AND AGREEMENTS AFFECTING A COMPANY’S CONSTITUTION

30 Resolutions and agreements affecting a company’s constitution31 Copies of resolutions or agreements to be forwarded to and recorded by

registrar32 Resolutions and agreements to be embodied in or attached to issued copies of

articles

CHAPTER 4

MISCELLANEOUS AND SUPPLEMENTARY PROVISIONS

Statement of company’s objects33 Statement of company’s objects

Company Law Reform Bill [HL] iii

Other provisions with respect to a company’s constitution34 Constitutional documents to be provided to members35 Effect of company’s constitution36 Notice to registrar where company’s constitution altered by enactment

Supplementary provisions37 Right to participate in profits otherwise than as member void38 Application to single member companies of enactments and rules of law

PART 4

A COMPANY’S CAPACITY AND RELATED MATTERS

Capacity of company and power of directors to bind it39 A company’s capacity40 Power of directors to bind the company41 Constitutional limitations: transactions involving directors or their associates42 Constitutional limitations: companies that are charities

Formalities of doing business under the law of England and Wales or Northern Ireland43 Company contracts44 Execution of documents45 Common seal46 Execution of deeds47 Execution of deeds abroad48 Authentication of documents

Formalities of doing business under the law of Scotland49 Execution of documents by companies

Other matters50 Official seal for use abroad51 Official seal for share certificates etc52 Pre-incorporation contracts, deeds and obligations53 Bills of exchange and promissory notes

PART 5

A COMPANY’S NAME

CHAPTER 1

GENERAL REQUIREMENTS

Prohibited names54 Prohibited names

Company Law Reform Bill [HL]iv

Sensitive words and expressions55 Names suggesting connection with government or public authority56 Other sensitive words or expressions57 Duty to seek comments of government department or other specified body

Permitted characters etc58 Permitted characters etc

CHAPTER 2

INDICATIONS OF COMPANY TYPE OR LEGAL FORM

Required indications for limited companies59 Public limited companies60 Private limited companies61 Exemption from requirement as to use of “limited”62 Continuation of existing exemption: companies limited by shares63 Continuation of existing exemption: companies limited by guarantee64 Exempt company: restriction on alteration of articles65 Power to direct change of name in case of company ceasing to be entitled to

exemption

Inappropriate use of indications of company type or legal form66 Inappropriate use of indications of company type or legal form

CHAPTER 3

SIMILARITY TO OTHER NAMES

Similarity to other name on registrar’s index67 Name not to be the same as another in the index68 Power to direct change of name in case of similarity to existing name69 Direction to change name: supplementary provisions

Similarity to other name in which person has goodwill70 Objection to company’s registered name71 Company names adjudicators72 Procedural rules73 Order requiring name to be changed74 Appeal from adjudicator’s decision

CHAPTER 4

OTHER POWERS OF THE SECRETARY OF STATE

75 Provision of misleading information etc76 Misleading indication of activities

Company Law Reform Bill [HL] v

CHAPTER 5

CHANGE OF NAME

77 Change of name78 Change of name by special resolution79 Change of name by means provided for in company’s articles80 Change of name: registration and issue of new certificate of incorporation81 Change of name: effect

CHAPTER 6

TRADING DISCLOSURES

82 Requirement to disclose company name etc83 Civil consequences of failure to make required disclosure84 Criminal consequences of failure to make required disclosures85 Minor variations in form of name to be left out of account

PART 6

A COMPANY’S REGISTERED OFFICE

General86 A company’s registered office87 Change of address of registered office

Welsh companies88 Welsh companies

PART 7

RE-REGISTRATION AS A MEANS OF ALTERING A COMPANY’S STATUS

Introductory89 Alteration of status by re-registration

Private company becoming public90 Re-registration of private company as public91 Requirements as to share capital92 Requirements as to net assets93 Recent allotment of shares for non-cash consideration94 Application and accompanying documents95 Statement of proposed secretary96 Issue of certificate of incorporation on re-registration

Public company becoming private97 Re-registration of public company as private limited company98 Application to court to cancel resolution

Company Law Reform Bill [HL]vi

99 Notice to registrar of court application or order100 Application and accompanying documents101 Issue of certificate of incorporation on re-registration

Private limited company becoming unlimited102 Re-registration of private limited company as unlimited103 Application and accompanying documents104 Issue of certificate of incorporation on re-registration

Unlimited private company becoming limited105 Re-registration of unlimited company as limited106 Application and accompanying documents107 Issue of certificate of incorporation on re-registration

Public company becoming private and unlimited108 Re-registration of public company as private and unlimited109 Application and accompanying documents110 Issue of certificate of incorporation on re-registration

Supplementary111 Form of statements required

PART 8

MEMBERS OF A COMPANY

CHAPTER 1

THE MEMBERS OF A COMPANY

112 The members of a company

CHAPTER 2

REGISTER OF MEMBERS

General113 Register of members114 Register to be kept available for inspection115 Index of members116 Rights to inspect and request copies117 Information as to state of register and index118 Removal of entries relating to former members

Special cases119 Share warrants120 Single member companies121 Company holding its own shares as treasury shares

Company Law Reform Bill [HL] vii

Supplementary122 Power of court to rectify register123 Trusts not to be entered on register124 Register to be evidence125 Time limit for claims arising from entry in register126 Overseas branch registers

CHAPTER 3

PROHIBITION ON SUBSIDIARY BEING MEMBER OF ITS HOLDING COMPANY

General prohibition127 Prohibition on subsidiary being a member of its holding company128 Shares acquired before prohibition became applicable

Subsidiary acting as personal representative or trustee129 Subsidiary acting as personal representative or trustee130 Interests to be disregarded: residual interest under pension scheme or

employees’ share scheme131 Interests to be disregarded: employer’s rights of recovery under pension

scheme or employees’ share scheme

Subsidiary acting as dealer in securities132 Subsidiary acting as authorised dealer in securities133 Protection of third parties in other cases where subsidiary acting as dealer in

securities

Supplementary134 Application of provisions to companies not limited by shares135 Application of provisions to nominees

PART 9

EXERCISE OF MEMBERS’ RIGHTS

136 Enjoyment or exercise of members’ rights137 Power to require provision to be made in company’s articles

PART 10

COMPANY DIRECTORS

CHAPTER 1

APPOINTMENT AND REMOVAL OF DIRECTORS

Requirement to have directors138 Companies required to have directors139 Companies required to have at least one director who is a natural person

Company Law Reform Bill [HL]viii

140 Direction requiring company to make appointment

Appointment141 Minimum age for appointment as director142 Power to provide for exceptions from minimum age requirement143 Existing under-age directors144 Appointment of directors of public company to be voted on individually145 Validity of acts of directors

Register of directors, etc146 Register of directors147 Particulars of directors to be registered: individuals148 Particulars of directors to be registered: corporate directors and firms149 Particulars of directors to be registered: power to make regulations150 Duty to notify registrar of changes151 Application of provisions to shadow directors

Removal152 Resolution to remove director153 Director's right to protest removal

CHAPTER 2

GENERAL DUTIES OF DIRECTORS

Introductory154 Scope and nature of general duties

The general duties155 Duty to act within powers156 Duty to promote the success of the company157 Duty to exercise independent judgment158 Duty to exercise reasonable care, skill and diligence159 Duty to avoid conflicts of interest160 Duty not to accept benefits from third parties161 Duty to declare interest in proposed transaction or arrangement

Supplementary provisions162 Civil consequences of breach of general duties163 Cases within more than one of the general duties164 Consent, approval or authorisation by members

CHAPTER 3

DECLARATION OF INTEREST IN EXISTING TRANSACTION OR ARRANGEMENT

165 Declaration of interest in existing transaction or arrangement166 Offence of failure to declare interest

Company Law Reform Bill [HL] ix

167 Declaration made by notice in writing168 General notice treated as sufficient declaration169 Declaration of interest in case of company with sole director170 Declaration of interest in existing transaction by shadow director

CHAPTER 4

TRANSACTIONS WITH DIRECTORS REQUIRING APPROVAL OF MEMBERS

Service contracts171 Directors’ long-term service contracts: requirement of members’ approval172 Directors’ long-term service contracts: civil consequences of contravention

Substantial property transactions173 Substantial property transactions: requirement of members’ approval174 Meaning of “substantial”175 Exception for transactions with members or other group companies176 Exception in case of company in winding up or administration177 Exception for transactions on recognised investment exchange178 Property transactions: civil consequences of contravention179 Property transactions: effect of subsequent affirmation

Loans, quasi-loans and credit transactions180 Loans or quasi-loans: requirement of members’ approval181 Meaning of “quasi-loan” and related expressions182 Credit transactions: requirement of members’ approval183 Meaning of “credit transaction”184 Related arrangements: requirement of members’ approval185 Exception for expenditure on company business186 Exception for expenditure on defending proceedings etc187 Exceptions for minor and business transactions188 Exceptions for intra-group transactions189 Exceptions for money-lending companies190 Other relevant transactions or arrangements191 The value of transactions and arrangements192 The person for whom a transaction or arrangement is entered into193 Loans etc: civil consequences of contravention194 Loans etc: effect of subsequent affirmation

Payments for loss of office195 Payments for loss of office196 Amounts taken to be payments for loss of office197 Payment by company: requirement of members’ approval198 Payment in connection with transfer of undertaking etc: requirement of

members’ approval199 Payment in connection with share transfer: requirement of members’

approval200 Exception for payments in discharge of legal obligations etc201 Exception for small payments202 Payments made without approval: civil consequences

Company Law Reform Bill [HL]x

Supplementary203 Transactions requiring members’ approval: application of provisions to

shadow directors204 Transactions requiring members’ approval: nature of resolution required

CHAPTER 5

DIRECTORS’ SERVICE CONTRACTS

205 Directors’ service contracts206 Copy of contract or memorandum of terms to be available for inspection207 Right of member to inspect and request copy208 Directors’ service contracts: application of provisions to shadow directors

CHAPTER 6

CONTRACTS WITH SOLE MEMBERS WHO ARE DIRECTORS

209 Contract with sole member who is also a director

CHAPTER 7

DIRECTORS’ LIABILITIES

Provision protecting directors from liability210 Provisions protecting directors from liability211 Provision of insurance212 Qualifying third party indemnity provision213 Qualifying third party indemnity provision to be disclosed in directors’

report214 Copy of qualifying third party indemnity provision to be available for

inspection215 Right of member to inspect and request copy

Ratification of acts giving rise to liability216 Ratification of acts of directors

CHAPTER 8

DIRECTORS’ RESIDENTIAL ADDRESSES: NON-DISCLOSURE CERTIFICATE

217 Issue of non-disclosure certificate218 Effect of non-disclosure certificate: the company219 Effect of non-disclosure certificate: the registrar220 Permitted use or disclosure by the registrar221 Disclosure under court order222 Non-disclosure certificate: change of address223 Revocation of non-disclosure certificate224 Effect of revocation225 Lapse of non-disclosure certificate

Company Law Reform Bill [HL] xi

CHAPTER 9

SUPPLEMENTARY PROVISIONS

Provision for employees on cessation or transfer of business226 Power to make provision for employees on cessation or transfer of business

Records of meetings of directors227 Minutes of directors’ meetings228 Minutes as evidence

Meaning of "director" and "shadow director"229 “Director”230 “Shadow director”

Other definitions231 Persons connected with a director232 Members of a director’s family233 Director “connected with” a body corporate234 Director “controlling” a body corporate235 Associated bodies corporate236 References to company’s constitution

General237 Power to increase financial limits238 Transactions under foreign law

PART 11

DERIVATIVE CLAIMS AND ACTIONS BY MEMBERS

CHAPTER 1

DERIVATIVE CLAIMS IN ENGLAND AND WALES OR NORTHERN IRELAND

239 Derivative claims240 Application for permission to continue derivative claim241 Application for permission to continue claim as a derivative claim242 Whether permission to be given243 Application for permission to continue derivative claim brought by another

member

CHAPTER 2

DERIVATIVE ACTIONS IN SCOTLAND

244 Derivative actions245 Requirement for leave and notice246 Granting of leave

Company Law Reform Bill [HL]xii

PART 12

COMPANY SECRETARIES

General247 Private company not required to have secretary248 Public company required to have secretary249 Direction requiring public company to appoint secretary

Provisions applying to secretaries of public companies250 Qualifications of secretaries of public companies251 Discharge of functions where office vacant or secretary unable to act252 Duty to keep register of secretaries253 Duty to notify registrar of changes

Supplementary254 Particulars of secretaries to be registered: individuals255 Particulars of secretaries to be registered: corporate secretaries and firms256 Particulars of secretaries to be registered: power to make regulations257 Acts done by person in dual capacity

PART 13

RESOLUTIONS AND MEETINGS

CHAPTER 1

GENERAL PROVISIONS ABOUT RESOLUTIONS

258 Resolutions259 Ordinary resolutions260 Special resolutions261 Votes: general rules262 Votes: specific requirements263 Votes of joint holders of shares264 Effect of provision in company’s articles as to admissibility of votes

CHAPTER 2

WRITTEN RESOLUTIONS

General provisions about written resolutions265 Written resolutions of private companies266 Eligible members

Circulation of written resolutions267 Circulation date268 Circulation of written resolutions proposed by directors269 Members’ power to require circulation of written resolution

Company Law Reform Bill [HL] xiii

270 Circulation of written resolution proposed by members271 Application not to circulate members’ statement

Agreeing to written resolutions272 Procedure for signifying agreement to written resolution273 Period for agreeing to written resolution

Supplementary274 Sending documents relating to written resolutions by electronic means275 Publication of written resolution on website276 Relationship between this Chapter and provisions of company’s articles

CHAPTER 3

RESOLUTIONS AT MEETINGS

General provisions about resolutions at meetings277 Resolutions at general meetings

Calling meetings278 Directors’ power to call general meetings279 Members’ power to require directors to call general meeting280 Directors’ duty to call meetings required by members281 Power of members to call meeting at company’s expense282 Power of court to order meeting

Notice of meetings283 Notice required of general meeting284 Manner in which notice to be given285 Publication of notice of meeting on website286 Persons entitled to receive notice of meetings287 Contents of notices of meetings288 Resolution requiring special notice289 Accidental failure to give notice of resolution or meeting

Members’ statements290 Members’ power to require circulation of statements291 Company’s duty to circulate members’ statement292 Application not to circulate members’ statement

Procedure at meetings293 Quorum at meetings294 Chairman of meeting295 Declaration by chairman on a show of hands296 Right to demand a poll297 Voting on a poll298 Representation of corporations at meetings

Company Law Reform Bill [HL]xiv

Proxies299 Rights to appoint proxies300 Notice of meeting to contain statement of rights301 Company-sponsored invitations to appoint proxies302 Notice required of appointment of proxy etc.303 Chairing meetings304 Right of proxy to demand a poll305 Notice required of termination of proxy’s authority306 Saving for more extensive rights conferred by articles

Adjourned meetings307 Resolution passed at adjourned meeting

Electronic communications308 Sending documents relating to meetings etc. in electronic form

Application to class meetings309 Application to class meetings310 Application to class meetings: companies without a share capital

CHAPTER 4

PUBLIC COMPANIES: ADDITIONAL REQUIREMENTS FOR AGMS

311 Public companies: annual general meeting312 Public companies: notice of AGM313 Public companies: members’ power to require circulation of resolutions for

AGMs314 Public companies: company’s duty to circulate members’ resolutions for

AGMs

CHAPTER 5

ADDITIONAL REQUIREMENTS FOR QUOTED COMPANIES

Website publication of poll results315 Results of poll to be made available on website

Independent report on poll316 Members’ power to require independent report on poll317 Appointment of independent assessor318 Independence requirement319 Meaning of “associate”320 Effect of appointment of a partnership321 The independent assessor’s report322 Rights of independent assessor: right to attend meeting etc323 Rights of independent assessor: right to information324 Offences relating to provision of information325 Information to be made available on website

Company Law Reform Bill [HL] xv

Supplementary326 Application of provisions to class meetings327 Requirements as to website availability328 Power to limit or extend the types of company to which provisions of this

Chapter apply

CHAPTER 6

RECORDS OF RESOLUTIONS AND MEETINGS

329 Records of resolutions and meetings etc330 Records as evidence of resolutions etc331 Records of decisions by sole member332 Inspection of records of resolutions and meetings333 Records of resolutions and meetings of class of members

CHAPTER 7


334 Meaning of “quoted company”

PART 14

CONTROL OF POLITICAL DONATIONS AND EXPENDITURE

Introductory335 Introductory

Donations and expenditure to which this Part applies336 Political parties, organisations etc to which this Part applies337 Meaning of “political donation”338 Meaning of “political expenditure”

Authorisation required for donations or expenditure339 Authorisation required for donations or expenditure340 Form of authorising resolution341 Majority required for authorising resolution342 Period for which resolution has effect

Remedies in case of unauthorised donations or expenditure343 Liability of directors in case of unauthorised donation or expenditure344 Enforcement of directors’ liabilities by shareholder action345 Costs of shareholder action346 Information for purposes of shareholder action

Exemptions347 Trade unions348 Subscription for membership of trade association

Company Law Reform Bill [HL]xvi

349 All-party parliamentary groups350 Political expenditure exempted by order351 Donations not amounting to more than £5,000 in any twelve month period

Supplementary provisions352 Minor definitions

PART 15

ACCOUNTS AND REPORTS

CHAPTER 1

INTRODUCTION

General353 Scheme of this Part

Companies subject to the small companies regime354 Companies subject to the small companies regime355 Companies qualifying as small: general356 Companies qualifying as small: parent companies357 Companies excluded from the small companies regime

Quoted and unquoted companies358 Quoted and unquoted companies

CHAPTER 2

ACCOUNTING RECORDS

359 Duty to keep accounting records360 Duty to keep accounting records: offence361 Where and for how long records to be kept362 Where and for how long records to be kept: offences

CHAPTER 3

A COMPANY’S FINANCIAL YEAR

363 A company’s financial year364 Accounting reference periods and accounting reference date365 Alteration of accounting reference date

Company Law Reform Bill [HL] xvii

CHAPTER 4

ANNUAL ACCOUNTS

General366 Accounts to give true and fair view

Individual accounts367 Duty to prepare individual accounts368 Individual accounts: applicable accounting framework369 Companies Act individual accounts370 IAS individual accounts

Group accounts: small companies371 Option to prepare group accounts

Group accounts: other companies372 Duty to prepare group accounts373 Exemption for company included in EEA group accounts of larger group374 Exemption for company included in non-EEA group accounts of larger group375 Exemption if no subsidiary undertakings need be included in the

consolidation

Group accounts: general376 Group accounts: applicable accounting framework377 Companies Act group accounts378 Companies Act group accounts: subsidiary undertakings included in the

consolidation379 IAS group accounts380 Consistency of financial reporting within group381 Individual profit and loss account where group accounts prepared

Information to be given in notes to the accounts382 Information about related undertakings383 Information about related undertakings: alternative compliance384 Information about employee numbers and costs385 Information about directors’ benefits: remuneration386 Information about directors’ benefits: advances, credit and guarantees

Approval and signing of accounts387 Approval and signing of accounts

Company Law Reform Bill [HL]xviii

CHAPTER 5

DIRECTORS’ REPORT

Directors’ report388 Duty to prepare directors’ report389 Contents of directors’ report: general390 Contents of directors’ report: business review391 Contents of directors’ report: statement as to disclosure to auditors392 Approval and signing of directors’ report

CHAPTER 6

QUOTED COMPANIES: OPERATING AND FINANCIAL REVIEW

393 Duty to prepare operating and financial review394 Objective and contents of operating and financial review395 Approval and signing of operating and financial review

CHAPTER 7

QUOTED COMPANIES: DIRECTORS’ REMUNERATION REPORT

396 Duty to prepare directors’ remuneration report397 Contents of directors’ remuneration report398 Approval and signing of directors’ remuneration report

CHAPTER 8

PUBLICATION OF ACCOUNTS AND REPORTS

Duty to circulate copies of accounts and reports399 Duty to circulate copies of annual accounts and reports400 Time allowed for sending out copies of accounts and reports401 Default in sending out copies of accounts and reports: offences

Option to provide summary financial statement402 Option to provide summary financial statement403 Form and contents of summary financial statement: unquoted companies404 Form and contents of summary financial statement: quoted companies405 Summary financial statements: offences

Quoted companies: requirements as to website publication406 Quoted companies: annual accounts and reports to be made available on

website407 Quoted companies: preliminary statement of results to be made available on

website408 Requirements as to website availability

Company Law Reform Bill [HL] xix

Right of member or debenture holder to demand copies of accounts and reports409 Right of member or debenture holder to copies of accounts and reports:

unquoted companies410 Right of member or debenture holder to copies of accounts and reports:

quoted companies

Requirements in connection with publication of accounts and reports411 Name of signatory to be stated in published copies of accounts and reports412 Requirements in connection with publication of statutory accounts413 Requirements in connection with publication of non-statutory accounts414 Meaning of “publication” in relation to accounts and reports

CHAPTER 9

PUBLIC COMPANIES: LAYING OF ACCOUNTS AND REPORTS BEFORE GENERAL MEETING

415 Public companies: laying of accounts and reports before general meeting416 Public companies: offence of failure to lay accounts and reports

CHAPTER 10

QUOTED COMPANIES: MEMBERS’ APPROVAL OF DIRECTORS’ REMUNERATION REPORT

417 Quoted companies: members’ approval of directors’ remuneration report418 Quoted companies: offences in connection with procedure for approval

CHAPTER 11

FILING OF ACCOUNTS AND REPORTS

Duty to file accounts and reports419 Duty to file accounts and reports with the registrar420 Period allowed for filing accounts421 Calculation of period allowed

Filing obligations of different descriptions of company422 Filing obligations of companies subject to small companies regime423 Filing obligations of medium-sized companies424 Filing obligations of unquoted companies425 Filing obligations of quoted companies426 Unlimited companies exempt from obligation to file accounts

Requirements where abbreviated accounts delivered427 Special auditor’s report where abbreviated accounts delivered428 Approval and signing of abbreviated accounts

Failure to file accounts and reports429 Default in filing accounts and reports: offences430 Default in filing accounts and reports: court order

Company Law Reform Bill [HL]xx

431 Civil penalty for failure to file accounts and reports

CHAPTER 12

REVISION OF DEFECTIVE ACCOUNTS AND REPORTS

Voluntary revision432 Voluntary revision of accounts etc

Secretary of State’s notice433 Secretary of State’s notice in respect of accounts or reports

Application to court434 Application to court in respect of defective accounts or reports435 Other persons authorised to apply to the court436 Disclosure of information by tax authorities

Power of authorised person to require documents etc437 Power of authorised person to require documents, information and

explanations438 Restrictions on disclosure of information obtained under compulsory powers439 Permitted disclosure of information obtained under compulsory powers440 Power to amend categories of permitted disclosure

CHAPTER 13


Accounting and reporting standards441 Accounting standards442 Reporting standards

Companies qualifying as medium-sized443 Companies qualifying as medium-sized: general444 Companies qualifying as medium-sized: parent companies445 Companies excluded from being treated as medium-sized

Other supplementary provisions446 Preparation and filing of accounts in euros447 Power to apply provisions to banking partnerships448 Meaning of “annual accounts” and related expressions449 Notes to the accounts450 Parliamentary procedure for certain regulations under this Part451 Minor definitions

Company Law Reform Bill [HL] xxi

PART 16

AUDIT

CHAPTER 1

REQUIREMENT FOR AUDITED ACCOUNTS

Requirement for audited accounts452 Requirement for audited accounts453 Right of members to require audit

Exemption from audit: small companies454 Small companies: conditions for exemption from audit455 Companies excluded from small companies exemption456 Availability of small companies exemption in case of group company

Exemption from audit: dormant companies457 Dormant companies: conditions for exemption from audit458 Companies excluded from dormant companies exemption

Exemption from audit: certain charities459 Small charities: accountant’s report in lieu of audit460 Companies excluded from report exemption461 Availability of report exemption in case of group company462 The accountant’s report463 The reporting accountant464 Effect of appointment of a partnership465 Independence requirement466 Meaning of “associate”467 Rights of reporting accountant

Companies subject to public sector audit468 Non-profit-making companies subject to public sector audit469 Scottish public sector companies: audit by Auditor General for Scotland

CHAPTER 2

APPOINTMENT OF AUDITORS

Private companies470 Appointment of auditors of private company: general471 Appointment of auditors of private company: default power of Secretary of

State472 Period for appointing auditors473 Term of office of auditors of private company474 Notice by members excluding deemed re-appointment

Company Law Reform Bill [HL]xxii

Public companies475 Appointment of auditors of public company: general476 Appointment of auditors of public company: default power of Secretary of

State477 Meaning of “accounts meeting”478 Term of office of auditors of public company

General provisions479 Fixing of auditor’s remuneration480 Disclosure of terms of audit appointment481 Disclosure of services provided by auditor or associates and related

remuneration

CHAPTER 3

FUNCTIONS OF AUDITOR

Auditors’ report482 Auditor’s report on company’s annual accounts483 Auditor’s report on directors’ report484 Auditor’s report on operating and financial review485 Auditor’s report on auditable part of directors’ remuneration report

Duties and rights of auditors486 Duties of auditor487 Auditor’s general right to information488 Auditor’s right to information from overseas subsidiaries489 Auditor’s rights to information: offences490 Auditor’s rights in relation to resolutions and meetings

Signature of auditor’s report491 Signature of auditor’s report492 Senior statutory auditor493 Name of auditor etc to be stated in published copies of auditor’s report.

Offences in connection with auditor’s report494 Offences in connection with auditor’s report495 Guidance for regulatory and prosecuting authorities: England, Wales and

Northern Ireland496 Guidance for regulatory authorities: Scotland

Company Law Reform Bill [HL] xxiii

CHAPTER 4

REMOVAL, RESIGNATION, ETC OF AUDITORS

Removal of auditor497 Resolution removing auditor from office498 Special notice required for resolution removing auditor from office499 Notice to registrar of resolution removing auditor from office500 Rights of auditor who has been removed from office

Failure to re-appoint auditor501 Failure to re-appoint auditor: special procedure required for written

resolution502 Failure to re-appoint auditor: special notice required for resolution at general

meeting

Resignation of auditor503 Resignation of auditor504 Notice to registrar of resignation of auditor505 Rights of resigning auditor

Statement by auditor on ceasing to hold office506 Statement by auditor to be deposited with company507 Company’s duties in relation to statement508 Copy of statement to be sent to registrar509 Copy of statement to be sent to appropriate audit authority510 Information to be given to accounting authorities

Supplementary511 Effect of casual vacancies

CHAPTER 5

QUOTED COMPANIES: RIGHT OF MEMBERS TO RAISE AUDIT CONCERNS AT ACCOUNTS MEETING

512 Members’ power to require website publication of audit concerns513 Requirements as to website availability514 Website publication: company’s supplementary duties515 Website publication: offences

CHAPTER 6

AUDITORS’ LIABILITY

Provisions protecting auditors from liability516 Provisions protecting auditors from liability517 Indemnity for costs of successfully defending proceedings

Company Law Reform Bill [HL]xxiv

Liability limitation agreements518 Liability limitation agreements519 Authorisation of agreement by members of the company520 Effect of liability limitation agreement521 Disclosure of agreement by company522 Exclusion of agreements for more than one year523 Termination of agreement by members of company

CHAPTER 7


524 Minor definitions

PART 17

PRIVATE AND PUBLIC COMPANIES

CHAPTER 1

PROHIBITION OF PUBLIC OFFERS BY PRIVATE COMPANIES

525 Prohibition of public offers by private company526 Meaning of “offer to the public”527 Meaning of “securities”528 Enforcement of prohibition: order restraining proposed contravention529 Enforcement of prohibition: order for re-registration or winding up530 Validity of allotment etc not affected

CHAPTER 2

MINIMUM SHARE CAPITAL REQUIREMENT FOR PUBLIC COMPANIES

531 Public company: requirement as to minimum share capital532 Procedure for obtaining certificate533 The authorised minimum

PART 18

ALLOTMENT OF SHARES

Power of directors to allot shares534 Exercise by directors of power to allot shares etc535 Power of directors to allot shares etc: private company with only one class of

shares536 Power of directors to allot shares etc: authorisation by company

Public companies: allotment where issue not fully subscribed537 Public companies: allotment where issue not fully subscribed538 Effect of allotment in contravention of section 537

Company Law Reform Bill [HL] xxv

Return of allotments539 Return of allotment by limited company540 Return of allotment of new class of shares by unlimited company541 Offence of failure to make return

Time for accepting pre-emption offer542 Time for acceptance of pre-emption offers

Disapplication of pre-emption rights543 Disapplication of pre-emption rights: private company with only one class of

shares544 Disapplication of pre-emption rights: directors acting under general

authorisation545 Disapplication of pre-emption rights by special resolution546 Liability for false statement in directors’ statement547 Disapplication of pre-emption rights: sale of treasury shares

Commissions, discounts and allowances548 Commissions, discounts and allowances

PART 19

SHARE CAPITAL

Share capital and how it may be altered549 Shares of limited companies to have fixed nominal value550 Alteration of share capital of limited company551 Sub-division or consolidation of shares552 Notice to registrar of sub-division or consolidation553 Re-conversion of stock into shares554 Notice to registrar of alteration of share capital

Reserve capital555 Abolition of reserve capital

Class rights556 Variation of class rights: companies having a share capital557 Variation of class rights: companies without a share capital558 Variation of class rights: saving for court’s powers under other provisions559 Registration of class rights

Share premiums560 Application of share premiums

Reduction of share capital561 Circumstances in which companies may reduce share capital

Company Law Reform Bill [HL]xxvi

562 Reduction of capital supported by solvency statement563 Registration of court order564 Liability of members on reduced shares

Financial assistance565 Financial assistance by company for acquisition of shares566 Circumstances in which financial assistance is not prohibited

Redeemable shares567 Redeemable shares

Purchase by company of its own shares568 Power of company to purchase own shares569 Statement of capital on disclosure by company of purchase etc of own shares570 Copy of contract or memorandum of terms to be available for inspection571 Power of private companies to redeem or purchase own shares out of capital

Transfers of shares etc.572 Registration of transfers of shares and debentures573 Share certificates and share warrants

Register of debenture holders574 Register of debenture holders575 Right to inspect register etc576 Time limit for claims arising from entry in register

Distributions577 Distributions in kind

Redenomination of share capital578 Redenomination of share capital579 Calculation of new nominal values580 Effect of redenomination581 Notice to registrar of redenomination582 Reduction of capital in connection with redenomination583 Notice to registrar of reduction of capital in connection with redenomination584 Redenomination reserve

PART 20

TRANSFER OF SECURITIES

585 Transfer of securities: power to make regulations586 Transfer of securities: extension of powers587 Transfer of securities: supplementary provisions

Company Law Reform Bill [HL] xxvii

PART 21

INFORMATION ABOUT INTERESTS IN COMPANY’S SHARES

Introductory588 Companies to which this Part applies589 Shares to which this Part applies

Notice requiring information about interests in shares590 Notice by company requiring information about interests in its shares591 Notice requiring information: order imposing restrictions on shares592 Notice requiring information: offences593 Notice requiring information: persons exempted from obligation to comply

Power of members to require company to act594 Power of members to require company to act595 Duty of company to comply with requisition596 Report to members on outcome of investigation597 Report to members: offences598 Right to inspect and request copy of reports

Register of interests disclosed599 Register of interests disclosed600 Register to be kept available for inspection601 Associated index602 Right to inspect and request copy of entries603 Entries not to be removed from register604 Removal of entries from register: old entries605 Removal of entries from register: incorrect entry relating to third party606 Adjustment of entry relating to share acquisition agreement607 Duty of company ceasing to be public company

Meaning of interest in shares608 Interest in shares: general609 Interest in shares: right to subscribe for shares610 Interest in shares: family interests611 Interest in shares: corporate interests612 Interest in shares: agreement to acquire interests in a particular company613 Extent of obligation in case of share acquisition agreement

Other supplementary provisions614 Information protected from wider disclosure615 Reckoning of periods for fulfilling obligations616 Power to make further provision by regulations

Company Law Reform Bill [HL]xxviii

PART 22

TAKEOVERS ETC

CHAPTER 1

THE TAKEOVER PANEL

The Panel and its rules617 The Panel618 Rules619 Further provisions about rules620 Rulings621 Directions

Information622 Power to require documents and information623 Restrictions on disclosure624 Offence of disclosure in contravention of section 623

Co-operation625 Panel’s duty of co-operation

Hearings and appeals626 Hearings and appeals

Contravention of rules etc627 Sanctions628 Failure to comply with rules about bid documentation629 Compensation630 Enforcement by the court631 No action for breach of statutory duty etc

Funding632 Fees and charges633 Levy634 Recovery of fees, charges or levy

Miscellaneous and supplementary635 Panel as party to proceedings636 Exemption from liability in damages637 Privilege against self-incrimination638 Annual reports639 Amendments to Financial Services and Markets Act 2000640 Power to extend to Isle of Man and Channel Islands

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CHAPTER 2

IMPEDIMENTS TO TAKEOVERS

Opting in and opting out641 Opting in and opting out642 Further provision about opting-in and opting-out resolutions

Consequences of opting in643 Effect on contractual restrictions644 Power of offeror to require general meeting to be called

Supplementary645 Communication of decisions646 Interpretation of Chapter647 Transitory provision648 Power to extend to Isle of Man and Channel Islands

CHAPTER 3

AMENDMENTS TO COMPANIES ACT 1985

649 Matters to be dealt with in directors’ report650 Takeover offers

PART 23

COMPANY INVESTIGATIONS

651 Powers of Secretary of State to give directions to inspectors652 Resignation, removal and replacement of inspectors653 Power to obtain information from former inspectors etc654 Disqualification orders: consequential amendments

PART 24

UK COMPANIES NOT FORMED UNDER THE COMPANIES ACTS

CHAPTER 1

COMPANIES NOT FORMED UNDER THE COMPANIES ACTS BUT AUTHORISED TO REGISTER

655 Companies authorised to register under the Companies Acts656 Definition of “joint stock company”657 Power to make provision by regulations658 Application of provisions to existing companies

Company Law Reform Bill [HL]xxx

CHAPTER 2

UNREGISTERED COMPANIES

659 Unregistered companies

PART 25

OVERSEA COMPANIES

Introductory660 Oversea companies

Registration of particulars661 Duty to register particulars662 Registered name of oversea company663 Registration under alternative name

Other requirements664 Accounts and reports: general665 Accounts and reports: credit or financial institutions666 Trading disclosures

Supplementary667 Offences668 Disclosure of individual’s residential address: non-disclosure certificate669 Requirement to identify persons to accept service of documents670 Duty to give notice of ceasing to have registrable presence in the UK

PART 26

THE REGISTRAR OF COMPANIES

The registrar671 The registrar672 The registrar’s functions673 The registrar’s official seal674 Fees payable to registrar

Certificates of incorporation675 Public notice of issue of certificate of incorporation676 Right to certificate of incorporation

Registered numbers677 Company’s registered numbers678 Registered numbers of branches of oversea company

Company Law Reform Bill [HL] xxxi

Delivery of documents to the registrar679 Prescribed forms etc680 Registrar’s requirements as to form and manner of delivery681 Power to require delivery by electronic means682 Agreement for delivery by electronic means683 Document not delivered until received

Defective delivery684 Defective delivery685 Informal correction of document686 Voluntary replacement of document previously delivered687 Exclusion of unnecessary material688 Registrar’s notice to remedy defective delivery

Public notice of receipt of certain documents689 Public notice of receipt of certain documents690 Documents subject to Directive disclosure requirements691 Effect of failure to give public notice

The register692 The register693 Annotation of the register694 Allocation of unique identifiers695 Preservation of original documents696 Records relating to companies that have been dissolved etc

Inspection etc of the register697 Inspection of the register698 Right to copy of material on the registrar699 Material not available for public inspection700 Form of application for inspection or copy701 Form and manner in which copies to be provided702 Certification of copies as accurate703 Issue of process for production of records kept by the registrar

Correction or removal of material on the register704 Registrar’s notice to resolve inconsistency on the register705 Administrative removal of material from the register706 Rectification of the register under court order

The registrar’s index of company names707 The registrar’s index of company names708 Right to inspect index709 Power to amend enactments relating to bodies other than companies

Language requirements: translation710 Application of language requirements

Company Law Reform Bill [HL]xxxii

711 Documents to be drawn up and delivered in English712 Documents relating to Welsh companies713 Documents that may be drawn up and delivered in other languages714 Voluntary filing of translations715 Certified translations

Language requirements: transliteration716 Transliteration of names and addresses: permitted characters717 Transliteration of names and addresses: voluntary transliteration into Roman

characters718 Transliteration of names and addresses: certification

Supplementary provisions719 General false statement offence720 Enforcement of company’s filing obligations721 Application of provisions about documents and delivery722 Meaning of “hard copy”, “electronic form” and “electronic means”723 Supplementary provisions relating to electronic communications724 Alternative to publication in the Gazette725 Registrar’s rules726 Payments into the Consolidated Fund727 Contracting out of registrar’s functions728 Application of Part to oversea companies729 Application of Part to functions under other enactments

PART 27

OFFENCES UNDER THE COMPANIES ACTS

Liability of officer in default730 Liability of officer in default731 Liability of company as officer in default732 Application to bodies other than companies

Offences under the Companies Act 1985733 Amendments of the Companies Act 1985

General provisions734 Meaning of “daily default fine”735 Consents required for certain prosecutions736 Summary proceedings: venue737 Summary proceedings: time limit for proceedings738 Legal professional privilege739 Proceedings against unincorporated bodies740 Imprisonment on summary conviction in England and Wales: transitory

provision

Company Law Reform Bill [HL] xxxiii

Supplementary741 Transitional provision

PART 28

COMPANIES: SUPPLEMENTARY PROVISIONS

Company records742 Meaning of “company records”743 Form of company records744 Regulations about inspection of records and provision of copies745 Duty to take precautions against falsification

Service addresses746 Service of documents on company747 Service of documents on directors, secretaries and others748 Service addresses

Sending or supplying documents or information749 The company communications provisions750 Sending or supplying documents or information751 Meaning of “in hard copy form”, “in electronic form” and “by means of a

website”752 Right to hard copy version753 Meaning of “authenticated”754 Interpretation of company communications provisions755 Deemed delivery of documents and information sent by post or electronic

means

Notice of appointment of certain officers756 Duty to notify registrar of certain appointments etc757 Offence of failure to give notice

Courts and legal proceedings758 Meaning of “the court”759 Power of court to grant relief in certain cases

PART 29

COMPANIES: INTERPRETATION

Meaning of "undertaking" and related expressions760 Meaning of “undertaking” and related expressions761 Parent and subsidiary undertakings

Other definitions762 Classes of shares

Company Law Reform Bill [HL]xxxiv

763 Dormant companies764 Meaning of “EEA state” and related expressions765 The former Companies Acts

General766 Minor definitions: general767 Index of defined expressions

PART 30

COMPANIES: MINOR AMENDMENTS

768 Power of Secretary of State to bring civil proceedings on company’s behalf769 Repeal of certain provisions about company directors770 Repeal of requirement that certain companies publish periodical statement771 Repeal of requirement that Secretary of State prepare annual report772 Repeal of certain provisions about company charges773 Access to constitutional documents of RTE and RTM companies

PART 31

COMPANY LAW REFORM POWER

The power774 Power to reform company law775 Definition of “company” and related expressions

Restrictions on the power776 No power to impose taxation777 Restrictions on penalties for criminal offences778 Restrictions on provisions for forcible entry etc.779 Restrictions on powers to legislate780 Restriction on exercise of powers in relation to Scotland781 Restrictions on delegation of legislative functions782 No power to make provision with retrospective effect

Procedure783 Procedure for making orders784 Consultation785 Document to be laid before Parliament786 Reasons for proposed order787 Representations made in confidence etc.788 Parliamentary consideration of proposals

Company Law Reform Bill [HL] xxxv

PART 32

BUSINESS NAMES

CHAPTER 1

RESTRICTED OR PROHIBITED NAMES

Introductory789 Application of this Chapter

Sensitive words or expressions790 Name suggesting connection with government or public authority791 Other sensitive words or expressions792 Requirement to seek comments of government department or other relevant

body793 Withdrawal of Secretary of State’s approval

Misleading names794 Name containing inappropriate indication of company type or legal form795 Name giving misleading indication of activities

Supplementary796 Savings for existing lawful business names

CHAPTER 2

DISCLOSURE REQUIRED IN CASE OF INDIVIDUAL OR PARTNERSHIP

Introductory797 Application of this Chapter798 Information required to be disclosed

Disclosure requirements799 Disclosure required: business documents etc800 Exemption for large partnerships if certain conditions met801 Disclosure required: business premises

Consequences of failure to make required disclosure802 Criminal consequences of failure to make required disclosure803 Civil consequences of failure to make required disclosure

CHAPTER 3

SUPPLEMENTARY

804 Application of general provisions about offences

Company Law Reform Bill [HL]xxxvi

805 Interpretation

PART 33

STATUTORY AUDITORS

CHAPTER 1

INTRODUCTORY

806 Main purposes of Part807 Meaning of “statutory auditor” etc808 Eligibility for appointment as a statutory auditor: overview

CHAPTER 2

INDIVIDUALS AND FIRMS

Eligibility for appointment809 Individuals and firms: eligibility for appointment as a statutory auditor810 Effect of ineligibility

Independence requirement811 Independence requirement812 Effect of lack of independence

Effect of appointment of a partnership813 Effect of appointment of a partnership

Supervisory bodies814 Supervisory bodies815 Exemption from liability for damages

Professional qualifications816 Appropriate qualifications817 Qualifying bodies and recognised professional qualifications818 Approval of overseas qualifications819 Eligibility of individuals retaining only 1967 Act authorisation

Information820 Matters to be notified to the Secretary of State821 The Secretary of State’s power to call for information

Enforcement822 Compliance orders

Company Law Reform Bill [HL] xxxvii

CHAPTER 3

AUDITORS GENERAL

Eligibility for appointment823 Auditors General: eligibility for appointment as a statutory auditor

Conduct of audits824 Individuals responsible for audit work on behalf of Auditors General

The Independent Supervisor825 Appointment of the Independent Supervisor

Supervision of Auditors General826 Supervision of Auditors General by the Independent Supervisor827 Duties of Auditors General in relation to supervision arrangements

Reporting requirement828 Reports by the Independent Supervisor

Information829 Matters to be notified to the Independent Supervisor830 The Independent Supervisor’s power to call for information

Enforcement831 Suspension notices832 Effect of suspension notices833 Compliance orders

Proceedings834 Proceedings involving the Independent Supervisor

Grants835 Grants to the Independent Supervisor

CHAPTER 4

THE REGISTER OF AUDITORS ETC

836 The register of auditors837 Information to be made available to public

Company Law Reform Bill [HL]xxxviii

CHAPTER 5

REGISTERED THIRD COUNTRY AUDITORS

Introductory838 Meaning of “third country auditor”, “registered third country auditor” etc

Duties839 Duties of registered third country auditors

Information840 Matters to be notified to the Secretary of State841 The Secretary of State’s power to call for information

Enforcement842 Compliance orders843 Removal of third country auditors from the register of auditors

CHAPTER 6

SUPPLEMENTARY AND GENERAL

Power to require second company audit

844 Secretary of State’s power to require second audit of a company845 Supplementary provision about second audits

False and misleading statements846 Misleading, false and deceptive statements

Fees847 Fees

Delegation of Secretary of State’s functions848 Delegation of the Secretary of State’s functions849 Delegation of functions to an existing body

International obligations850 Directions to comply with international obligations

General provision relating to offences851 Offences by bodies corporate, partnerships and unincorporated associations852 Time limits for prosecution of offences853 Jurisdiction and procedure in respect of offences

Company Law Reform Bill [HL] xxxix

Notices etc854 Service of notices855 Documents in electronic form

Interpretation856 Meaning of “associate”857 Minor definitions858 Index of defined expressions

Miscellaneous and general859 Power to make provision in consequence of changes affecting accountancy

bodies860 Consequential amendments

PART 34

MISCELLANEOUS PROVISIONS

Transparency and corporate governance rules861 Transparency and corporate governance rules862 Consequential amendments of the Financial Services and Markets Act 2000

Regulation of actuaries etc863 Grants to bodies concerned with actuarial standards etc864 Levy to pay expenses of bodies concerned with actuarial standards etc865 Application of provisions to Scotland and Northern Ireland

Exercise of voting rights by institutional investors866 Institutional investors: information about exercise of voting rights

Disclosure of information under the Enterprise Act 2002867 Disclosure of information under the Enterprise Act 2002

Expenses of winding up868 Expenses of winding up

Commonhold associations869 Amendment of memorandum or articles in pre-commonhold period

PART 35

NORTHERN IRELAND

870 Extension of Companies Acts to Northern Ireland871 Extension of GB enactments relating to SEs

Company Law Reform Bill [HL]xl

872 Extension of GB enactments relating to certain other forms of businessorganisation

873 Extension of enactments relating to business names

PART 36

GENERAL SUPPLEMENTARY PROVISIONS

Regulations and orders874 Regulations and orders: statutory instrument875 Regulations and orders: negative resolution procedure876 Regulations and orders: affirmative resolution procedure877 Regulations and orders: approval after being made878 Regulations and orders: supplementary

Meaning of "enactment"879 Meaning of “enactment”

Consequential and transitional provisions880 Power to make consequential amendments etc881 Repeals882 Power to make transitional provision and savings

PART 37

FINAL PROVISIONS

883 Short title884 Extent885 Commencement

Schedule 1 — Connected persons: references to an interest in shares ordebentures

Schedule 2 — Specified persons, descriptions of disclosures etc for thepurposes of section 623

Part 1 — Specified personsPart 2 — Specified descriptions of disclosuresPart 3 — Overseas regulatory bodies

Schedule 3 — Amendments to Part 13A of the Companies Act 1985Schedule 4 — Amendments of remaining provisions of the Companies Act

1985 relating to offencesSchedule 5 — Documents and information sent or supplied to a company

Part 1 — IntroductionPart 2 — Communications in hard copy formPart 3 — Communications in electronic formPart 4 — Other agreed forms of communication

Schedule 6 — Communications by a company other than a traded companyPart 1 — Introduction

Company Law Reform Bill [HL] xli

Part 2 — Communications in hard copy formPart 3 — Communications in electronic formPart 4 — Communications by means of a websitePart 5 — Other agreed forms of communicationPart 6 — Supplementary provisions

Schedule 7 — Communications by a traded companyPart 1 — IntroductionPart 2 — Communications in hard copy formPart 3 — Communications in electronic formPart 4 — Communications by means of a websitePart 5 — Other agreed forms of communicationPart 6 — Supplementary provisions

Schedule 8 — Parent and subsidiary undertakings: supplementaryprovisions

Schedule 9 — Index of defined expressionsSchedule 10 — Recognised supervisory bodies

Part 1 — Grant and revocation of recognition of a supervisory bodyPart 2 — Requirements for recognition of a supervisory bodyPart 3 — Arrangements in which recognised supervisory bodies are

required to participateSchedule 11 — Recognised professional qualifications

Part 1 — Grant and revocation of recognition of a professionalqualification

Part 2 — Requirements for recognition of a professional qualificationSchedule 12 — Arrangements in which registered third country auditors are

required to participateSchedule 13 — Supplementary provisions with respect to delegation orderSchedule 14 — Statutory auditors: consequential amendmentsSchedule 15 — Repeals

HL Bill 34 54/1

Company Law Reform Bill [HL]Part 1 — General introductory provisions

1

A

B I L LTO

Reform company law and restate the greater part of the enactments relating tocompanies; to make other provision relating to companies and other forms ofbusiness organisation; to make provision about business names, auditors andactuaries; to amend Part 9 of the Enterprise Act 2002; and for connectedpurposes.

E IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice andconsent of the Lords Spiritual and Temporal, and Commons, in this present

Parliament assembled, and by the authority of the same, as follows:—

PART 1

GENERAL INTRODUCTORY PROVISIONS

Companies and Companies Acts

1 Companies

(1) In the Companies Acts, unless the context otherwise requires—“company” means a company formed and registered under this Act or an

existing company; and“existing company” means a company that immediately before the

commencement of this Part was formed and registered under—(a) the Companies Act 1985 (c. 6), or(b) the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032

(N.I. 6)),or was an existing company for the purposes of that Act or that Order.

(2) Certain provisions of the Companies Acts apply to companies incorporated inthe United Kingdom that—

(a) are registered, but were not formed, under those Acts (see section 655),or

(b) are unregistered (see section 659).

B

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(3) For provisions applying to companies incorporated outside the UnitedKingdom, see Part 25 (oversea companies).

2 The Companies Acts

(1) In this Act “the Companies Acts” means—(a) the company law provisions of this Act,(b) Part 2 of the Companies (Audit, Investigations and Community

Enterprise) Act 2004 (c. 27) (community interest companies), and(c) the provisions of the Companies Act 1985 (c. 6) and the Companies

Consolidation (Consequential Provisions) Act 1985 (c. 9) that remain inforce.

(2) The company law provisions of this Act are—(a) the provisions of Parts 1 to 31 of this Act, and(b) the provisions of Parts 35 to 37 of this Act so far as they apply for the

purposes of those Parts.

(3) Except as otherwise provided—(a) expressions that are defined for the purposes of the company law

provisions of this Act have the same meaning in the Companies Act1985, and

(b) expressions that are defined for the purposes of that Act have the samemeaning in the company law provisions of this Act.

Types of company

3 Limited and unlimited companies

(1) A company is a “limited company” if the liability of its members is limited byits constitution.It may be limited by shares or limited by guarantee.

(2) If their liability is limited to the amount, if any, unpaid on the shares held bythem, the company is “limited by shares”.

(3) If their liability is limited to such amount as the members undertake tocontribute to the assets of the company in the event of its being wound up, thecompany is “limited by guarantee”.

(4) If there is no limit on the liability of its members, the company is an “unlimitedcompany”.

4 Private and public companies

(1) A “private company” is any company that is not a public company.

(2) A “public company” is a company limited by shares or limited by guaranteeand having a share capital—

(a) whose certificate of incorporation states that it is a public company, and(b) in relation to which the requirements of the Companies Acts, or the

former Companies Acts, as to registration or re-registration as a publiccompany have been complied with on or after the relevant date.

(3) For the purposes of subsection (2)(b) the relevant date is—

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(a) in relation to registration or re-registration in Great Britain, 22ndDecember 1980;

(b) in relation to registration or re-registration in Northern Ireland, 1st July1983.

(4) For the two major differences between private and public companies, see Part17.

5 Companies limited by guarantee and having share capital

(1) A company cannot be formed as, or become, a company limited by guaranteewith a share capital.

(2) Provision to this effect has been in force—(a) in Great Britain since 22nd December 1980, and(b) in Northern Ireland since 1st July 1983.

(3) Any provision in the constitution of a company limited by guarantee thatpurports to divide the company’s undertaking into shares or interests is aprovision for a share capital.This applies whether or not the nominal value or number of the shares orinterests is specified by the provision.

6 Community interest companies

(1) In accordance with Part 2 of the Companies (Audit, Investigations andCommunity Enterprise) Act 2004 (c. 27)—

(a) a company limited by shares or a company limited by guarantee andnot having a share capital may be formed as or become a communityinterest company, and

(b) a company limited by guarantee and having a share capital maybecome a community interest company.

(2) The other provisions of the Companies Acts have effect subject to that Part.

PART 2

COMPANY FORMATION

General

7 Method of forming company

(1) A company is formed under this Act by one or more persons—(a) subscribing their names to a memorandum of association (see section

8), and(b) complying with the requirements of this Act as to registration (see

sections 9 to 14).

(2) A company may not be so formed for an unlawful purpose.

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8 Memorandum of association

(1) A memorandum of association is a memorandum stating that thesubscribers—

(a) wish to form a company under this Act, and(b) agree to become members of the company and, in the case of a company

that is to have a share capital, to take at least one share each.

(2) The memorandum must be in the prescribed form and must be authenticatedby each subscriber.

Requirements for registration

9 Registration documents

(1) The memorandum of association must be delivered to the registrar togetherwith an application for registration of the company, the documents required bythis section and a statement of compliance.

(2) The application for registration must state—(a) the company’s proposed name,(b) whether the company’s registered office is to be situated in England

and Wales (or in Wales), in Scotland or in Northern Ireland,(c) whether the liability of the members of the company is to be limited,

and if so whether it is to be limited by shares or by guarantee,(d) whether the company is to be a private or a public company;

(3) If the application is delivered by a person as agent for the subscribers to thememorandum of association, it must state his name and address.

(4) The application must contain—(a) in the case of a company that is to have a share capital—

(i) a statement of initial shareholdings (see section 10), and(ii) a statement of capital (see section 11);

(b) in the case of a company that is to be limited by guarantee, a statementof guarantee (see section 12);

(c) a statement of the company’s proposed officers (see section 13).

(5) The applicant must also contain—(a) a statement of the intended address of the company’s registered office;

and(b) a copy of any proposed articles of association (to the extent that these

are not supplied by the default application of model articles: see section21).

(6) The application must be delivered—(a) to the registrar of companies for England and Wales, if the registered

office of the company is to be situated in England and Wales (or inWales);

(b) to the registrar of companies for Scotland, if the registered office of thecompany is to be situated in Scotland;

(c) to the registrar of companies for Northern Ireland, if the registeredoffice of the company is to be situated in Northern Ireland.

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10 Statement of initial shareholdings

(1) The statement of initial shareholdings required to be delivered in the case of acompany that is to have a share capital must comply with this section.

(2) It must contain the names and addresses of the subscribers to thememorandum of association.

(3) It must state with respect to each subscriber to the memorandum—(a) the number and nominal value of the shares to be taken by him on

formation, and(b) the amount (if any) payable in respect of each share on formation,

whether on account of the nominal value or by way of a premium.

11 Statement of share capital

(1) The statement of share capital required to be delivered in the case of a companythat is to have a share capital must comply with this section.

(2) It must contain the names and addresses of the subscribers to thememorandum of association.

(3) It must state with respect to the company’s share capital to be taken by themon formation—

(a) the total number of shares of the company,(b) the aggregate nominal value of those shares,(c) for each class of shares—

(i) prescribed particulars of the rights attached to the shares,(ii) the total number of shares of that class, and

(iii) the aggregate nominal value of shares of that class, and(d) the amount paid up and the amount (if any) unpaid on each share

(whether on account of the nominal value of the share or by way ofpremium).

12 Statement of guarantee

(1) The statement of guarantee required to be delivered in the case of a companythat is to be limited by guarantee must comply with this section.

(2) It must contain the names and addresses of the subscribers to thememorandum.

(3) It must state that each member undertakes that, if the company is wound upwhile he is a member, or within one year after he ceases to be a member, he willcontribute to the assets of the company such amount as may be required for—

(a) payment of the debts and liabilities of the company contracted beforehe ceases to be a member,

(b) payment of the costs, charges and expenses of winding up, and(c) adjustment of the rights of the contributories among themselves,

not exceeding a specified amount.

13 Statement of proposed officers

(1) The statement of the company’s proposed officers required to be delivered tothe registrar must contain the required particulars of—

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(a) the person who is, or persons who are, to be the first director ordirectors of the company;

(b) in the case of a company that is to be a public company, the person whois (or the persons who are) to be the first secretary (or joint secretaries)of the company.

(2) The required particulars are the particulars that will be required to be stated inthe company’s register of directors (see sections 147 to 149) or register ofsecretaries (see sections 254 to 256).

(3) The statement must also contain a consent by each of the persons named as adirector, as secretary or as one of joint secretaries, to act in the relevantcapacity.If all the partners in a firm are to be joint secretaries, consent may be given byone partner on behalf of all of them.

14 Statement of compliance

(1) The statement of compliance required to be delivered to the registrar is astatement that the requirements of this Act as to registration have beencomplied with.

(2) The registrar may accept the statement of compliance as sufficient evidence ofcompliance.

Registration and its effect

15 Registration

(1) If the registrar is satisfied that the requirements of this Act as to registration arecomplied with, he shall register the documents delivered to him.

(2) References in the Companies Acts to registration of the company are toregistration under this section (or, where the context requires, undercorresponding earlier provisions).

16 Issue of certificate of incorporation

(1) On the registration of a company, the registrar of companies shall give acertificate that the company is incorporated.

(2) The certificate must state—(a) the name and registered number of the company,(b) the date of its incorporation,(c) whether it is a limited or unlimited company, and if it is limited

whether it is limited by shares or limited by guarantee,(d) whether it is a private or a public company, and(e) whether the company’s registered office is situated in England and

Wales (or in Wales), in Scotland or in Northern Ireland.

(3) The certificate must be signed by the registrar or authenticated by theregistrar’s official seal.

(4) The certificate is conclusive evidence that the requirements of this Act as toregistration have been complied with and that the company—

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(a) is duly registered under this Act, and(b) where relevant, is duly registered as a limited company or public

company.

17 Effect of registration

(1) The registration of a company has the following effects as from the date ofincorporation.

(2) The subscribers to the memorandum, together with such other persons as mayfrom time to time become members of the company, are a body corporate bythe name stated in the certificate of incorporation.

(3) That body corporate is capable of exercising all the functions of anincorporated company.

(4) The status and registered office of the company are as stated in, or inconnection with, the application for registration.

(5) The persons named in the statement of proposed officers—(a) as director, or(b) in the case of a public company, as secretary or joint secretary of the

company,are deemed to have been appointed to that office.

PART 3

A COMPANY’S CONSTITUTION

CHAPTER 1

INTRODUCTORY

18 A company’s constitution

Unless the context otherwise requires, references in the Companies Acts to acompany’s constitution include—

(a) the company’s articles, and(b) any resolutions and agreements to which Chapter 3 of this Part applies.

CHAPTER 2

ARTICLES OF ASSOCIATION

General

19 Articles of association

(1) A company must have articles of association prescribing regulations for thecompany.

(2) Unless it is a company to which model articles apply by virtue of section 21(default application of model articles in case of limited company), it mustregister articles of association.

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Company Law Reform Bill [HL]Part 3 — A company’s constitutionChapter 2 — Articles of association

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(3) A company’s articles of association are part of its constitution.

(4) References in the Companies Acts to a company’s “articles” are to its articles ofassociation.

20 Power of Secretary of State to prescribe model articles

(1) The Secretary of State may by regulations prescribe model articles ofassociation for companies.

(2) Different model articles may be prescribed for different descriptions ofcompany.

(3) A company may adopt all or any of the provisions of model articles.

(4) Any amendment of model articles by regulations under this section does notaffect a company registered before the amendment takes effect.“Amendment” here includes addition, alteration or repeal.

(5) Regulations under this section are subject to negative resolution procedure.

21 Default application of model articles

(1) In the case of a limited company—(a) if articles are not registered, or(b) if articles are registered, in so far as they do not exclude or modify the

relevant model articles,the relevant model articles (so far as applicable) form part of the company’sarticles in the same manner and to the same extent as if articles in the form ofthose articles had been duly registered.

(2) The “relevant model articles” means the model articles prescribed for acompany of that description as in force at the date on which the company isfirst registered.

Alteration of articles

22 Alteration of articles

(1) A company may alter its articles by special resolution.

(2) In the case of a company that is a charity, this is subject to—(a) in England and Wales, section 64 of the Charities Act 1993 (c. 10);(b) in Northern Ireland, Article 9 of the Charities (Northern Ireland) Order

1987.

(3) In the case of a company that is registered in the Scottish Charity Register, thisis subject to—

(a) section 112 of the Companies Act 1989 (c. 40), and(b) section 16 of the Charities and Trustee Investment (Scotland) Act 2005

(asp 10).

23 Entrenched provisions of the articles

(1) A company’s articles may provide that specified provisions of the articles—

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(a) may not be altered or repealed, or(b) may be altered or repealed only if conditions are met, or procedures are

complied with, that are more restrictive than those applicable in thecase of a special resolution.

This is referred to as “provision for entrenchment”.

(2) Provision for entrenchment may only be made—(a) in the company’s articles on formation, or(b) by an amendment of the company’s articles agreed to by all the

members of the company.

24 Notice to registrar in case of entrenched provisions

(1) Where—(a) a company’s articles on formation contain provision for entrenchment,

or(b) a company’s articles are altered so as to include such provision,

the company must give notice to the registrar.

(2) Where a company whose articles contain provision for entrenchment isrequired to send to the registrar any document making or evidencing analteration in the company’s articles, the company must deliver with it astatement of compliance.

(3) The statement of compliance required is a statement certifying that thealteration has been made in accordance with the company’s articles.

(4) The registrar may rely on the statement of compliance as sufficient evidence ofthe matters stated in it.

25 Notice to registrar of removal of entrenched provisions

(1) Where a company whose articles contain provision for entrenchment alters itsarticles so that they no longer contain any such provision, it must give noticeof that fact to the registrar.

(2) The notice must be accompanied by a statement of compliance.

(3) The statement of compliance required is a statement certifying that thealteration has been made in accordance with the company’s articles.

(4) The registrar may rely on the statement of compliance as sufficient evidence ofthe matters stated in it.

26 Effect of alteration of articles on company’s members

(1) A member of a company is not bound by an alteration to its articles after thedate on which he became a member, if and so far as the alteration—

(a) requires him to take or subscribe for more shares than the number heldby him at the date on which the alteration is made, or

(b) in any way increases his liability as at that date to contribute to thecompany’s share capital or otherwise to pay money to the company.

(2) Subsection (1) does not apply in a case where the member agrees in writing,either before or after the alteration is made, to be bound by the alteration.

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27 Registrar to be sent copy of amended articles

(1) Where a company is required to send to the registrar any document (other thanan enactment: see section 36) making or evidencing an alteration in thecompany’s articles, the company must send with it a copy of the articles asaltered.

(2) This section does not require a company to set out in its articles any provisionsof model articles that—

(a) are applied by the articles, or(b) apply by virtue of section 21 (default application of model articles).

(3) If a company fails to comply with this section an offence is committed by—(a) the company, and(b) every officer of the company who is in default.

(4) A person guilty of an offence under this paragraph is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and, forcontinued contravention, a daily default fine not exceeding one-tenth of level3 on the standard scale.

28 Registrar’s notice to comply in case of failure with respect to amended articles

(1) If it appears to the registrar that a company has failed to comply with anyenactment requiring it—

(a) to send to the registrar a document making or evidencing an alterationin the company’s articles, or

(b) to send to the registrar a copy of the company’s articles as amended,the registrar may give notice to the company requiring it to comply.

(2) The notice must—(a) state the date on which it is issued, and(b) require the company to comply within 28 days from that date.

(3) If the company complies with the notice within the specified time, no criminalproceedings may be brought in respect of the failure to comply with theenactment mentioned in subsection (1).

(4) If the company does not comply with the notice within the specified time, it isliable to a civil penalty of £200.This is in addition to any liability to criminal proceedings in respect of thefailure mentioned in subsection (1).

(5) The penalty may be recovered by the registrar and is to be paid into theConsolidated Fund.

Supplementary

29 Existing companies: provisions of memorandum treated as provisions of articles

(1) Provisions that immediately before the commencement of this Part werecontained in a company’s memorandum but are not provisions of the kindmentioned in section 8 (provisions of new-style memorandum) are to be

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treated after the commencement of this Part as provisions of the company’sarticles.

(2) This applies not only to substantive provisions but also to provision forentrenchment (as defined in section 23).

(3) The provisions of this Part about provision for entrenchment apply to suchprovision as they apply to provision made on the company’s formation, exceptthat the duty under section 24(2) to give notice to the registrar does not apply.

CHAPTER 3

RESOLUTIONS AND AGREEMENTS AFFECTING A COMPANY’S CONSTITUTION

30 Resolutions and agreements affecting a company’s constitution

(1) This Chapter applies to—(a) any special resolution;(b) any resolution or agreement agreed to by all the members of a company

that, if not so agreed to, would not have been effective for its purposeunless passed as a special resolution;

(c) any resolution or agreement agreed to by all the members of a class ofshareholders that, if not so agreed to, would not have been effective forits purpose unless passed by some particular majority or otherwise insome particular manner;

(d) any resolution or agreement that effectively binds all members of aclass of shareholders though not agreed to by all those members;

(e) a resolution to give, vary, revoke or renew authority for the purposesof section 536 (authority of company for allotment of shares bydirectors);

(f) a resolution to redenominate share capital or a class of share capitalunder section 578;

(g) a resolution of the directors of a company under section 147(2) of theCompanies Act 1985 (c. 6) (resolution in connection with re-registrationin consequence of company acquiring its own shares);

(h) a resolution conferring, varying, revoking or renewing authority undersection 166 of that Act (market purchase of company’s own shares);

(i) a resolution for voluntary winding up passed under section 84(1)(a) ofthe Insolvency Act 1986 (c. 45) or Article 70(1)(a) of the Insolvency(Northern Ireland) Order 1986;

(j) a resolution of the director of an old public company under section 2(1)of the Companies Consolidation (Consequential Provisions) Act 1985(c. 9) that the company should be re-registered as a public company;

(k) a resolution passed by virtue of regulations made under section 207 ofthe Companies Act 1989 (c. 40) (transfer of securities).

(2) References in subsection (1) to a member of a company, or of a class ofmembers of a company, do not include the company itself where it is such amember by virtue only of its holding shares as treasury shares.

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31 Copies of resolutions or agreements to be forwarded to and recorded by registrar

(1) A copy of every resolution or agreement to which this Chapter applies, printedor in some other form approved by the registrar, must be—

(a) forwarded to the registrar within 15 days after it is passed or made, and(b) recorded by him.

(2) If a company fails to comply with this section, an offence is committed by—(a) the company, and(b) every officer of it who is in default.

(3) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and, forcontinued contravention, a daily default fine not exceeding one-tenth of level3 on the standard scale.

(4) For the purposes of this section, a liquidator of the company is treated as anofficer of it.

32 Resolutions and agreements to be embodied in or attached to issued copies of articles

(1) Any resolution or agreement relating to a company that—(a) has been recorded by the registrar—

(i) under section 31, or(ii) before the commencement of this Part, under section 380 of the

Companies Act 1985 (c. 6) or Article 388 of the Companies(Northern Ireland) Order 1986 (which made provisioncorresponding to this Chapter), and

(b) that is for the time being in force,must be embodied in or annexed to every copy of the company’s articles issuedby the company.

(2) If a company fails to comply with this section, an offence is committed by everyofficer of the company who is in default.

(3) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale for eachoccasion on which copies are issued or, as the case may be, requested.

(4) For the purposes of this section, a liquidator of the company is treated as anofficer of it.

CHAPTER 4

MISCELLANEOUS AND SUPPLEMENTARY PROVISIONS

Statement of company’s objects

33 Statement of company’s objects

(1) Unless a company’s articles specifically restrict the objects of the company, itsobjects are unrestricted.

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(2) Where a company alters its articles so as to add, remove or alter a statement ofthe company’s objects—

(a) it must give notice to the registrar,(b) on receipt of the notice, the registrar shall register it, and(c) the alteration is not effective until entry of that notice on the register.

(3) Any such alteration does not affect any rights or obligations of the company orrender defective any legal proceedings by or against it.

(4) In the case of a company that is a charity, the provisions of this section haveeffect subject to—

(a) in England and Wales, section 64 of the Charities Act 1993 (c. 10);(b) in Northern Ireland, Article 9 of the Charities (Northern Ireland) Order

198 (S.I. 1987/2048 (N.I. 19)).

(5) In the case of a company that is entered in the Scottish Charity Register, theprovisions of this section have effect subject to the provisions of the Charitiesand Trustee Investment (Scotland) Act 2005 (asp 10).

Other provisions with respect to a company’s constitution

34 Constitutional documents to be provided to members

(1) A company must, on request by any member, send to him a copy of thefollowing documents—

(a) an up-to-date copy of the company’s articles incorporating anyalterations made to them;

(b) copies of any resolution or agreement relating to the company that hasbeen recorded by the registrar—

(i) under section 31, or(ii) before the commencement of this Part, under section 380 of the

Companies Act 1985 (c. 6) or Article 388 of the Companies(Northern Ireland) Order 1986 (which made provisioncorresponding to this Chapter),

and that is for the time being in force;(c) a copy of the company’s current certificate of incorporation, and of any

past certificates of incorporation;(d) in the case of a company with a share capital—

(i) its statement of initial shareholdings, and(ii) a current statement of share capital;

(e) in the case of a company limited by guarantee, the statement ofguarantee.

(2) The statement of capital required by subsection (1)(d)(ii) is a statement of—(a) the total number of shares of the company,(b) the aggregate nominal value of those shares,(c) for each class of shares—


(iii) the aggregate nominal value of shares of that class, and

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(d) the amount paid up and the amount (if any) unpaid on each share(whether on account of the nominal value of the share or by way ofpremium).

(3) If a company makes default in complying with this section, an offence iscommitted by every officer of the company who is in default.

(4) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale.

35 Effect of company’s constitution

(1) The provisions of a company’s constitution, when registered, bind thecompany and its members to the same extent as if they—

(a) had been signed and sealed by each member, and(b) contained covenants on the part of each member to observe their

provisions.

(2) Money payable by a member to the company under its constitution is a debtdue from him to the company.In England and Wales and Northern Ireland it is of the nature of an ordinarycontract debt.

36 Notice to registrar where company’s constitution altered by enactment

(1) Where a company’s constitution is altered by an enactment, other than anenactment amending the general law, the company must—

(a) give notice of the alteration to the registrar, specifying the enactment,and

(b) send the registrar a copy of the company’s constitution as altered by theenactment,

not later than 15 days after the enactment comes into force.

(2) In the case of a special enactment the notice must be accompanied by a copy ofthe enactment.

(3) A “special enactment” means an enactment that is not a public generalenactment, and includes—

(a) an Act for confirming a provisional order,(b) any provision of a public general Act in relation to the passing of which

any of the standing orders of the House of Lords or the House ofCommons relating to Private Business applied, or

(c) any enactment to the extent that it is incorporated or applied for thepurposes of a special enactment.



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Supplementary provisions

37 Right to participate in profits otherwise than as member void

In the case of a company not having a share capital any provision in thecompany’s articles, or in any resolution of the company, purporting to give aperson a right to participate in the divisible profits of the company otherwisethan as member is void.

38 Application to single member companies of enactments and rules of law

Any enactment or rule of law applicable to companies formed by two or morepersons or having two or more members applies with any necessarymodification in relation to a company formed by one person or having onlyone person as a member.

PART 4

A COMPANY’S CAPACITY AND RELATED MATTERS

Capacity of company and power of directors to bind it

39 A company’s capacity

(1) The validity of an act done by a company shall not be called into question onthe ground of lack of capacity by reason of anything in the company’sconstitution.

(2) This section has effect subject to section 42 (companies that are charities).

40 Power of directors to bind the company

(1) In favour of a person dealing with a company in good faith, the power of thedirectors to bind the company, or authorise others to do so, is deemed to be freeof any limitation under the company’s constitution.

(2) For this purpose—(a) a person “deals with” a company if he is a party to any transaction or

other act to which the company is a party,(b) a person dealing with a company—

(i) is not bound to enquire as to any limitation on the powers of thedirectors to bind the company or authorise others to do so,

(ii) is presumed to have acted in good faith unless the contrary isproved, and

(iii) is not to be regarded as acting in bad faith by reason only of hisknowing that an act is beyond the powers of the directors underthe company’s constitution.

(3) The references above to limitations on the directors’ powers under thecompany’s constitution include limitations deriving—

(a) from a resolution of the company or of any class of shareholders, or(b) from any agreement between the members of the company or of any

class of shareholders.

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(4) This section does not affect any right of a member of the company to bringproceedings to restrain the doing of an action that is beyond the powers of thedirectors.But no such proceedings lie in respect of an act to be done in fulfilment of alegal obligation arising from a previous act of the company.

(5) This section does not affect any liability incurred by the directors, or any otherperson, by reason of the directors’ exceeding their powers.

(6) This section has effect subject to—section 41 (transactions with directors or their associates), andsection 42 (companies that are charities).

41 Constitutional limitations: transactions involving directors or their associates

(1) This section applies to a transaction if or to the extent that its validity dependson section 40 (power of directors deemed to be free of limitations undercompany’s constitution in favour of person dealing with company in goodfaith).Nothing in this section shall be read as excluding the operation of any otherenactment or rule of law by virtue of which the transaction may be called inquestion or any liability to the company may arise.

(2) Where—(a) a company enters into such a transaction, and(b) the parties to the transaction include—

(i) a director of the company or of its holding company, or(ii) a person connected with any such director,

the transaction is voidable at the instance of the company

(3) Whether or not it is avoided, any such party to the transaction as is mentionedin subsection (2)(b)(i) or (ii), and any director of the company who authorisedthe transaction, is liable—

(a) to account to the company for any gain he has made directly orindirectly by the transaction, and

(b) to indemnify the company for any loss or damage resulting from thetransaction.

(4) The transaction ceases to be voidable if—(a) restitution of any money or other asset which was the subject-matter of

the transaction is no longer possible, or(b) the company is indemnified for any loss or damage resulting from the

transaction, or(c) rights acquired bona fide for value and without actual notice of the

directors’ exceeding their powers by a person who is not party to thetransaction would be affected by the avoidance, or

(d) the transaction is affirmed by the company.

(5) A person other than a director of the company is not liable under subsection (3)if he shows that at the time the transaction was entered into he did not knowthat the directors were exceeding their powers.

(6) Nothing in the preceding provisions of this section affects the rights of anyparty to the transaction not within subsection (2)(b)(i) or (ii), but the court may,on the application of the company or any such party, make such order

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affirming, severing or setting aside the transaction, on such terms, as appear tothe court to be just.

(7) In this section—(a) “transaction” includes any act; and(b) the reference to a person connected with a director have the same

meaning as in Part 10 (company directors).

42 Constitutional limitations: companies that are charities

(1) Sections 39 and 40 (company’s capacity and power of directors to bindcompany) do not apply to the acts of a company that is a charity except infavour of a person who—

(a) does not know at the time the act is done that the company is a charity,or

(b) gives full consideration in money or money’s worth in relation to theact in question and does not know (as the case may be)—

(i) that the act is not permitted by the company’s constitution or,(ii) that the act is beyond the powers of the directors.

(2) Where a company that is a charity purports to transfer or grant an interest inproperty, the fact that (as the case may be)—

(a) the act was not permitted by the company’s constitution, or(b) the directors in connection with the act exceeded any limitation on their

powers under the company’s constitution,does not affect the title of a person who subsequently acquires the property orany interest in it for full consideration without actual notice of any suchcircumstances affecting the validity of the company’s act.

(3) In any proceedings arising out of subsection (1) or (2) the burden of proving—(a) that a person knew that the company was a charity, or(b) that a person knew that an act was not permitted by the company’s

constitution or was beyond the powers of the directors,lies on the person asserting that fact.

(4) In the case of a company that is a charity the affirmation of a transaction towhich section 41 applies (transactions with directors or their associates) isineffective without the prior written consent of—

(a) in England and Wales, the Charity Commissioners;(b) in Northern Ireland, the Department for Social Development.

(5) This section does not extend to Scotland (but see section 112 of the CompaniesAct 1989 (c. 40)).

Formalities of doing business under the law of England and Wales or Northern Ireland

43 Company contracts

(1) Under the law of England and Wales or Northern Ireland a contract may bemade—

(a) by a company, by writing under its common seal, or(b) on behalf of a company, by a person acting under its authority, express

or implied.

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(2) Any formalities required by law in the case of a contract made by an individualalso apply, unless a contrary intention appears, to a contract made by or onbehalf of a company.

44 Execution of documents

(1) Under the law of England and Wales or Northern Ireland a document isexecuted by a company—

(a) by the affixing of its common seal, or(b) by signature in accordance with the following provisions.

(2) In the case of a private company a document is validly executed is it isexpressed (in whatever form of words) to be executed by the company andsigned—

(a) by two directors of the company, or(b) by a director of the company in the presence of a witness who attests

the signature.

(3) In the case of a public company a document is validly executed if it is expressed(in whatever form of words) to be executed by the company and signed—

(a) by a director and a secretary of the company,(b) by two directors of the company, or(c) by a director of the company in the presence of a witness who attests

the signature.

(4) In favour of a purchaser a document is deemed to have been duly executed bya company if it purports to be signed in accordance with subsection (2) or (3).A “purchaser” means a purchaser in good faith for valuable consideration andincludes a lessee, mortgagee or other person who for valuable considerationacquires an interest in property.

(5) Where a document is to be signed by a person as a director or the secretary ofmore than one company, is it not duly signed by that person for the purposesof this section unless he signs it separately in each capacity.

(6) References in this section to a document being (or purporting to be) signed bya director or secretary are to be read, in a case where the office of director orsecretary is held by a firm, as references to its being (or purporting to be) signedby an individual authorised by the firm to sign on its behalf.

(7) This section applies to a document that is (or purports to be) executed by acompany in the name of or on behalf of another person whether or not thatperson is also a company.

45 Common seal

A company may have a common seal, but need not have one.

46 Execution of deeds

(1) A document is validly executed by a company as a deed for the purposes ofsection 1(2)(b) of the Law of Property (Miscellaneous Provisions) Act 1989(c. 34) if, and only if—

(a) it is duly executed by the company, and(b) it is delivered as a deed.

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(2) For the purposes of subsection (1)(b) a document is presumed to be deliveredupon its being executed, unless a contrary intention is proved.

47 Execution of deeds abroad

(1) Under the law of England and Wales or Northern Ireland a company may, bywriting under its common seal, empower any person, either generally or inrespect of specified matters, as its attorney, to execute deeds on its behalf in anyplace outside the United Kingdom.

(2) A deed so executed has the same effect as if executed under the company’scommon seal.

48 Authentication of documents

A document or proceedings requiring authentication by a company issufficiently authenticated for the purposes of the law of England and Wales orNorthern Ireland by a signature of—

(a) a director of the company, or(b) a person authorised by the company to act on its behalf.

Formalities of doing business under the law of Scotland

49 Execution of documents by companies

(1) The following provisions form part of the law of Scotland only.

(2) Notwithstanding the provisions of any enactment, a company need not have acompany seal.

(3) For the purposes of any enactment—(a) providing for a document to be executed by a company by affixing its

common seal, or(b) referring (in whatever terms) to a document so executed,

a document signed or subscribed by or on behalf of the company in accordancewith the provisions of the Requirements of Writing (Scotland) Act 1995 (c. 7)has effect as if so executed.

Other matters

50 Official seal for use abroad

(1) A company that has a common seal may have an official seal for use outsidethe United Kingdom.

(2) The official seal must be a facsimile of the company’s common seal, with theaddition on its face of the place or places where it is to be used.

(3) The official seal when duly affixed to a document has the same effect as thecompany’s common seal.This subsection does not extend to Scotland.

(4) A company having an official seal for use outside the United Kingdom may—(a) by writing under its common seal, or

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(b) as respects Scotland, by writing subscribed in accordance with theRequirements of Writing (Scotland) Act 1995 (c. 7),

authorise any person appointed for the purpose to affix the official seal to anydeed or other document to which the company is party.

(5) As between the company and a person dealing with such an agent, the agent’sauthority continues—

(a) during the period mentioned in the instrument conferring theauthority, or

(b) if no period is mentioned, until notice of the revocation or terminationof the agent’s authority has been given to the person dealing with him.

(6) The person affixing the official seal must certify in writing on the deed or otherdocument to which the seal is affixed the date on which, and place at which, itis affixed.

51 Official seal for share certificates etc

(1) A company that has a common seal may have an official seal for use—(a) for sealing securities issued by the company, or(b) for sealing documents creating or evidencing securities so issued.

(2) The official seal—(a) must be a facsimile of the company’s common seal, with the addition

on its face of the word “Securities”, and(b) when duly affixed to the document has the same effect as the

company’s common seal.

52 Pre-incorporation contracts, deeds and obligations

(1) A contract that purports to be made by or on behalf of a company at a timewhen the company has not been formed has effect, subject to any agreement tothe contrary, as one made with the person purporting to act for the companyor as agent for it, and he is personally liable on the contract accordingly.

(2) Subsection (1) applies—(a) to the making of a deed under the law of England and Wales or

Northern Ireland, and(b) to the undertaking of an obligation under the law of Scotland,

as it applies to the making of a contract.

53 Bills of exchange and promissory notes

A bill of exchange or promissory note is deemed to have been made, acceptedor endorsed on behalf of a company if made, accepted or endorsed in the nameof, or by or on behalf or on account of, the company by a person acting underits authority.

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PART 5

A COMPANY’S NAME

CHAPTER 1

GENERAL REQUIREMENTS

Prohibited names

54 Prohibited names

A company must not be registered under the Companies Acts by a name if, inthe opinion of the Secretary of State—

(a) its use by the company would constitute an offence, or(b) it is offensive.

Sensitive words and expressions

55 Names suggesting connection with government or public authority

(1) The approval of the Secretary of State is required for a company to beregistered under the Companies Acts by a name that would be likely to givethe impression that the company is connected with—

(a) Her Majesty’s Government, any part of the Scottish administration orHer Majesty’s Government in Northern Ireland,

(b) a local authority, or(c) any public authority specified for the purposes of this section by

regulations made by the Secretary of State.

(2) For the purposes of this section—“local authority” means—

(a) a local authority within the meaning of the Local GovernmentAct 1972 (c. 70), the Common Council of the City of London orthe Council of the Isles of Scilly,

(b) a council constituted under section 2 of the Local Governmentetc. (Scotland) Act 1994 (c. 39), or

(c) a district council in Northern Ireland;“public authority” includes any person or body having functions of a

public nature.

(3) Regulations under this section are subject to affirmative resolution procedure.

56 Other sensitive words or expressions

(1) The approval of the Secretary of State is required for a company to beregistered under the Companies Acts by a name that includes a word orexpression for the time being specified in regulations made by the Secretary ofState under this section.

(2) Regulations under this section are subject to approval after being made.

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57 Duty to seek comments of government department or other specified body

(1) The Secretary of State may by regulations under—(a) section 55 (name suggesting connection with government or public

authority), or(b) section 56 (other sensitive words or expressions),

require that, in connection with an application for the approval of the Secretaryof State under that section, the applicant must seek the view of a specifiedGovernment department or other body.

(2) Where such a requirement applies, the company must request the specifieddepartment or other body (in writing) to indicate whether (and if so why) it hasany objections to the proposed name.

(3) Where the company is applying for registration under this Act the applicationmust—

(a) include a statement that a request under this section has been made,and

(b) be accompanied by a copy of any response received.

(4) Where the company is seeking to change its name, the instrument effecting thechange, when sent to the registrar, must be accompanied by—

(a) a statement by a director or secretary of the company that a requestunder this section has been made, and

(b) a copy of any response received.

Permitted characters etc

58 Permitted characters etc

(1) The Secretary of State may make provision by regulations—(a) as to the letters or other characters, signs or symbols (including accents

and other diacritical marks) and punctuation that may be used in thename of a company registered under the Companies Acts; and

(b) specifying a standard style or format for the name of a company for thepurposes of registration.

(2) The regulations may prohibit the use of specified characters, signs or symbolswhen appearing in a specified position (in particular, at the beginning of aname).

(3) A company may not be registered under the Companies Acts by a name thatconsists of or includes anything that is not permitted in accordance withregulations under this section.


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CHAPTER 2

INDICATIONS OF COMPANY TYPE OR LEGAL FORM

Required indications for limited companies

59 Public limited companies

(1) The name of a limited company that is a public company must end with“public limited company” or “p.l.c.”.

(2) In the case of a Welsh company, its name may instead end with “cwmnicyfyngedig cyhoeddus” or “c.c.c.”.

(3) This section does not apply to community interest companies (but see section33(3) and (4) of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004 (c. 27)).

60 Private limited companies

(1) The name of a limited company that is a private company must end with“limited” or “ltd.”.

(2) In the case of a Welsh company, its name may instead end with “cyfyngedig”or “cyf.”.

(3) Certain companies are exempt from this requirement (see section 61).

(4) This section does not apply to community interest companies (but see section33(1) and (2) of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004).

61 Exemption from requirement as to use of “limited”

(1) A private company is exempt from section 60 (requirement to have nameending with “limited” or permitted alternative) if—

(a) it is a charity,(b) it is exempted from the requirement of that section by regulations made

by the Secretary of State, or(c) it meets the conditions specified in—

section 62 (continuation of existing exemption: companies limitedby shares), or

section 63 (continuation of existing exemption: companies limitedby guarantee).

(2) The registrar may refuse to register a private limited company by a name thatdoes not include the word “limited” (or a permitted alternative) unless astatement has been delivered to him that the company meets the conditions forexemption.

(3) The registrar may accept the statement as sufficient evidence of the mattersstated in it.


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62 Continuation of existing exemption: companies limited by shares

(1) This section applies to a private company limited by shares that— (a) that on 25th February 1982—

(i) was registered in Great Britain, and(ii) had a name that, by virtue of a licence under section 19 of the

Companies Act 1948 (or corresponding earlier legislation), didnot include the word “limited” or any of the permittedalternatives, or

(b) that on 30th June 1983—(i) was registered in Northern Ireland, and

(ii) had a name that, by virtue of a licence under section 19 of theCompanies (Northern Ireland) Act 1960 (or correspondingearlier legislation), did not include the word “limited” or any ofthe permitted alternatives.

(2) A company to which this section applies is exempt from section 60(requirement to have name ending with “limited” or permitted alternative) solong as—

(a) it continues to meet the following two conditions, and(b) it does not change its name.

(3) The first condition is that the objects of the company are the promotion ofcommerce, art, science, education, religion, charity or any profession, andanything incidental or conducive to any of those objects.

(4) The second condition is that the company’s articles—(a) require its income to be applied in promoting its objects,(b) prohibit the payment of dividends, or any return of capital, to its

members, and(c) require all the assets that would otherwise be available to its members

generally to be transferred on its winding up either—(i) to another body with objects similar to its own, or

(ii) to another body the objects of which are the promotion ofcharity and anything incidental or conducive thereto,

(whether or not the body is a member of the company).

63 Continuation of existing exemption: companies limited by guarantee

(1) A private company limited by guarantee that immediately before thecommencement of this Part—

(a) was exempt by virtue of section 30 of the Companies Act 1985 (c. 6) orArticle 40 of the Companies (Northern Ireland) Order 1986 (S.I.1986/1032 (N.I. 6) from the requirement to have a name including the word“limited” or a permitted alternative, and

(b) had a name that did not include the word “limited” or any of thepermitted alternatives,

is exempt from section 60 (requirement to have name ending with “limited” orpermitted alternative) so long as it continues to meet the following twoconditions and does not change its name.

(2) The first condition is that the objects of the company are the promotion ofcommerce, art, science, education, religion, charity or any profession, andanything incidental or conducive to any of those objects.

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(3) The second condition is that the company’s articles—(a) require its income to be applied in promoting its objects,(b) prohibit the payment of dividends to its members, and(c) require all the assets that would otherwise be available to its members

generally to be transferred on its winding up either—(i) to another body with objects similar to its own, or

(ii) to another body the objects of which are the promotion ofcharity and anything incidental or conducive thereto,

(whether or not the body is a member of the company).

64 Exempt company: restriction on alteration of articles

(1) A private company—(a) that is exempt under section 62 or 63 from the requirement to use

“limited” (or a permitted alternative) as part of its name, and(b) whose name does not include “limited” or any of the permitted

alternatives,must not alter its articles so that it ceases to comply with the conditions forexemption under that section.

(2) If subsection (1) above is contravened an offence is committed by—(a) the company, and(b) any officer of the company who is in default.

For this purpose a shadow director is treated as an officer of the company.

(3) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 5 on the standard scale and, forcontinued contravention, to a daily default fine not exceeding one-tenth oflevel 5 on the standard scale.

(4) Where—(a) it was a condition of the licence referred to in section 62(1)(b) that the

company’s memorandum or articles contain provision preventing analteration of them without the approval of—

(i) the Board of Trade or a Northern Ireland department (or anyother department or Minister), or

(ii) the Charity Commission,and

(b) immediately before the commencement of this section the company’smemorandum or articles contained such provision,

that condition (so far as still effective), and the provision required by it, shallcease to have effect.This does not apply if, or to the extent that, the provision is required by orunder any other enactment.

(5) It is hereby declared that any such provision as is mentioned in subsection(4)(a) formerly contained in a company’s memorandum was at all materialtimes capable, with the appropriate approval, of being altered or removedunder section 17 of the Companies Act 1985 (c. 6) or Article 28 of theCompanies (Northern Ireland) Order 1986 (or corresponding earlierenactments).

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65 Power to direct change of name in case of company ceasing to be entitled to exemption

(1) If it appears to the Secretary of State that a company whose name does notinclude “limited” or any of the permitted alternatives—

(a) has ceased to be entitled to exemption under section 61(1)(a) or (b), or(b) in the case of a company within section 62 or 63 (which impose

conditions as to the objects and articles of the company)—(i) has carried on any business other than the promotion of any of

the objects mentioned in subsection (2) of that section, or(ii) has acted inconsistently with the provision required by

subsection (3)(a) or (b) of that section,the Secretary of State may direct the company to change its name so that it endswith “limited” or one of the permitted alternatives.

(2) The direction must be in writing and must specify the period within which thecompany is to change its name.

(3) A change of name in order to comply with a direction under this section maybe made by resolution of the directors.This is without prejudice to any other method of changing the company’sname.

(4) Where a resolution of the directors is passed in accordance with subsection (3),the company must give notice to the registrar of the change.Sections 80 and 81 apply as regards the registration and effect of the change.

(5) If the company fails to comply with a direction under this section an offence iscommitted by—

(a) the company, and(b) any officer of the company who is in default.


(7) A company that has been directed to change its name under this section maynot, without the approval of the Secretary of State, subsequently change itsname so that it does not include “limited” or one of the permitted alternatives.This does not apply to a change of name on re-registration or on conversion toa community interest company.

Inappropriate use of indications of company type or legal form

66 Inappropriate use of indications of company type or legal form

(1) The Secretary of State may make provision by regulations prohibiting the usein a company name of specified words, expressions or other indications —

(a) that are associated with a particular type of company or form oforganisation, or

(b) that are similar to words, expressions or other indications associatedwith a particular type of company or form of organisation.

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(2) The regulations may prohibit the use of words, expressions or otherindications—

(a) in a specified part, or otherwise than in a specified part, of a company’sname;

(b) in conjunction with, or otherwise than in conjunction with, such otherwords, expressions or indications as may be specified.

(3) A company must not be registered under the Companies Acts by a name thatconsists of or includes anything prohibited by regulations under this section.

(4) In this section “specified” means specified in the regulations.


CHAPTER 3

SIMILARITY TO OTHER NAMES

Similarity to other name on registrar’s index

67 Name not to be the same as another in the index

(1) A company must not be registered under this Act by a name that is the same asanother name appearing in the registrar’s index of company names.

(2) The Secretary of State may make provision by regulations supplementing thissection.

(3) The regulations may make provision—(a) as to matters that are to be disregarded, and(b) as to words, expressions, signs or symbols that are, or are not, to be

regarded as the same,for the purposes of this section.

(4) The regulations may provide—(a) that registration by a name that would otherwise be prohibited under

this section is permitted—(i) in specified circumstances, or

(ii) with specified consent, and(b) that if those circumstances obtain or that consent is given at the time a

company is registered by a name, a subsequent change ofcircumstances or withdrawal of consent does not affect the registration.


68 Power to direct change of name in case of similarity to existing name

(1) The Secretary of State may direct a company to change its name if it has beenregistered in a name that is the same as or, in the opinion of the Secretary ofState, too like—

(a) a name appearing at the time of the registration in the registrar’s indexof company names, or

(b) a name that should have appeared in that index at that time.

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(2) The Secretary of State may make provision by regulations supplementing thissection.

(3) The regulations may make provision—(a) as to matters that are to be disregarded, and(b) as to words, expressions, signs or symbols that are, or are not, to be

regarded as the same,for the purposes of this section.

(4) The regulations may provide—(a) that no direction is to be given under this section in respect of a name—

(i) in specified circumstances, or(ii) if specified consent is given, and

(b) that a subsequent change of circumstances or withdrawal of consentdoes not give rise to grounds for a direction under this section.


69 Direction to change name: supplementary provisions

(1) The following provisions have effect in relation to a direction under section 68(power to direct change of name in case of similarity to existing name).

(2) Any such direction—(a) must be given within twelve months of the company’s registration by

the name in question, and(b) must specify the period within which the company is to change its

name.

(3) The Secretary of State may by a further direction extend that period.Any such direction must be given before the end of the period for the timebeing specified.

(4) If a company fails to comply with the direction, an offence is committed by—(a) the company, and(b) every officer of the company who is in default.



Similarity to other name in which person has goodwill

70 Objection to company’s registered name

(1) A person (“the applicant”) may object to a company’s registered name on theground—

(a) that it is the same as a name associated with the applicant in which hehas goodwill, or

(b) that it is sufficiently similar to such a name that its use in Great Britainwould be likely to mislead by suggesting a connection between thecompany and the applicant.

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(2) The objection must be made by application to a company names adjudicator(see section 71).

(3) The company concerned shall be the primary respondent to the application.Any of its members or directors may be joined as respondents.

(4) If the ground specified in subsection (1)(a) or (b) is established, it is for therespondents to show—

(a) that the name was registered before the commencement of the activitieson which the applicant relies to show goodwill; or

(b) that the company—(i) is operating under the name, or

(ii) is proposing to do so and has incurred substantial start-up costsin preparation, or

(iii) was formerly operating under the name and is now dormant;or

(c) that the name was registered in the ordinary course of a companyformation business and the company is available for sale to theapplicant on the standard terms of that business; or

(d) that the name was adopted in good faith; or(e) that the interests of the applicant are not adversely affected to any

significant extent.If none of those is shown, the objection shall be upheld.

(5) If the facts mentioned in subsection (4)(a), (b) or (c) are established, theobjection shall nevertheless be upheld if the applicant shows that the mainpurpose of the respondents (or any of them) in registering the name was toobtain money (or other consideration) from the applicant or prevent him fromregistering the name.

(6) If the objection is not upheld under subsection (4) or (5), it shall be dismissed.

(7) In this section “goodwill” includes reputation of any description.

71 Company names adjudicators

(1) The Secretary of State shall appoint persons to be company namesadjudicators.

(2) The persons appointed must have such legal or other experience as, in theSecretary of State’s opinion, makes them suitable for appointment.

(3) An adjudicator—(a) holds office in accordance with the terms of his appointment,(b) is eligible for re-appointment when his term of office ends,(c) may resign at any time by notice in writing given to the Secretary of

State, and(d) may be dismissed by the Secretary of State on the ground of incapacity

or misconduct.

(4) One of the adjudicators shall be appointed Chief Adjudicator.He shall perform such functions as the Secretary of State may assign to him.

(5) The other adjudicators shall undertake such duties as the Chief Adjudicatormay determine.

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(6) The Secretary of State may—(a) appoint staff for the adjudicators;(b) pay remuneration and expenses to the adjudicators and their staff;(c) defray other costs arising in relation to the performance by the

adjudicators of their functions;(d) compensate persons for ceasing to be adjudicators.

72 Procedural rules

(1) The Secretary of State may make rules about proceedings before a companynames adjudicator.

(2) The rules may, in particular, make provision—(a) as to how an application is to be made and the form and content of an

application or other documents;(b) for fees to be charged;(c) about the service of documents and the consequences of failure to serve

them;(d) as to the form and manner in which evidence is to be given;(e) for circumstances in which hearings are required and those in which

they are not;(f) for cases to be heard by more than one adjudicator;(g) setting time limits for anything required to be done in connection with

the proceedings (and allowing for such limits to be extended, even ifthey have expired);

(h) enabling the adjudicator to strike out an application, or any defence, inwhole or in part—

(i) on the ground that it is vexatious, has no reasonable prospect ofsuccess or is otherwise misconceived, or

(ii) for failure to comply with the requirements of the rules;(i) conferring power to order security for costs (in Scotland, caution for

expenses);(j) as to how far proceedings are to be held in public;

(k) requiring one party to bear the costs (in Scotland, expenses) of anotherand as to the taxing (or settling) the amount of such costs (or expenses).

(3) The rules may confer on the Chief Adjudicator power to determine any matterthat could be the subject of provision in the rules.

(4) Rules under this section shall be made by statutory instrument which shall besubject to annulment in pursuance of a resolution of either House ofParliament.

73 Order requiring name to be changed

(1) If an application under section 70 is upheld, the adjudicator shall make anorder—

(a) requiring the respondent company to change its name to one that is notan offending name, and

(b) requiring all the respondents—(i) to take all such steps as are within their power to make, or

facilitate the making, of that change, and

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(ii) not to cause or permit any steps to be taken calculated to resultin another company being registered with a name that is anoffending name.

(2) An “offending name” means a name that, by reason of its similarity to the nameassociated with the applicant in which he claims goodwill, would be likely—

(a) to be the subject of a direction under section 68 (power of registrar todirect change of name), or

(b) to give rise to a further application under section 70.

(3) The order must specify a date by which the respondent company’s name is tobe changed and may be enforced—

(a) in England and Wales or Northern Ireland, in the same way as an orderof the High Court;

(b) in Scotland, in the same way as a decree of the Court of Session.

(4) If the respondent company’s name is not changed in accordance with the orderby the specified date, the adjudicator may determine a new name for thecompany.

(5) If the adjudicator determines a new name for the respondent company he mustgive notice of his determination—

(a) to the applicant,(b) to the respondents, and(c) to the registrar.

(6) For the purposes of this section a company’s name is changed when the changetakes effect in accordance with section 81(1) (on the issue of the newcertification of incorporation).

74 Appeal from adjudicator’s decision

(1) An appeal lies to the court from any decision of a company names adjudicatorto uphold or dismiss an application under section 70.

(2) Notice of appeal against a decision upholding an application must be givenbefore the date specified in the adjudicator’s order by which the respondentcompany’s name is to be changed.

(3) If notice of appeal is given against a decision upholding an application, theeffect of the adjudicator’s order is suspended.

(4) If on appeal the court—(a) affirms the decision of the adjudicator to uphold the application, or(b) reverses the decision of the adjudicator to dismiss the application,

the court may (as the case may require) specify the date by which theadjudicator’s order is to be complied with, remit the matter to the adjudicatoror make any order that the adjudicator might have made.

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CHAPTER 4

OTHER POWERS OF THE SECRETARY OF STATE

75 Provision of misleading information etc

(1) If it appears to the Secretary of State—(a) that misleading information has been given for the purposes of a

company’s registration by a particular name, or(b) that an undertaking or assurance has been given for that purpose and

has not been fulfilled,the Secretary of State may direct the company to change its name.

(2) Any direction under this section—(a) must be given within five years of the company’s registration by that

name, and(b) must specify the period within which the company is to change its

name.

(3) The Secretary of State may by a further direction extend the period withinwhich the company is to change its name.Any such direction must be given before the end of the period for the timebeing specified.

(4) A direction under this section must be in writing.

(5) If a company fails to comply with a direction under this section, an offence iscommitted by—

(a) the company, and(b) every officer of the company who is in default.



76 Misleading indication of activities

(1) If in the opinion of the Secretary of State the name by which a company isregistered gives so misleading an indication of the nature of its activities as tobe likely to cause harm to the public, the Secretary of State may direct thecompany to change its name.

(2) The direction must be complied with within a period of six weeks from the dateof the direction or such longer period as the Secretary of State may think fit toallow.This does not apply if an application is duly made to the court under thefollowing provisions.

(3) The company may apply to the court to set the direction aside.The application must be made within the period of three weeks from the dateof the direction.

(4) The court may set the direction aside or confirm it.

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If the direction is confirmed, the court shall specify the period within which thedirection is to be complied with.





CHAPTER 5

CHANGE OF NAME

77 Change of name

(1) A company may change its name—(a) by special resolution (see section 78), or(b) by other means provided for by the company’s articles (see section 79).

(2) The name of a company may also be changed—(a) by resolution of the directors acting under section 65 (change of name

to comply with direction of Secretary of State under that section); or(b) by order under section 73 (order of adjudicator following objection to

company name).

78 Change of name by special resolution

(1) Where a change of name has been agreed to by a company by specialresolution, the company must give notice to the registrar.This is in addition to the obligation to forward a copy of the resolution to theregistrar.

(2) Where a change of name by special resolution is conditional on the occurrenceof an event, the notice given to the registrar of the change must—

(a) specify that the change is conditional, and(b) state whether the event has occurred.

(3) If the notice states that the event has not occurred—(a) the registrar is not required to act under section 80 (registration and

issue of new certificate of incorporation) until further notice,(b) when the event occurs, the company must give notice to the registrar

stating that it has occurred, and(c) the registrar may rely on the statement as sufficient evidence of the

matters stated in it.

79 Change of name by means provided for in company’s articles

(1) Where a change of a company’s name has been made by other means providedfor by its articles—

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(a) the company must give notice to the registrar, and(b) the notice must be accompanied by a statement that the change of name

has been made by means provided for by the company’s articles.

(2) The registrar may rely on the statement as sufficient evidence of the mattersstated in it.

80 Change of name: registration and issue of new certificate of incorporation

(1) This section applies where the registrar receives notice of a change of acompany’s name.

(2) If the registrar is satisfied—(a) that the new name complies with the requirements of this Part, and(b) that the requirements of the Companies Acts, and any relevant

requirements of the company’s articles, with respect to a change ofname are complied with,

the registrar must enter the new name on the register in place of the formername.

(3) On the registration of the new name, the registrar must issue a certificate ofincorporation altered to meet the circumstances of the case.

81 Change of name: effect

(1) A change of a company’s name has effect from the date on which the newcertificate of incorporation is issued.

(2) The change does not affect any rights or obligations of the company or renderdefective any legal proceedings by or against it.

(3) Any legal proceedings that might have been continued or commenced againstit by its former name may be continued or commenced against it by its newname.

CHAPTER 6

TRADING DISCLOSURES

82 Requirement to disclose company name etc

(1) The Secretary of State may by regulations make provision requiringcompanies—

(a) to display specified information in specified locations,(b) to state specified information in specified descriptions of document or

communication, and(c) to provide specified information on request to those they deal with in

the course of their business.

(2) The regulations—(a) must in every case require disclosure of the name of the company, and(b) may make provision as to the manner in which any specified

information is to be displayed, stated or provided.

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(3) The regulations may provide that, for the purposes of any requirement todisclose a company’s name, any variation between a word or words requiredto be part of the name and a permitted abbreviation of that words or thosewords (or vice versa) shall be disregarded.



83 Civil consequences of failure to make required disclosure

(1) This section applies to any legal proceedings brought by a company to whichsection 82 applies (requirement to disclose company name etc) to enforce aright arising out of a contract made in the course of a business in respect ofwhich the company was, at the time the contract was made, in breach ofregulations under that section.

(2) The proceedings shall be dismissed if the defendant (in Scotland, the defender)to the proceedings shows—

(a) that he has a claim against the claimant (pursuer) arising out of thecontract that he has been unable to pursue by reason of the latter’sbreach of the regulations, or

(b) that he has suffered some financial loss in connection with the contractby reason of the claimant’s (pursuer’s) breach of the regulations,

unless the court before which the proceedings are brought is satisfied that it isjust and equitable to permit the proceedings to continue.

(3) This section does not affect the right of any person to enforce such rights as hemay have against another person in any proceedings brought by that person.

84 Criminal consequences of failure to make required disclosures

(1) Regulations under section 82 may provide—(a) that where a company fails, without reasonable excuse, to comply with

any specified requirement of regulations under that section an offenceis committed by—

(i) the company, and(ii) every officer of the company who is in default;

(b) that a person guilty of such an offence is liable on summary convictionto a fine not exceeding level 3 on the standard scale and, in the case ofcontinued contravention, to a daily default fine not exceeding one-tenth of level 3 on the standard scale.

(2) In subsection (1)(a) “specified” means specified in the regulations.

85 Minor variations in form of name to be left out of account

(1) For the purposes of this Chapter, in considering a company’s name no accountis to be taken of—

(a) whether upper or lower case characters (or a combination of the two)are used,

(b) whether diacritical marks or punctuation are present or absent,(c) whether the name is in the same format or style as is specified under

section 58(1)(b) for the purposes of registration,

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provided there is no real likelihood of names differing only in those respectsbeing taken to be different names.

(2) This does not affect the operation of regulations under section 58(1)(a)permitting only specified characters, diacritical marks or punctuation.

PART 6

A COMPANY’S REGISTERED OFFICE

General

86 A company’s registered office

A company must at all times have a registered office to which allcommunications and notices may be addressed.

87 Change of address of registered office

(1) The company may change the address of its registered office by giving noticeto the registrar.

(2) The change takes effect upon the notice being registered by the registrar, butuntil the end of the period of 14 days beginning with the date on which it isregistered a person may validly serve any document on the company at theaddress previously registered.

(3) For the purposes of any duty of a company—(a) to keep available for inspection at its registered office any register,

index or other document, or(b) to mention the address of its registered office in any document,

a company that has given notice to the registrar of a change in the address ofits registered office may act on the change as from such date, not more than 14days after the notice is given, as it may determine.

(4) Where a company unavoidably ceases to perform at its registered office anysuch duty as is mentioned in subsection (3)(a) in circumstances in which it wasnot practicable to give prior notice to the registrar of a change in the address ofits registered office, but—

(a) resumes performance of that duty at other premises as soon spracticable, and

(b) gives notice accordingly to the registrar of a change in the situation ofits registered office within 14 days of doing so,

it is not to be treated as having failed to comply with that duty.

Welsh companies

88 Welsh companies

(1) In the Companies Acts a “Welsh company” means a company as to which it isstated in the register that its registered office is to be situated in Wales.

(2) A company—(a) whose registered office is in Wales, and

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(b) as to which it is stated in the register that is registered office is to besituated in England and Wales,

may by special resolution require the register to be amended so that it statesthat the company’s registered office is to be situated in Wales.

(3) A company—(a) whose registered office is in Wales, and(b) as to which it is stated in the register that is registered office is to be

situated in Wales,may by special resolution require the register to be amended so that it statesthat the company’s registered office is to be situated in England and Wales.

(4) Where a company passes a resolution under this section it must give notice tothe registrar, who shall—

(a) amend the register accordingly, and(b) issue a new certificate of incorporation altered to meet the

circumstances of the case.

PART 7

RE-REGISTRATION AS A MEANS OF ALTERING A COMPANY’S STATUS

Introductory

89 Alteration of status by re-registration

A company may by re-registration under this Part alter its status—(a) from a private company to a public company (see sections 90 to 96);(b) from a public company to a private company (see sections 97 to 101);(c) from a private limited company to an unlimited company (see sections

102 to 104);(d) from an unlimited private company to a limited company (see sections

105 to 107);(e) from a public company to an unlimited private company (see sections

108 to 110).

Private company becoming public

90 Re-registration of private company as public

(1) A private company may be re-registered as a public company limited by sharesif—

(a) a special resolution that it should be so re-registered is passed,(b) the conditions specified below are met, and(c) an application for re-registration is delivered to the registrar in

accordance with section 94, together with—(i) the other documents required by that section, and

(ii) a statement of compliance.

(2) The conditions are—(a) that the company is limited by shares;

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(b) that the requirements of section 91 are met as regards to its sharecapital;

(c) that the requirements of section 92 are met as regards its net assets;(d) if section 93 applies (recent allotment of shares for non-cash

consideration), the requirements of that section are met, and(e) that the company has not previously been re-registered as unlimited.

(3) The company must make such changes—(a) in its name, and(b) in its articles,

as are necessary in connection with its becoming a public company.

(4) If the company is unlimited it must also make such changes in its articles as arenecessary in connection with its becoming a company limited by shares.

91 Requirements as to share capital

(1) The following requirements must be met at the time the special resolution ispassed that the company should be re-registered as a public company—

(a) the nominal value of the company’s allotted share capital must be notless than the authorised minimum;

(b) each of the company’s allotted shares must be paid up at least as to one-quarter of the nominal value of that share and the whole of anypremium on it;

(c) if any shares in the company or any premium on them have been fullyor partly paid up by an undertaking given by any person that he oranother should do work or perform services (whether for the companyor any other person), the undertaking must have been performed orotherwise discharged;

(d) if shares have been allotted as fully or partly paid up as to their nominalvalue or any premium on them otherwise than in cash, and theconsideration for the allotment consists of or includes an undertakingto the company (other than one to which paragraph (c) applies), theneither—

(i) the undertaking must have been performed or otherwisedischarged, or

(ii) there must be a contract between the company and some personpursuant to which the undertaking is to be performed withinfive years from the time the special resolution is passed.

(2) For the purpose of determining whether the requirements in subsection (1)(b),(c) and (d) are met, the following may be disregarded—

(a) shares allotted—(i) before 22nd June 1982 in the case of a company then registered

in Great Britain, or(ii) before 31st December 1984 in the case of a company then

registered in Northern Ireland;(b) shares allotted in pursuance of an employees’ share scheme by reason

of which the company would, but for this subsection, be precludedunder subsection (1)(b) (but not otherwise) from being re-registered asa public company.

(3) No more than one-tenth of the nominal value of the company’s allotted sharecapital is to be disregarded under subsection (2)(a).

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For this purpose the allotted share capital is treated as not including sharesdisregarded under subsection (2)(b).

(4) Shares disregarded under subsection (2) are treated as not forming part of theallotted share capital for the purposes of subsection (1)(a).

(5) A company must not be re-registered as a public company if it appears to theregistrar that—

(a) the company has resolved to reduce its share capital,(b) the reduction—

(i) is supported by a solvency statement in accordance with section135B of the Companies Act 1985 (c. 6),

(ii) has been confirmed by an order of the court under section 137of that Act, or

(iii) is made under section 582 of this Act (reduction in connectionwith redenomination of share capital), and

(c) the effect of the reduction is, or will be, that the nominal value of thecompany’s allotted share capital is below the authorised minimum.

(6) In this section “the authorised minimum” has the meaning given by section533.

92 Requirements as to net assets

(1) A company applying to re-register as a public company must obtain—(a) a balance sheet prepared as at a date not more than seven months

before the date on which the application is delivered to the registrar,(b) an unqualified report by the company’s auditor on that balance sheet,

and(c) a written statement by the company’s auditor that in his opinion at the

balance sheet date the amount of the company’s net assets was not lessthan the aggregate of its called-up share capital and undistributablereserves.

(2) Between the balance sheet date and the date on which the application for re-registration is delivered to the registrar, there must be no change in thecompany’s financial position that results in the amount of its net assetsbecoming less than the aggregate of its called-up share capital andundistributable reserves.

(3) In subsection (1)(b) an “unqualified report” means—(a) if the balance sheet was prepared for a financial year of the company, a

report stating without material qualification the auditor’s opinion thatthe balance sheet has been properly prepared in accordance with therequirements of this Act;

(b) if the balance sheet was not prepared for a financial year of thecompany, a report stating without material qualification the auditor’sopinion that the balance sheet has been properly prepared inaccordance with the provisions of this Act which would have appliedif it had been prepared for a financial year of the company.

(4) For the purposes of an auditor’s report on a balance sheet that was notprepared for a financial year of the company, the provisions of this Act applywith such modifications as are necessary by reason of that fact.

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(5) For the purposes of subsection (3) a qualification is material unless the auditorstates in his report that the matter giving rise to the qualification is not materialfor the purpose of determining (by reference to the company’s balance sheet)whether at the balance sheet date the amount of the company’s net assets wasnot less than the aggregate of its called up share capital and undistributablereserves.

(6) In this Part “net assets” and “undistributable reserves” have the meaningsgiven by section 264(2) and (3) of the Companies Act 1985 (c. 6).

93 Recent allotment of shares for non-cash consideration

(1) This section applies where—(a) shares are allotted by the company in the period between the date as at

which the balance sheet required by section 92 is prepared and thepassing of the resolution that the company should re-register as apublic company, and

(b) the shares are allotted as fully or partly paid up as to their nominalvalue or any premium on them otherwise than in cash.

(2) The registrar shall not entertain an application by the company for re-registration as a public company unless—

(a) the consideration for the allotment has been valued in accordance withsection 108 of the Companies Act 1985 and a report with respect to thevalue of the consideration has been made to the company (inaccordance with that section) during the six months immediatelypreceding the allotment, or

(b) the allotment is in connection with—(i) a share exchange (see subsections (3) to (5) below), or

(ii) a proposed merger with another company (see subsection (6)below).

(3) An allotment is in connection with a share exchange if—(a) the shares are allotted in connection with an arrangement under which

the whole or part of the consideration for the shares allotted is providedby—

(i) the transfer to the company allotting the shares of shares (orshares of a particular class) in another company, or

(ii) the cancellation of shares (or shares of a particular class) inanother company; and

(b) the allotment is open to all the holders of the shares of the othercompany in question (or, where the arrangement applies only to sharesof a particular class, to all the holders of the company’s shares of thatclass) to take part in the arrangement in connection with which theshares are allotted.

(4) In determining whether a person is a holder of shares for the purposes ofsubsection (3), there shall be disregarded—

(a) shares held by, or by a nominee of, the company allotting the shares;(b) shares held by, or by a nominee of—

(i) the holding company of the company allotting the shares,(ii) a subsidiary of the company allotting the shares, or

(iii) a subsidiary of the holding company of the company allottingthe shares.

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(5) It is immaterial, for the purposes of deciding whether an allotment is inconnection with a share exchange, whether or not the arrangement inconnection with which the shares are allotted involves the issue to thecompany allotting the shares of shares (or shares of a particular class) in theother company.

(6) There is a proposed merger with another company if one of the companiesconcerned proposes to acquire all the assets and liabilities of the other inexchange for the issue of its shares or other securities to shareholders of theother (whether or not accompanied by a cash payment).“Another company” includes any body corporate and any body to whichletters patent have been issued under the Chartered Companies Act 1837(c. 73).

(7) For the purposes of this section— (a) the consideration for an allotment does not include any amount

standing to the credit of any of the company’s reserve accounts, or of itsprofit and loss account, that has been applied in paying up (to anyextent) any of the shares allotted or any premium on those shares; and

(b) “arrangement” means any agreement, scheme or arrangement,including an arrangement sanctioned in accordance with—

(i) section 425 of the Companies Act 1985 (c. 6) (companycompromise with creditors and members), or

(ii) section 110 of the Insolvency Act 1986 (c. 45) or Article 96 of theInsolvency (Northern Ireland) Order 1989 (liquidator inwinding up accepting shares as consideration for sale ofcompany’s property).

94 Application and accompanying documents

(1) An application for re-registration as a public company must contain—(a) a statement of the company’s proposed name on re-registration; and(b) in the case of a company that does not have a secretary, a statement of

the company’s proposed secretary (see section 95).

(2) The application must be accompanied by—(a) a copy of the special resolution that the company should re-register as

a public company (unless a copy has already been forwarded to theregistrar under Chapter 3 of Part 3);

(b) a copy of the company’s articles as proposed to be amended;(c) a copy of the balance sheet and other documents referred to in section

92(1), and(d) if section 93 applies (recent allotment of shares for non-cash

consideration), a copy of the valuation report (if any) under subsection(2)(a) of that section.

(3) The statement of compliance required to be delivered together with theapplication is a statement that the requirements of this Part as to re-registrationas a public company have been complied with.

(4) The registrar may accept the statement of compliance as sufficient evidencethat the company is entitled to be re-registered as a public company.

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95 Statement of proposed secretary

(1) The statement of the company’s proposed secretary must contain the requiredparticulars of the person who is or the persons who are to be the secretary orjoint secretaries of the company.

(2) The required particulars are the particulars that will be required to be stated inthe company’s register of secretaries (see sections 254 to 256).

(3) The statement must also contain a consent by the person named as secretary,or each of the persons named as joint secretaries, to act in the relevant capacity.If all the partners in a firm are to be joint secretaries, consent may be given byone partner on behalf of all of them.

96 Issue of certificate of incorporation on re-registration

(1) If on an application for re-registration as a public company the registrar issatisfied that the company is entitled to be so re-registered, the company shallbe re-registered accordingly.

(2) The registrar must issue a certificate of incorporation altered to meet thecircumstances of the case.

(3) The certificate must state that it is issued on re-registration and the date onwhich it is issued.

(4) On the issue of the certificate—(a) the company by virtue of the issue of the certificate becomes a public

company,(b) the changes in the company’s name and articles take effect, and(c) any person nominated in a statement under section 95 (statement of

proposed secretary) is deemed to have been appointed to that office.

(5) The certificate is conclusive evidence—(a) that the requirements of this Act as to re-registration have been

complied with, and(b) that the company is a public company.

Public company becoming private

97 Re-registration of public company as private limited company

(1) A public company may be re-registered as a private limited company if—(a) a special resolution that it should be so re-registered is passed,(b) the conditions specified below are met, and(c) an application for re-registration is delivered to the registrar in



(2) The conditions are that—(a) the period during which an application for cancellation of the

resolution under section 98 may be made has expired without any suchapplication having been made, or

(b) where such an application has been made—

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(i) the application has been withdrawn, or(ii) an order has been made confirming the resolution and a copy of

that order has been delivered to the registrar.


as are necessary in connection with its becoming a private company limited byshares or, as the case may be, by guarantee.

98 Application to court to cancel resolution

(1) Where a special resolution by a public company to be re-registered as a privatelimited company has been passed, an application to the court for thecancellation of the resolution may be made—

(a) by the holders of not less in the aggregate than 5% in nominal value ofthe company’s issued share capital or any class of the company’s issuedshare capital (disregarding any shares held by the company as treasuryshares);

(b) if the company is not limited by shares, by not less than 5% of itsmembers; or

(c) by not less than 50 of the company’s members;but not by a person who has consented to or voted in favour of the resolution.

(2) The application must be made within 28 days after the passing of the resolutionand may be made on behalf of the persons entitled to make it by such one ormore of their number as they may appoint for the purpose.

(3) On the hearing of the application the court shall make an order eithercancelling or confirming the resolution.

(4) The court may—(a) make that order on such terms and conditions as it thinks fit,(b) if it thinks fit adjourn the proceedings in order that an arrangement

may be made to the satisfaction of the court for the purchase of theinterests of dissentient members, and

(c) give such directions, and make such orders, as it thinks expedient forfacilitating or carrying into effect any such arrangement.

(5) The court’s order may, if the court thinks fit—(a) provide for the purchase by the company of the shares of any of its

members and for the reduction accordingly of the company’s capital;and

(b) make such alteration in the company’s articles as may be required inconsequence of that provision.

(6) The court’s order may, if the court thinks fit, require the company not to makeany, or any specified, alterations in its articles without the leave of the court.

99 Notice to registrar of court application or order

(1) If an application is made under section 98 (application for cancellation ofresolution) the company must immediately give notice to the registrar.

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(2) Within 15 days of the making of the court’s order on the application, or suchlonger period as the court may at any time direct, the company must deliver tothe registrar a copy of the order.

(3) If a company fails to comply with subsection (1) or (2) an offence is committedby—

(a) the company,(b) every officer of the company who is in default.



(1) An application for re-registration as a private limited company must contain astatement of the company’s proposed name on re-registration.

(2) The application must be accompanied by—(a) a copy of the resolution that the company should re-register as a private

limited company (unless a copy has already been forwarded to theregistrar under Chapter 3 of Part 3); and

(b) a copy of the company’s articles as proposed to be amended.

(3) The statement of compliance required to be delivered together with theapplication is a statement that the requirements of this Part as to re-registrationas a private limited company have been complied with.

(4) The registrar may accept the statement of compliance as sufficient evidencethat the company is entitled to be re-registered as a private limited company.


(1) If on an application for re-registration as a private limited company theregistrar is satisfied that the company is entitled to be so re-registered, thecompany shall be re-registered accordingly.



(4) On the issue of the certificate—(a) the company by virtue of the issue of the certificate becomes a private

limited company, and(b) the changes in the company’s name and articles take effect.


complied with, and(b) that the company is a limited company.

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Private limited company becoming unlimited

102 Re-registration of private limited company as unlimited

(1) A private limited company may be re-registered as an unlimited company if—(a) all the members of the company have assented to its being so re-

registered,(b) the conditions specified below are met, and(c) an application for re-registration is delivered to the registrar in



(2) The conditions are that the company has not previously been re-registered—(a) as limited (having previously been unlimited), or(b) as unlimited (having previously been limited).

(3) The company must make such changes—(a) in its name and its articles, as are necessary in connection with its

becoming an unlimited company; and(b) if it is to have a share capital, as are necessary in connection with its

becoming an unlimited company having a share capital.

(4) For the purposes of this section—(a) a trustee in bankruptcy of a member of the company is entitled, to the

exclusion of the member, to assent to the company’s becomingunlimited; and

(b) the personal representative of a deceased member of the company mayassent on behalf of the deceased.


(1) An application for re-registration as an unlimited company must contain astatement of the company’s proposed name on re-registration.

(2) The application must be accompanied by—(a) the prescribed form of assent to the company’s being registered as

unlimited company, subscribed by or on behalf of all the members ofthe company;

(b) if the company is to have a share capital—(i) a statement of initial shareholdings, and

(ii) a statement of capital; and(c) a copy of the company’s articles as proposed to be amended.

For the form of the statements required by paragraph (b), see section 111.

(3) The statement of compliance required to be delivered together with theapplication is a statement that the requirements of this Part as to re-registrationas an unlimited company have been complied with.

(4) The statement must contain a statement by the directors of the company—(a) that the persons by whom or on whose behalf the form of assent is

subscribed constitute the whole membership of the company, and(b) if any of the members have not subscribed that form themselves, that

the directors have taken all reasonable steps to satisfy themselves that

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each person who subscribed it on behalf of a member was lawfullyempowered to do so.

(5) The registrar may accept the statement of compliance as sufficient evidencethat the company is entitled to be re-registered as an unlimited company.

(6) References in this section to subscription include, in relation to a document inelectronic form, authentication in such manner as the registrar may require.


(1) If on an application for re-registration of a private limited company as anunlimited company the registrar is satisfied that the company is entitled to beso re-registered, the company shall be re-registered accordingly.



(4) On the issue of the certificate—(a) the company by virtue of the issue of the certificate becomes an

unlimited company, and(b) the changes in the company’s name and articles take effect.

(5) The certificate is conclusive evidence that the requirements of this Act as to re-registration have been complied with.

Unlimited private company becoming limited

105 Re-registration of unlimited company as limited

(1) An unlimited company may be re-registered as a private limited company if—(a) a special resolution that it should be so re-registered is passed,(b) the condition specified below is met, and(c) an application for re-registration is delivered to the registrar in



(2) The condition is that the company has not previously been re-registered asunlimited.

(3) The special resolution must state whether the company is to be limited byshares or by guarantee.


as are necessary in connection with its becoming a company limited by sharesor, as the case may be, by guarantee.

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(1) An application for re-registration as a limited company must contain astatement of the company’s proposed name on re-registration.

(2) The application must be accompanied by—(a) a copy of the resolution that the company should re-register as a private

limited company (unless a copy has already been forwarded to theregistrar under Chapter 3 of Part 3);

(b) if the company is to be limited by shares and has not previously had ashare capital—

(i) a statement of initial shareholdings, and(ii) a statement of capital;

(c) if the company is to be limited by guarantee, a statement of guarantee;(d) a copy of the company’s articles as proposed to be amended.

For the form of the statements required by paragraph (b) and (c), see section111.

(3) The statement of compliance required to be delivered together with theapplication is a statement that the requirements of this Part as to re-registrationas a limited company have been complied with.

(4) The registrar may accept the statement of compliance as sufficient evidencethat the company is entitled to be re-registered as a limited company.


(1) If on an application for re-registration of an unlimited company as a limitedcompany the registrar is satisfied that the company is entitled to be so re-registered, the company shall be re-registered accordingly.


(3) The certificate must state that it is issued on re-registration and the date onwhich it is so issued.

(4) On the issue of the certificate—(a) the company by virtue of the issue of the certificate becomes a limited

company, and(b) the changes in the company’s name and articles take effect.


complied with, and(b) that the company is a limited company.

Public company becoming private and unlimited

108 Re-registration of public company as private and unlimited

(1) A public company limited by shares may be re-registered as an unlimitedprivate company with a share capital if—

(a) all the members of the company have assented to its being so re-registered,

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(b) the condition specified below is met, and(c) an application for re-registration is delivered to the registrar in



(2) The condition is that the company has not previously been re-registered—(a) as limited, or(b) as unlimited.


as are necessary in connection with its becoming an unlimited privatecompany.

(4) For the purposes of this section—(a) a trustee in bankruptcy of a member of the company is entitled, to the

exclusion of the member, to assent to the company’s re-registration;and

(b) the personal representative of a deceased member of the company mayassent on behalf of the deceased.


(1) An application for re-registration of a public company as an unlimited privatecompany must contain a statement of the company’s proposed name on re-registration.

(2) The application must be accompanied by—(a) the prescribed form of assent to the company’s being registered as

unlimited company, subscribed by or on behalf of all the members ofthe company, and

(b) a copy of the company’s articles as proposed to be amended.

(3) The statement of compliance required to be delivered together with theapplication is a statement that the requirements of this Part as to re-registrationas an unlimited private company have been complied with.

(4) The statement must contain a statement by the directors of the company—(a) that the persons by whom or on whose behalf the form of assent is

subscribed constitute the whole membership of the company, and(b) if any of the members have not subscribed that form themselves, that

the directors have taken all reasonable steps to satisfy themselves thateach person who subscribed it on behalf of a member was lawfullyempowered to do so.

(5) The registrar may accept the statement of compliance as sufficient evidencethat the company is entitled to be re-registered as an unlimited privatecompany.

(6) References in this section to subscription include, in relation to a document inelectronic form, authentication in such manner as the registrar may require.

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(1) If on an application for re-registration of a public company as an unlimitedprivate company the registrar is satisfied that the company is entitled to be sore-registered, the company shall be re-registered accordingly.


(3) The certificate must state that it is issued on re-registration and the date onwhich it is so issued.

(4) On the issue of the certificate—(a) the company by virtue of the issue of the certificate becomes an

unlimited private company, and(b) the changes in the company’s name and articles take effect.

(5) The certificate is conclusive evidence that the requirements of this Act as to re-registration have been complied with.

Supplementary

111 Form of statements required

(1) This section makes provision about the form of the statements required by— section 103(2)(b) (company re-registering as unlimited); orsection 106(2)(b) and (c) (company re-registering as limited).

(2) The statement of initial shareholdings required to be delivered in the case of acompany that is to have a share capital must state with respect to each memberof the company—

(a) the number and nominal value of the shares to be allotted to him on re-registration, and

(b) the amount (if any) payable in respect of each share on re-registration,whether on account of the nominal value or by way of a premium.

(3) The statement of share capital required to be delivered in the case of a companythat is to have a share capital must state with respect to the company’s sharecapital to be allotted on re-registration—





(4) The statement of guarantee required to be delivered in the case of a companythat is to be limited by guarantee must state that each member undertakes that,if the company is wound up while he is a member, or within one year after heceases to be a member, he will contribute to the assets of the company suchamount as may be required for—

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(a) payment of the debts and liabilities of the company contracted beforehe ceases to be a member,

(b) payment of the costs, charges and expenses of winding up, and(c) adjustment of the rights of the contributories among themselves,

not exceeding a specified amount.

PART 8

MEMBERS OF A COMPANY

CHAPTER 1

THE MEMBERS OF A COMPANY

112 The members of a company

(1) The subscribers of a company’s memorandum are deemed to have agreed tobecome members of the company, and on its registration become members andmust be entered as such in its register of members.

(2) Every other person who agrees to become a member of a company, and whosename is entered in its register of members, is a member of the company.

CHAPTER 2

REGISTER OF MEMBERS

General

113 Register of members

(1) Every company must keep a register of its members.

(2) There must be entered in the register—(a) the names and addresses of the members,(b) the date on which each person was registered as a member, and(c) the date at which any person ceased to be a member.

(3) In the case of a company having a share capital there must be entered in theregister, with the names and addresses of the members, a statement of—

(a) the shares held by each member, distinguishing each share—(i) by its number (so long as the share has a number) and,

(ii) where the company has more than one class of issued shares, byits class,

and(b) the amount paid or agreed to be considered as paid on the shares of

each member.

(4) If the company has converted any of its shares into stock, and given notice ofthe conversion to the registrar, the register of members must show the amountand class of stock held by each member instead of the amount of shares and theparticulars relating to shares specified above.

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(5) In the case of joint holders of shares or stock in a company the company’sregister of members must state the names of each joint holder.In other respects joint holders are regarded for the purposes of this Chapter asa single member (so that the register must show a single address).

(6) In the case of a company that does not have a share capital but has more thanone class of members, there must be entered in the register, with the names andaddresses of the members, a statement of the class to which each memberbelongs.

(7) If a company makes default in complying with this section an offence iscommitted by—


(8) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and in the caseof continued contravention to a daily default fine not exceeding one-tenth oflevel 3 on the standard scale.

114 Register to be kept available for inspection

(1) A company’s register of members must be kept available for inspection—(a) at its registered office, or(b) at another place in the part of the United Kingdom in which the

company is registered.

(2) A company must give notice to the registrar of the place where its register ofmembers is kept available for inspection and of any change in that place.

(3) No such notice is required if the register has, at all times since it came intoexistence (or, in the case of a register in existence on the relevant date, at alltimes since then) been kept available for inspection at the company’s registeredoffice.

(4) The relevant date for the purposes of subsection (3) is—(a) 1st July 1948 in the case of a company registered in Great Britain, and(b) 1st April 1961 in the case of a company registered in Northern Ireland.

(5) If a company makes default for 14 days in complying with subsection (2), anoffence is committed by—



115 Index of members

(1) Every company having more than 50 members must keep an index of thenames of the members of the company, unless the register of members is insuch a form as to constitute in itself an index.

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(2) The company must make any necessary alteration in the index within 14 daysafter the date on which any alteration is made in the register of members.

(3) The index must contain, in respect of each member, a sufficient indication toenable the account of that member in the register to be readily found.

(4) The index must be at all times kept available for inspection at the same place asthe register of members.

(5) If default is made in complying with this section, an offence is committed by—(a) the company,(b) every officer of the company who is in default.


116 Rights to inspect and request copies

(1) The register and the index of members’ names must be open to theinspection—

(a) of any member of the company without charge, and(b) of any other person on payment of such fee as may be prescribed.

(2) Any person may require a copy of a company’s register of members, or of anypart of it, on payment of such fee as may be prescribed.

(3) Where a company receives a request under this section, it must within fiveworking days either—

(a) comply with the request, or(b) apply to the court.

If it applies to the court it must notify the person making the request.

(4) If the court is satisfied that the inspection or copy is not sought for a properpurpose—

(a) it shall direct that the company need not comply with the request, and(b) it may further order that the company’s costs (in Scotland, expenses) on

the application be paid in whole or in part by the person who made therequest, even if he is not a party to the application.

(5) If the company applies to the court but no such direction is made, the companymust comply with the request immediately upon the court giving its decisionor, as the case may be, the proceedings being discontinued.

(6) If an inspection required under this section is refused, or default is made inproviding a copy required under this section, an offence is committed by—



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(8) In the case of any such refusal or default the court may by order compel animmediate inspection or, as the case may be, direct that the copy required besent to the person requesting it.

117 Information as to state of register and index

(1) When a person inspects the register, or the company provides him with a copyof the register or any part of it, the company must inform him of the mostrecent date (if any) on which alterations were made to the register and therewere no further alterations to be made.

(2) When a person inspects the index of members’ names, the company mustinform him whether there is any alteration to the register that is not reflectedin the index.

(3) If a company fails to provide the information required under subsection (1) or(2), an offence is committed by—



118 Removal of entries relating to former members

An entry relating to a former member of the company may be removed fromthe register after the expiration of ten years from the date on which he ceasedto be a member.

Special cases

119 Share warrants

(1) On the issue of a share warrant the company must—(a) enter in the register of members—

(i) the fact of the issue of the warrant,(ii) a statement of the shares included in the warrant,

distinguishing each share by its number so long as the share hasa number, and

(iii) the date of the issue of the warrant,and

(b) amend the register, if necessary, so that no person is named on theregister as the holder of the shares specified in the warrant.

(2) Until the warrant is surrendered, the particulars specified in subsection (1)(a)are deemed to be those required by this Act to be entered in the register ofmembers.

(3) The bearer of a share warrant may, if the articles of the company so provide, bedeemed a member of the company within the meaning of this Act, either to thefull extent or for any purposes defined in the articles.

(4) Subject to the company’s articles, the bearer of a share warrant is entitled, onsurrendering it for cancellation, to have his name entered as a member in theregister of members.

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(5) The company is responsible for any loss incurred by any person by reason ofthe company entering in the register the name of a bearer of a share warrant inrespect of the shares specified in it without the warrant being surrendered andcancelled.

(6) On the surrender of a share warrant, the date of the surrender must be enteredin the register.

120 Single member companies

(1) If a private company is formed under this Act with only one member thereshall be entered in the company’s register of members, with the name andaddress of the sole member, a statement that the company has only onemember.

(2) If the number of members of a private company falls to one there shall uponthe occurrence of that event be entered in the company’s register of members,with the name and address of the sole member—

(a) a statement that the company has only one member, and(b) the date on which the company became a company having only one

member.

(3) If the membership of a private company increases from one to two or moremembers there shall upon the occurrence of that event be entered in thecompany’s register of members, with the name and address of the person whowas formerly the sole member—

(a) a statement that the company has ceased to have only one member, and(b) the date on which that event occurred.

(4) If a company makes default in complying with this section, an offence iscommitted by—



121 Company holding its own shares as treasury shares

(1) Where a company purchases its own shares in circumstances in which section162A of the Companies Act 1985 (c. 6) (treasury shares) applies—

(a) the requirements of section 113 above (register of members) need not becomplied with if the company cancels all of the shares forthwith afterthe purchase, and

(b) if the company does not cancel all of the shares forthwith after thepurchase, any share that is so cancelled shall be disregarded for thepurposes of that section.

(2) Subject to subsection (1), where a company holds shares as treasury shares thecompany must be entered in the register as the member holding those shares.

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Supplementary

122 Power of court to rectify register

(1) If—(a) the name of any person is, without sufficient cause, entered in or

omitted from a company’s register of members, or(b) default is made or unnecessary delay takes place in entering on the

register the fact of any person having ceased to be a member,the person aggrieved, or any member of the company, or the company, mayapply to the court for rectification of the register.

(2) The court may either refuse the application or may order rectification of theregister and payment by the company of any damages sustained by any partyaggrieved.

(3) On such an application the court may decide any question relating to the titleof a person who is a party to the application to have his name entered in oromitted from the register, whether the question arises between members oralleged members, or between members or alleged members on the one handand the company on the other hand, and generally may decide any questionnecessary or expedient to be decided for rectification of the register.

(4) In the case of a company required by this Act to send a list of its members tothe registrar of companies, the court, when making an order for rectification ofthe register, shall by its order direct notice of the rectification to be given to theregistrar.

123 Trusts not to be entered on register

No notice of any trust, expressed, implied or constructive, shall be entered onthe register in England and Wales or Northern Ireland, or be receivable by theregistrar.

124 Register to be evidence

The register of members is prima facie evidence of any matters which are bythis Act directed or authorised to be inserted in it.

125 Time limit for claims arising from entry in register

(1) Liability incurred by a company—(a) from the making or deletion of an entry in the register of members, or(b) from a failure to make or delete any such entry,

is not enforceable more than ten years after the date on which the entry wasmade or deleted or, as the case may be, the failure first occurred.

(2) This is without prejudice to any lesser period of limitation.

126 Overseas branch registers

(1) Nothing in this Chapter affects the power of a company to keep an overseasbranch register under section 362 of, and Schedule 14 to, the Companies Act1985 (c. 6).

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(2) The Secretary of State may make provision by regulations—(a) as to the circumstances in which a company is to be regarded as

keeping a register in a particular country or territory, and(b) modifying any provision of this Chapter as it applies in relation to an

overseas branch register.


CHAPTER 3

PROHIBITION ON SUBSIDIARY BEING MEMBER OF ITS HOLDING COMPANY

General prohibition

127 Prohibition on subsidiary being a member of its holding company

(1) Except as provided by this Chapter—(a) a body corporate cannot be a member of a company that is its holding

company, and(b) any allotment or transfer of shares in a company to its subsidiary is

void.

(2) The exceptions are provided for in—section 129 (subsidiary acting as personal representative or trustee), andsection 132 (subsidiary acting as authorised dealer in securities).

128 Shares acquired before prohibition became applicable

(1) Where a body corporate became a holder of shares in a company—(a) before the relevant date, or(b) on or after that date and before the commencement of this Chapter in

circumstances in which the prohibition in section 23(1) of theCompanies Act 1985 (c. 6) or Article 33(1) of the Companies (NorthernIreland) Order 1986 (or any corresponding earlier enactment), as it thenhad effect, did not apply, or

(c) on or after the commencement of this Chapter in circumstances inwhich the prohibition in section 127 did not apply,

it may continue to be a member of the company.

(2) The relevant date for the purposes of subsection (1)(a) is—(a) 1st July 1948 in the case of a company registered in Great Britain, and(b) 1st April 1961 in the case of a company registered in Northern Ireland.

(3) So long as it is permitted to continue as a member of a company by virtue ofthis section, an allotment to it of fully paid shares in the company may bevalidly made by way of capitalisation of reserves of the company.

(4) But, so long as the prohibition in section 127 would (apart from this section)apply, it has no right to vote in respect of the shares mentioned in subsection(1) above, or any shares allotted as mentioned in subsection (2) above, on awritten resolution or at meetings of the company or of any class of its members.

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Subsidiary acting as personal representative or trustee

129 Subsidiary acting as personal representative or trustee

(1) The prohibition in section 127 (prohibition on subsidiary being a member of itsholding company) does not apply where the subsidiary is concerned only—

(a) as personal representative, or(b) as trustee,

unless, in the latter case, the holding company or a subsidiary of it isbeneficially interested under the trust.

(2) For the purpose of ascertaining whether the holding company or a subsidiaryis so interested, there shall be disregarded—

(a) any interest held only by way of security for the purposes of atransaction entered into by the holding company or subsidiary in theordinary course of a business that includes the lending or money;

(b) any interest within—section 130 (interests to be disregarded: residual interest under

pension scheme or employees’ share scheme), orsection 131 (interests to be disregarded: employer’s rights of

recovery under pension scheme or employees’ share scheme);(c) any rights that the company or subsidiary has in its capacity as trustee,

including in particular—(i) any right to recover its expenses or be remunerated out of the

trust property, and(ii) any right to be indemnified out of the trust property for any

liability incurred by reason of any act or omission in theperformance of its duties as trustee.

130 Interests to be disregarded: residual interest under pension scheme or employees’ share scheme

(1) Where shares in a company are held on trust for the purposes of a pensionscheme or employees’ share scheme, there shall be disregarded for thepurposes of section 129 any residual interest that has not vested in possession.

(2) A “residual interest” means a right of the company or subsidiary (“the residualbeneficiary”) to receive any of the trust property in the event of—

(a) all the liabilities arising under the scheme having been satisfied orprovided for, or

(b) the residual beneficiary ceasing to participate in the scheme, or(c) the trust property at any time exceeding what is necessary for satisfying

the liabilities arising or expected to arise under the scheme.

(3) In subsection (2)—(a) the reference to a right includes a right dependent on the exercise of a

discretion vested by the scheme in the trustee or another person, and(b) the reference to liabilities arising under a scheme includes liabilities

that have resulted, or may result, from the exercise of any suchdiscretion.

(4) For the purposes of this section a residual interest vests in possession—

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(a) in a case within subsection (2)(a), on the occurrence of the eventmentioned there (whether or not the amount of the property receivablepursuant to the right is ascertained);

(b) in a case within subsection (2)(b) or (c), when the residual beneficiarybecomes entitled to require the trustee to transfer to him any of theproperty receivable pursuance to the right.

(5) In this section “pension scheme” means a scheme for the provision of benefitsconsisting of or including relevant benefits for or in respect of employees orformer employees.

(6) In subsection (5)—(a) “relevant benefits” here means any pension, lump sum, gratuity or

other like benefit given or to be given on retirement or on death or inanticipation of retirement or, in connection with past service, afterretirement or death; and

(b) “employee” shall be read as if a director of a company were employedby it.

131 Interests to be disregarded: employer’s rights of recovery under pension scheme or employees’ share scheme

(1) Where shares in a company are held on trust for the purposes of a pensionscheme or employees’ share scheme, there shall be disregarded for thepurposes of section 129 any charge or lien on, or set-off against, any benefit orother right or interest under the scheme for the purpose of enabling theemployer or former employer of a member of the scheme to obtain thedischarge or a monetary obligation due to him from the member.

(2) In the case of a trust for the purposes of a pension scheme there shall also bedisregarded any right to receive from the trustee of the scheme, or as trustee ofthe scheme to retain, an amount that can be recovered or retained, undersection 61 of the Pension Schemes Act 1993 (c. 48) or section 57 of the PensionSchemes (Northern Ireland) Act 1993 (deduction of contributions equivalentpremium from refund of scheme contributions) or otherwise, asreimbursement or partial reimbursement for any contributions equivalentpremium paid in connection with the scheme under Part 3 of that Act.

(3) In this section “pension scheme” means a scheme for the provision of benefitsconsisting of or including relevant benefits for or in respect of employees orformer employees.“Relevant benefits” here means any pension, lump sum, gratuity or other likebenefit given or to be given on retirement or on death or in anticipation ofretirement or, in connection with past service, after retirement or death.

(4) In this section “employer” and “employee” shall be read as if a director of acompany were employed by it.

Subsidiary acting as dealer in securities

132 Subsidiary acting as authorised dealer in securities

(1) The prohibition in section 127 (prohibition on subsidiary being a member of itsholding company) does not apply where the shares are held by the subsidiaryin the ordinary course of its business as an intermediary.

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(2) For this purpose a person is an intermediary if he—(a) carries on a bona fide business of dealing in securities,(b) is a member of an EEA exchange (and satisfies any requirements for

recognition as a dealer in securities laid down by that exchange) or isotherwise approved or supervised as a dealer in securities under thelaws of an EEA state, and

(c) does not carry on an excluded business.

(3) The following are excluded businesses—(a) a business that consists wholly or mainly in the making or managing of

investments;(b) a business that consists wholly or mainly in, or is carried on wholly or

mainly for the purposes of, providing services to persons who areconnected with the person carrying on the business;

(c) a business that consists in insurance business;(d) a business that consists in managing or acting as trustee in relation to a

pension scheme, or that is carried on by the manager or trustee of sucha scheme in connection with or for the purposes of the scheme;

(e) a business that consists in operating or acting as trustee in relation to acollective investment scheme, or that is carried on by the operator ortrustee of such a scheme in connection with and for the purposes of thescheme.

(4) For the purposes of this section—(a) the question whether a person is connected with another shall be

determined in accordance with section 839 of the Income andCorporation Taxes Act 1988 (c. 1);

(b) “collective investment scheme” has the meaning given in section 236 ofthe Financial Services and Markets Act 2000 (c. 8);

(c) “EEA exchange” means a market that appears on the list drawn up byan EEA state pursuance to Article 16 of Council Directive 93/22/EECon investment services in the securities field;

(d) “insurance business” means business that consists in the effecting orcarrying out of contracts of insurance;

(e) “securities” includes—(i) options,

(ii) futures, and(iii) contracts for differences,

and rights or interests in those investments;(f) “trustee” and “the operator” in relation to a collective investment

scheme shall be construed in accordance with section 237(2) of theFinancial Services and Markets Act 2000.

(5) Expressions used in this section that are also used in the provisions regulatingactivities under the Financial Services and Markets Act 2000 have the samemeaning here as they do in those provisions.See section 22 of that Act, orders made under that section and Schedule 2 tothat Act.

133 Protection of third parties in other cases where subsidiary acting as dealer in securities

(1) This section applies where—

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(a) a subsidiary that is a dealer in securities has purportedly acquiredshares in its holding company in contravention of the prohibition insection 127, and

(b) a person acting in good faith has agreed, for value and without noticeof the contravention, to acquire shares in the holding company—

(i) from the subsidiary or (ii) from someone who has purportedly acquired the shares after

their disposal by the subsidiary.

(2) A transfer to that person of the shares mentioned in subsection (1)(a) has thesame effect as it would have had if their original acquisition by the subsidiaryhad not been in contravention of the prohibition.

Supplementary

134 Application of provisions to companies not limited by shares

In relation to a company other than a company limited by shares, the referencesin this Chapter to shares shall be read as references to the interest of itsmembers as such, whatever the form of that interest.

135 Application of provisions to nominees

The provisions of this Chapter apply to a nominee acting on behalf of asubsidiary as to the subsidiary itself.

PART 9

EXERCISE OF MEMBERS’ RIGHTS

136 Enjoyment or exercise of members’ rights

(1) This section applies where provision is made by a company’s articles enablinga member to nominate another person or persons as entitled to enjoy orexercise all or any specified rights of the member in relation to the company.

(2) So far as is necessary to give effect to that provision, anything required orauthorised by any provision of the Companies Acts to be done by or in relationto the member shall instead be done, or (as the case may be) may instead bedone, by or in relation to the nominated person (or each of them) as if he werea member of the company.

(3) This applies, in particular, to the rights conferred by—(a) sections 268 and 270 (right to be sent proposed written resolution);(b) section 269 (right to require circulation of written resolution);(c) section 279 (right to require directors to call general meeting);(d) section 286 (right to notice of general meetings);(e) section 290 (right to require circulation of a statement);(f) section 299 (right to appoint proxy to act at meeting);(g) section 313 (right to require circulation of resolution for AGM of public

company); and(h) section 399 (right to be sent a copy of annual accounts and reports).

(4) This section and any such provision as is mentioned in subsection (1)—

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(a) do not confer rights enforceable against the company by anyone otherthan the member, and

(b) do not affect the requirements for an effective transfer or otherdisposition of the whole or part of a member’s interest in the company.

137 Power to require provision to be made in company’s articles

(1) The Secretary of State may by regulations require companies to enablemembers to nominate another person or persons as entitled to receivedocuments and information that the member is entitled to receive from thecompany.

(2) So far as is necessary to give effect to the regulations, any documents orinformation required or authorised by any provision of the Companies Acts tobe sent or supplied to a member shall, or (as the case may be) may, instead besent or supplied to the nominated person (or each of them) as if he were amember of the company.

(3) Regulations under this section may—(a) make provision only in respect of a particular class or description of

company;(b) make provision only in respect of a particular document or a particular

class of documents;(c) make provision as to the manner and form in which the documents or

information are to be sent or supplied (subject to subsection (4));(d) create summary criminal offences punishable with a fine not exceeding

level 5 on the standard scale or such lower amount as may be specified.

(4) No regulations are to be made having the effect of requiring documents to besent or supplied in hard copy form unless the Secretary of State is satisfied—

(a) that this would improve the ability of nominated persons to exerciserights arising under the articles or under an agreement between themand the member in question, and

(b) that the benefits would be significant having regard to the likely costsresulting from additional obligation.

(5) Rights under regulations made under this section have effect as if they wererights under the company’s articles and may be enforced by membersaccordingly.

(6) This section and regulations made under this section—(a) do not confer rights enforceable against the company by anyone other

than a member (except to the extent that such regulations createoffences); and

(b) do not affect the requirements for an effective transfer or otherdisposition of the whole or part of a member’s interest in the company.


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Company Law Reform Bill [HL]Part 10 — Company directors

Chapter 1 — Appointment and removal of directors

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PART 10

COMPANY DIRECTORS

CHAPTER 1

APPOINTMENT AND REMOVAL OF DIRECTORS

Requirement to have directors

138 Companies required to have directors

(1) A private company must have at least one director.

(2) A public company must have at least two directors.

139 Companies required to have at least one director who is a natural person

(1) A company must have at least one director who is a natural person.

(2) This requirement is met if the office of director is held by a natural person as acorporation sole or otherwise by virtue of an office.

140 Direction requiring company to make appointment

(1) If it appears to the Secretary of State that a company is in breach of—section 138 (requirements as to number of directors), orsection 139 (requirement to have at least one director who is a natural

person)the Secretary of State may give the company a direction under this section.

(2) The direction must specify—(a) the statutory requirement the company appears to be in breach of,(b) what the company must do in order to comply with the direction, and(c) the period within which it must do so.

That period must be not less than one month or more than three months afterthe date on which the direction is given.

(3) The direction must also inform the company of the consequences of failing tocomply.

(4) Where the company is in breach of section 138 or 139 it must comply with thedirection by—

(a) making the necessary appointment or appointments, and(b) giving notice of them under section 150,

before the end of the period specified in the direction.

(5) If the company has already made the necessary appointment or appointments(or so far as it has done so), it must comply with the direction by giving noticeof them under section 150 before the end of the period specified in thedirection.


(a) the company, and

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(b) every officer of the company who is in default.For this purpose a shadow director is treated as an officer of the company.


Appointment

141 Minimum age for appointment as director

(1) A person may not be appointed a director of a company unless he has attainedthe age of 16 years.

(2) This does not affect the validity of an appointment that is not to take effect untilthe person appointed attains that age.

(3) Where the office of director of a company is held by a corporation sole, orotherwise by virtue of another office, the appointment to that other office of aperson who has not attained the age of 16 years is not effective also to makehim a director of the company until he attains the age of 16 years.

(4) An appointment made in contravention of this section is void.

(5) Nothing in this section affects any liability of a person under any provision ofthe Companies Acts if he—

(a) purports to act as director or(b) acts as a shadow director,

although he could not, by virtue of this section, be validly appointed as adirector.

(6) This section has effect subject to section 142 (power to provide for exceptionsfrom minimum age requirement).

142 Power to provide for exceptions from minimum age requirement

(1) The Secretary of State may make provision by regulations for cases in which aperson who has not attained the age of 16 years may be appointed a director ofa company.

(2) The regulations must specify the circumstances in which, and any conditionssubject to which, the appointment may be made.

(3) If the specified circumstances cease to obtain, or any specified conditions ceaseto be met, a person who was appointed by virtue of the regulations and whohas not since attained the age of 16 years ceases to hold office.

(4) The regulations may make different provision for different parts of the UnitedKingdom.This is without prejudice to the general power to make different provision fordifferent cases.


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143 Existing under-age directors

(1) This section applies where—(a) a person appointed a director of a company before section 141

(minimum age for appointment as director) comes into force has notattained the age of 16 when that section comes into force, or

(b) the office of director of a company is held by a corporation sole, orotherwise by virtue of another office, and the person appointed to thatother office has not attained the age of 16 years when that section comesinto force,

and the case is not one excepted from that section by regulations under section142.

(2) That person ceases to be a director on section 141 coming into force.

(3) The company must make the necessary consequential alteration in its registerof directors but need not give notice to the registrar of the change.

(4) If it appears to the registrar (from other information) that a person has ceasedby virtue of this section to be a director of a company, the registrar shall notethat fact on the register.

144 Appointment of directors of public company to be voted on individually

(1) At a general meeting of a public company a motion for the appointment of twoor more persons as directors of the company by a single resolution must not bemade unless a resolution that it should be so made has first been agreed to bythe meeting without any vote being given against it.

(2) A resolution moved in contravention of this section is void, whether or not itsbeing so moved was objected to at the time.But where a resolution so moved is passed, no provision for the automaticreappointment of retiring directors in default of another appointment applies.

(3) For purposes of this section a motion for approving a person's appointment, orfor nominating a person for appointment, is treated as a motion for hisappointment.

(4) Nothing in this section applies to a resolution altering the company's articles.

145 Validity of acts of directors

(1) The acts of a director are valid notwithstanding any defect that may afterwardsbe discovered in his appointment or qualification.

(2) This applies even if the resolution for his appointment is void under section144 (appointment of directors of public company to be voted on individually).

Register of directors, etc

146 Register of directors

(1) Every company must keep a register of its directors.

(2) The register—

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(a) must contain the required particulars (see sections 147 to 149) of eachperson who is a director of the company, and

(b) must be kept available for inspection at the company’s registered office.

(3) The register must be open to the inspection—(a) of any member of the company without charge, and(b) of any other person on payment of such fee as may be prescribed.

(4) If default is made in complying with subsection (1) or (2), or if an inspectionrequired under this section is refused, an offence is committed by—




(6) In the case of a refusal of inspection of the register, the court may by ordercompel an immediate inspection of it.

147 Particulars of directors to be registered: individuals

(1) A company’s register of directors must contain the following particulars in thecase of an individual—

(a) name and any former name;(b) address;(c) nationality;(d) business occupation (if any);(e) date of birth.

(2) For the purposes of this section “name” means a person’s Christian name (orother forename) and surname, except that in the case of—

(a) a peer or(b) an individual usually known by a title

the title may be stated instead of his Christian name (or other forename) andsurname or in addition to either or both of them.

(3) For the purposes of this section a “former name” means a name by which theindividual was formerly known for business purposes.Where a person is or was formerly known by more than one such name, eachof them must be stated.

(4) It is not necessary for the register to contain particulars of a former name in thefollowing cases—

(a) in the case of a peer or an individual normally known by a British title,where the name is one by which the person was known previous to theadoption of or succession to the title;

(b) in the case of any person, where the former name—(i) was changed or disused before the person attained the age of 18

years, or(ii) has been changed or disused for 20 years or more.

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(5) A person’s “address” means the person’s usual residential address, unless anon-disclosure certificate is in force (see sections 217 to 225)) in which case itmeans a service address.The service address may be stated to be “The company’s registered office”.

148 Particulars of directors to be registered: corporate directors and firms

A company’s register of directors must contain the following particulars in thecase of a body corporate, or a firm that is legal person under the law by whichit is governed—

(a) corporate or firm name;(b) registered or principal office;(c) in the case of an EEA company to which the First Company Law

Directive applies, particulars of—(i) the register in which the company file mentioned in Article 3 of

that Directive is kept (including details of the relevant state),and

(ii) the registration number in that register;(d) in any other case, particulars of—

(i) the legal form of the company or firm and the law by which it isgoverned, and

(ii) if applicable, the register in which it is entered (including detailsof the state) and its registration number in that register.

149 Particulars of directors to be registered: power to make regulations

(1) The Secretary of State may make provision by regulations amending—section 147 (particulars of directors to be registered: individuals), orsection 148 (particulars of directors to be registered: corporate directors

and firms),so as to add to or remove items from the particulars required to be containedin a company’s register of directors.

(2) Nothing in the regulations affects the operation of sections 217 to 225 (directorsresidential addresses: non-disclosure certificates).


150 Duty to notify registrar of changes

(1) A company must, within the period of 14 days from the occurrence of—(a) any change in its directors, or(b) any change in the particulars contained in its register of directors,

give notice to the registrar of the change and of the date on which it occurred.

(2) Notice of a person having become a director of the company must—(a) contain a statement of the particulars of the new director that are

required to be included in the company’s register of directors, and(b) be accompanied by a consent, authenticated by that person, to act in

that capacity.

(3) If default is made in complying with this section, an offence is committed byevery officer of the company who is in default.

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151 Application of provisions to shadow directors

(1) For the purposes of sections 146 to 149 (register of directors) a shadow directoris treated as a director.

Removal

152 Resolution to remove director

(1) A company may by ordinary resolution at a meeting remove a director beforethe expiration of his period of office, notwithstanding anything in its articles orin any agreement between it and him.

(2) Special notice is required of a resolution to remove a director under this sectionor to appoint somebody instead of a director so removed at the meeting atwhich he is removed.

(3) A vacancy created by the removal of a director under this section, if not filledat the meeting at which he is removed, may be filled as a casual vacancy.

(4) A person appointed director in place of a person removed under this section istreated, for the purpose of determining the time at which he or any otherdirector is to retire, as if he had become director on the day on which the personin whose place he is appointed was last appointed a director.

(5) This section is not to be taken—(a) as depriving a person removed under it of compensation or damages

payable to him in respect of the termination of his appointment asdirector or of any appointment terminating with that as director, or

(b) as derogating from any power to remove a director that may exist apartfrom this section.

153 Director's right to protest removal

(1) On receipt of notice of an intended resolution to remove a director undersection 152, the company must forthwith send a copy of the notice to thedirector concerned.

(2) The director (whether or not a member of the company) is entitled to be heardon the resolution at the meeting.

(3) Where notice is given of an intended resolution to remove a director under thatsection, and the director concerned makes with respect to it representations inwriting to the company (not exceeding a reasonable length) and requests theirnotification to members of the company, the company shall, unless therepresentations are received by it too late for it to do so—

(a) in any notice of the resolution given to members of the company statethe fact of the representations having been made; and

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(b) send a copy of the representations to every member of the company towhom notice of the meeting is sent (whether before or after receipt ofthe representations by the company).

(4) If a copy of the representations is not sent as required by subsection (3) becausereceived too late or because of the company's default, the director may(without prejudice to his right to be heard orally) require that therepresentations shall be read out at the meeting.

(5) Copies of the representations need not be sent out and the representations neednot be read out at the meeting if, on the application either of the company or ofany other person who claims to be aggrieved, the court is satisfied that therights conferred by this section are being abused.

(6) The court may order the company's costs (in Scotland, expenses) on anapplication under subsection (5) to be paid in whole or in part by the director,notwithstanding that he is not a party to the application.

CHAPTER 2

GENERAL DUTIES OF DIRECTORS

Introductory

154 Scope and nature of general duties

(1) The general duties specified in sections 155 to 161 are owed by a director of acompany to the company.

(2) A person who ceases to be a director continues to be subject—(a) to the duty in section 159 (duty to avoid conflicts of interest) as regards

the exploitation of any property, information or opportunity of whichhe became aware at a time when he was a director, and

(b) to the duty in section 160 (duty not to accept benefits from third parties)as regards things done or omitted by him before he ceased to be adirector.

To that extent those duties apply to a former director as to a director, subject toany necessary adaptations.

(3) The general duties are based on certain common law rules and equitableprinciples as they apply in relation to directors and have effect in place of thoserules and principles as regards the duties owed to a company by a director.

(4) The general duties shall be interpreted and applied in the same way ascommon law rules or equitable principles, and regard shall be had to thecorresponding common law rules and equitable principles in interpreting andapplying the general duties.

(5) The general duties apply to shadow directors where, and to the extent that, thecorresponding common law rules or equitable principles so apply.

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The general duties

155 Duty to act within powers

A director of a company must—(a) act in accordance with the company’s constitution, and (b) only exercise powers for the purposes for which they are conferred.

156 Duty to promote the success of the company

(1) A director of a company must act in the way he considers, in good faith, wouldbe most likely to promote the success of the company for the benefit of itsmembers as a whole.

(2) Where or to the extent that the purposes of the company consist of or includepurposes other than the benefit of its members, his duty is to act in the way heconsiders, in good faith, would be most likely to achieve those purposes.

(3) In fulfilling the duty imposed by this section a director must (so far asreasonably practicable) have regard to—

(a) the likely consequences of any decision in the long term,(b) the interests of the company’s employees,(c) the need to foster the company’s business relationships with suppliers,

customers and others,(d) the impact of the company’s operations on the community and the

environment,(e) the desirability of the company maintaining a reputation for high

standards of business conduct, and(f) the need to act fairly as between members of the company.

(4) The duty imposed by this section has effect subject to any enactment or rule oflaw requiring directors, in certain circumstances, to consider or act in theinterests of creditors of the company.

157 Duty to exercise independent judgment

(1) A director of a company must exercise independent judgment.

(2) This duty is not infringed by his acting—(a) in accordance with an agreement duly entered into by the company

that restricts the future exercise of discretion by its directors, or(b) in a way authorised by the company’s constitution.

158 Duty to exercise reasonable care, skill and diligence

(1) A director of a company must exercise reasonable care, skill and diligence.

(2) This means the care, skill and diligence that would be exercised by areasonably diligent person with—

(a) the general knowledge, skill and experience that may reasonably beexpected of a person carrying out the functions carried out by thedirector in relation to the company, and

(b) the general knowledge, skill and experience that the director has.

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159 Duty to avoid conflicts of interest

(1) A director of a company must avoid a situation in which he has, or can have, adirect or indirect interest that conflicts, or possibly may conflict, with theinterests of the company.

(2) This applies in particular to the exploitation of any property, information oropportunity (and it is immaterial whether the company could take advantageof the property, information or opportunity).

(3) This duty does not apply to a conflict of interest arising in relation to atransaction or arrangement with the company.

(4) This duty is not infringed—(a) if the situation cannot reasonably be regarded as likely to give rise to a

conflict of interest; or(b) if the matter has been authorised by the directors.

(5) Authorisation may be given by the directors—(a) where the company is a private company and nothing in the company’s

constitution invalidates such authorisation, by the matter beingproposed to and authorised by the directors; or

(b) where the company is a public company and its constitution includesprovision enabling the directors to authorise the matter, by the matterbeing proposed to and authorised by them in accordance with theconstitution.

(6) The authorisation is effective only if—(a) any requirement as to the quorum at the meeting at which the matter is

considered is met without counting the director in question or anyother interested director, and

(b) the matter was agreed to without their voting or would have beenagreed to if their votes had not been counted.

(7) Any reference in this section to a conflict of interest includes a conflict ofinterest and duty and a conflict of duties.

160 Duty not to accept benefits from third parties

(1) A director of a company must not accept a benefit from a third party conferredby reason of—

(a) his being a director, or(b) his doing (or not doing) anything as director.

(2) A “third party” means a person other than the company, an associated bodycorporate or a person acting on behalf of the company or an associated bodycorporate.

(3) Benefits received by a director from a person by whom his services (as adirector or otherwise) are provided to the company are not regarded asconferred by a third party.

(4) This duty is not infringed if the acceptance of the benefit cannot reasonably beregarded as likely to give rise to a conflict of interest.

(5) Any reference in this section to a conflict of interest includes a conflict ofinterest and duty and a conflict of duties.

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161 Duty to declare interest in proposed transaction or arrangement

(1) If a director of a company is in any way, directly or indirectly, interested in aproposed transaction or arrangement with the company, he must declare thenature and extent of that interest to the other directors.

(2) The declaration may (but need not) be made—(a) at a meeting of the directors, or(b) by notice to the directors in accordance with—

(i) section 167 (notice in writing), or(ii) section 168 (general notice).

(3) If a declaration of interest under this section proves to be, or becomes,inaccurate or incomplete, a further declaration must be made.

(4) Any declaration required by this section must be made before the companyenters into the transaction or arrangement.

(5) This section does not require a declaration of an interest of which the directoris not aware or where the director is not aware of the transaction orarrangement in question.For this purpose a director is treated as being aware of matters of which heought reasonably to be aware.

(6) A director need not declare an interest—(a) if it cannot reasonably be regarded as likely to give rise to a conflict of

interest;(b) if, or to the extent that, the other directors are already aware of it (and

for this purpose the other directors are treated as aware of anything ofwhich they ought reasonably to be aware); or

(c) if, or to the extent that, it concerns terms of his service contract that havebeen or are to be considered—

(i) by a meeting of the directors, or(ii) by a committee of the directors appointed for the purpose under

the company’s constitution.


162 Civil consequences of breach of general duties

(1) The consequences of breach (or threatened breach) of sections 155 to 161 are thesame as would apply if the corresponding common law rule or equitableprinciple applied.

(2) The duties in those sections (with the exception of section 158 (duty to exercisereasonable care, skill and diligence)) are, accordingly, enforceable in the sameway as any other fiduciary duty owed to a company by its directors.

163 Cases within more than one of the general duties

Except as otherwise provided, more than one of the general duties may applyin any given case.

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164 Consent, approval or authorisation by members

(1) In a case where—(a) section 159 (duty to avoid conflicts of interest) is complied with by

authorisation by the directors, or(b) section 161 (duty to declare interest in proposed transaction or

arrangement) is complied with,the transaction or arrangement is not liable to be set aside by virtue of anycommon law rule or equitable principle requiring the consent or approval ofthe members of the company.This is without prejudice to any enactment, or provision of the company’sconstitution, requiring such consent or approval.

(2) The application of the general duties is not affected by the fact that the case alsofalls within Chapter 4 (transactions requiring approval of members), exceptthat where that Chapter applies and—

(a) approval is given under that Chapter, or(b) the matter is one as to which it is provided that approval is not needed,

it is not necessary also to comply with section 159 (duty to avoid conflicts ofinterest) or section 160 (duty not to accept benefits from third parties).

(3) Compliance with the general duties does not remove the need for approvalunder any applicable provision of Chapter 4 (transactions requiring approvalof members).

(4) The general duties have effect subject to any rule of law enabling the companyto give authority, specifically or generally, for anything to be done (or omitted)by the directors, or any of them, that would otherwise be a breach of duty.

(5) Otherwise, the general duties have effect (except as otherwise provided or thecontext otherwise requires) notwithstanding any enactment or rule of law.

CHAPTER 3

DECLARATION OF INTEREST IN EXISTING TRANSACTION OR ARRANGEMENT

165 Declaration of interest in existing transaction or arrangement

(1) Where a director of a company is in any way, directly or indirectly, interestedin a transaction or arrangement that has been entered into by the company, hemust declare the nature and extent of the interest to the other directors inaccordance with this section.This section does not apply if or to the extent that the interest has been declaredunder section 161 (duty to declare interest in proposed transaction orarrangement).

(2) The declaration must be made—(a) at a meeting of the directors, or(b) by notice in writing (see section 167), or(c) by general notice (see section 168).

(3) If a declaration of interest under this section proves to be, or becomes,inaccurate or incomplete, a further declaration must be made.

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(4) Any declaration required by this section must be made as soon as is reasonablypracticable.Failure to comply with this requirement does not affect the underlying duty tomake the declaration.

(5) This section does not require a declaration of an interest of which the directoris not aware or where the director is not aware of the transaction orarrangement in question.For this purpose a director is treated as being aware of matters of which heought reasonably to be aware.

(6) A director need not declare an interest under this section—(a) if it cannot reasonably be regarded as likely to give rise to a conflict of

interest;(b) if, or to the extent that, the other directors are already aware of it (and

for this purpose the other directors are treated as aware of anything ofwhich they ought reasonably to be aware); or

(c) if, or to the extent that, it concerns terms of his service contract that havebeen or are to be considered—

(i) by a meeting of the directors, or(ii) by a committee of the directors appointed for the purpose under

the company’s constitution.

166 Offence of failure to declare interest

(1) A director who fails to comply with the requirements of section 165(declaration of interest in existing transaction or arrangement) commits anoffence.

(2) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum.

167 Declaration made by notice in writing

(1) This section applies to a declaration of interest made by notice in writing.

(2) The director must send the notice to the other directors.

(3) The notice may be sent in hard copy form or, if the recipient has agreed toreceive it in electronic form, in an agreed electronic form.

(4) The notice may be sent—(a) by hand or by post, or(b) if the recipient has agreed to receive it by electronic means, by agreed

electronic means.

(5) The form and the means adopted must be such that the recipient is able to readthe text of the notice and to keep and refer to it at a later date.

(6) Where a director declares an interest by notice in writing in accordance withthis section—

(a) the making of the declaration is deemed to form part of the proceedingsat the next meeting of the directors after the notice is given, and

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(b) the provisions of section 227 (minutes of meetings of directors) apply asif the declaration had been made at that meeting.

168 General notice treated as sufficient declaration

(1) General notice in accordance with this section is a sufficient declaration ofinterest in relation to the matters to which it relates.

(2) General notice is notice given to the directors of a company to the effect that thedirector—

(a) has an interest (as member, officer, employee or otherwise) in aspecified body corporate or firm and is to be regarded as interested inany transaction or arrangement that may, after the date of the notice, bemade with that body corporate or firm, or

(b) is connected with a specified person (other than a body corporate orfirm) and is to be regarded as interested in any transaction orarrangement that may, after the date of the notice, be made with thatperson.

(3) The notice must state the nature and extent of the director’s interest in the bodycorporate or firm or, as the case may be, the nature of his connection with theperson.

(4) General notice is not effective unless—(a) it is given at a meeting of the directors, or(b) the director takes reasonable steps to secure that it is brought up and

read at the next meeting of the directors after it is given.

169 Declaration of interest in case of company with sole director

(1) Where a declaration of interest under section 165 (duty to declare interest inexisting transaction or arrangement) is required of a sole director of a companythat is required to have more than one director—

(a) the declaration must be recorded in writing,(b) the making of the declaration is deemed to form part of the proceedings

at the next meeting of the directors after the notice is given, and(c) the provisions of section 227 (minutes of meetings of directors) apply as

if the declaration had been made at that meeting.

(2) Nothing in this section affects the operation of section 209 (contract with solemember who is also a director: terms to be set out in writing or recorded inminutes).

170 Declaration of interest in existing transaction by shadow director

(1) The provisions of this Chapter relating to the duty under section 165 (duty todeclare interest in existing transaction or arrangement) apply to a shadowdirector as to a director, but with the following adaptations.

(2) Subsection (2)(a) of that section (declaration at meeting of directors) does notapply.

(3) In section 168 (general notice treated as sufficient declaration), subsection (4)(notice to be given at or brought up and read at meeting of directors) does notapply.

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(4) General notice by a shadow director is not effective unless given by notice inwriting in accordance with section 167.

CHAPTER 4

TRANSACTIONS WITH DIRECTORS REQUIRING APPROVAL OF MEMBERS

Service contracts

171 Directors’ long-term service contracts: requirement of members’ approval

(1) This section applies to provision under which the guaranteed term of adirector’s employment—

(a) with the company of which he is a director, or(b) where he is the director of a holding company, within the group

consisting of that company and its subsidiaries,is, or may be, longer than five years.

(2) A company may not agree to such provision unless it has been approved—(a) by resolution of the members of the company, and(b) in the case of a director of a holding company, by resolution of the

members of that company.

(3) The guaranteed term of a director’s employment is—(a) the period (if any) during which the director’s employment—

(i) is to continue, or may be continued otherwise than at theinstance of the company (whether under the original agreementor under a new agreement entered into in pursuance of it), and

(ii) cannot be terminated by the company by notice, or can be soterminated only in specified circumstances, or

(b) in the case of employment terminable by the company by notice, theperiod of notice required to be given,

or, in the case of employment having a period within paragraph (a) and aperiod within paragraph (b), the aggregate of those periods.

(4) If more than six months before the end of the guaranteed term of a director’semployment the company enters into a further service contract (otherwise thanin pursuance of a right conferred by or under the original contract on the otherparty to it), this section applies as if there were added to the guaranteed termof the new contract the unexpired period of the guaranteed term of the originalcontract.

(5) A resolution approving provision to which this section applies must not bepassed unless a memorandum setting out the proposed contract incorporatingthe provision is made available to members—

(a) in the case of a written resolution, by being sent or submitted to everyeligible member at or before the time at which the proposed resolutionis sent or submitted to him;

(b) in the case of a resolution at a meeting, by being made available forinspection by members of the company both—

(i) at the company’s registered office for not less than 15 daysending with the date of the meeting, and

(ii) at the meeting itself.

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(6) No approval is required under this section on the part of the members of—(a) a body corporate that is not—

(i) a company as defined in section 1 of this Act, or(ii) a body registered under the Companies Acts by virtue of

section 655 (bodies not formed under Companies Acts butauthorised to register);

(b) a body corporate that is a wholly-owned subsidiary of another bodycorporate.

(7) In this section “employment” means any employment under a director’sservice contract.

172 Directors’ long-term service contracts: civil consequences of contravention

(1) If a company agrees to provision in contravention of section 171 (directors’long-term service contracts: requirement of members’ approval)—

(a) the provision is void, to the extent of the contravention, and(b) the contract is deemed to contain a term entitling the company to

terminate it at any time by the giving of reasonable notice.

Substantial property transactions

173 Substantial property transactions: requirement of members’ approval

(1) A company may not enter into an arrangement under which—(a) a director of the company or of its holding company, or a person

connected with such a director, acquires or is to acquire from thecompany (directly or indirectly) a substantial non-cash asset, or

(b) the company acquires or is to acquire a substantial non-cash asset(directly or indirectly) from such a director or a person so connected,

unless the arrangement has been approved by a resolution of the members ofthe company or is conditional on such approval being obtained.For the meaning of “substantial non-cash asset” see section 174.

(2) If the director or connected person is a director of its holding company or aperson connected with such a director, the arrangement must also have beenapproved by a resolution of the members of the holding company.

(3) A company shall not be subject to any liability by reason of a failure to obtainapproval required by this section.

(4) No approval is required under this section on the part of the members of a—(a) a body corporate that is not—




(5) For the purposes of this section—(a) an arrangement involving more than one non-cash asset, or(b) an arrangement that is one of a series involving non-cash assets,

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shall be treated as if they involved a non-cash asset of a value equal to theaggregate value of all the non-cash assets involved in the arrangement or, asthe case may be, the series.

(6) This section does not apply to a transaction so far as it relates—(a) to anything to which a director of a company is entitled under his

service contract, or(b) to payment for loss of office as defined in section 195 (payments

requiring members’ approval).

174 Meaning of “substantial”

(1) This section explains what is meant in section 173 (requirement of approval forsubstantial property transactions) by a “substantial” non-cash asset.

(2) An asset is a substantial asset in relation to a company if its value—(a) exceeds 10% of the company’s asset value and is more than £5,000, or(b) exceeds £100,000.

(3) For this purpose a company’s “asset value” at any time is—(a) the value of the company’s net assets determined by reference to its

most recent statutory accounts, or(b) if no statutory accounts have been prepared, the amount of the

company’s called-up share capital.

(4) A company’s “statutory accounts” means its annual accounts prepared inaccordance with Part 15, and its “most recent” statutory accounts means thosein relation to which the time for sending them out to members (see section 400)is most recent.

(5) Whether an asset is a substantial asset shall be determined as at the time thearrangement is entered into.

175 Exception for transactions with members or other group companies

Approval is not required under section 173 (requirement of members’approval for substantial property transactions)—

(a) for a transaction between a company and a person in his character as amember of that company, or

(b) for a transaction between—(i) a holding company and its wholly-owned subsidiary, or

(ii) two wholly-owned subsidiaries of the same holding company.

176 Exception in case of company in winding up or administration

Approval is not required under section 173 (requirement of members’approval for substantial property transactions) on the part of the members of acompany—

(a) that is being wound up (unless the winding up is a members’ voluntarywinding up), or

(b) that is in administration within the meaning of Schedule B1 to theInsolvency Act 1986 (c. 45) or the Insolvency (Northern Ireland) Order1989.

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177 Exception for transactions on recognised investment exchange

(1) Approval is not required under section 173 (requirement of members’approval for substantial property transactions) for a transaction on arecognised investment exchange effected by a director, or a person connectedwith him, through the agency of a person who in relation to the transaction actsas an independent broker.

(2) For this purpose—(a) “independent broker” means a person who, independently of the

director or any person connected with him, selects the person withwhom the transaction is to be effected; and

(b) “recognised investment exchange” has the same meaning as in Part 18of the Financial Services and Markets Act 2000 (c. 8)

178 Property transactions: civil consequences of contravention

(1) This section applies where a company enters into an arrangement incontravention of section 173 (requirement of members’ approval forsubstantial property transactions).

(2) The arrangement is voidable at the instance of the company, unless—(a) restitution of any money or other asset that was the subject-matter of

the arrangement is no longer possible,(b) the company has been indemnified for any loss or damage resulting

from the arrangement, or(c) rights acquired in good faith, for value and without actual notice of the

contravention by a person who is not a party to the arrangement wouldbe affected by the avoidance.

(3) Whether or not the arrangement has been avoided, each of the personsspecified in subsection (4) is liable—

(a) to account to the company for any gain that he has made directly orindirectly by the arrangement, and

(b) (jointly and severally with any other person so liable under this section)to indemnify the company for any loss or damage resulting from thearrangement.

(4) The persons so liable are—(a) any director of the company or of its holding company, or any person

connected with such a director, with whom the company entered intothe arrangement, and

(b) any director of the company who authorised the arrangement.This is subject to subsections (5) and (6).

(5) In the case of an arrangement entered into by a company with a personconnected with a director of the company or its holding company, that directoris not liable if he shows that he took all reasonable steps to secure thecompany’s compliance with section 173.

(6) In any case a person so connected, or a director who authorised thearrangement, is not liable if he shows that, at the time the arrangement wasentered into, he did not know the relevant circumstances constituting thecontravention.

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(7) Nothing in this section shall be read as excluding the operation of any otherenactment or rule of law by virtue of which the arrangement may be called inquestion or any liability to the company may arise.

179 Property transactions: effect of subsequent affirmation

Where a transaction or arrangement is entered into by a company incontravention of section 173 (requirement of members’ approval) but, within areasonable period, it is affirmed—

(a) in the case of a contravention of subsection (1) of that section, byresolution of the members of the company, and

(b) in the case of a contravention of subsection (2) of that section, byresolution of the members of the holding company,

the transaction or arrangement may no longer be avoided under section 178.

Loans, quasi-loans and credit transactions

180 Loans or quasi-loans: requirement of members’ approval

(1) A company may not—(a) make a loan or quasi-loan to a director of the company or of its holding

company, or to a person connected with such a director, or(b) give a guarantee or provide security in connection with a loan or quasi-

loan made by any person to such a director, or to a person connectedwith such a director,

unless the transaction has been approved by a resolution of the members of thecompany.

(2) If the director or connected person is a director of its holding company or aperson connected with such a director, the transaction must also have beenapproved by a resolution of the members of the holding company.

(3) A resolution approving a transaction to which this section applies must not bepassed unless a memorandum setting out the matters mentioned in subsection(4) is made available to members—





(4) The matters to be disclosed are—(a) the nature of the transaction,(b) the amount of the loan or quasi-loan and the purpose for which it is

required, and(c) the extent of the company’s liability under any transaction connected

with the loan or quasi-loan.


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181 Meaning of “quasi-loan” and related expressions

(1) A “quasi-loan” is a transaction under which one party (“the creditor”) agrees topay, or pays otherwise than in pursuance of an agreement, a sum for another(“the borrower”) or agrees to reimburse, or reimburses otherwise than inpursuance of an agreement, expenditure incurred by another party for another(“the borrower”)—

(a) on terms that the borrower (or a person on his behalf) will reimbursethe creditor; or

(b) in circumstances giving rise to a liability on the borrower to reimbursethe creditor.

(2) Any reference to the person to whom a quasi-loan is made is a reference to theborrower.

(3) The liabilities of the borrower under a quasi-loan include the liabilities of anyperson who has agreed to reimburse the creditor on behalf of the borrower.

182 Credit transactions: requirement of members’ approval

(1) A company may not—(a) enter into a credit transaction as creditor for the benefit of a director of

the company or of its holding company, or a person connected withsuch a director, or

(b) give a guarantee or provide security in connection with a credittransaction entered into by any person for the benefit of such a director,or a person connected with such a director,

unless the transaction (that is, the credit transaction, the giving of the guaranteeor the provision of security, as the case may be) has been approved byresolution of the members of the company.

(2) If the director or connected person is a director of its holding company or aperson connected with such a director, the transaction must also have beenapproved by a resolution of the members of the holding company.






(4) The matters to be disclosed are—

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(a) the nature of the transaction,(b) the value of the credit transaction and the purpose for which the land,

goods or services sold or otherwise disposed of, leased, hired orsupplied under the credit transaction are required, and

(c) the extent of the company’s liability under any transaction connectedwith the credit transaction.





183 Meaning of “credit transaction”

(1) A “credit transaction” is a transaction under which one party (“the creditor”)—(a) supplies any goods or sells any land under a hire-purchase agreement

or a conditional sale agreement,(b) leases or hires any land or goods in return for periodical payments, or(c) otherwise disposes of land or supplies goods or services on the

understanding that payment (whether in a lump sum or instalments orby way of periodical payments or otherwise) is to be deferred.

(2) Any reference to the person for whose benefit a credit transaction is enteredinto is to the person to whom goods, land or services are supplied, sold, leased,hired or otherwise disposed of under the transaction.

(3) In this section—“conditional sale agreement” has the same meaning as in the Consumer

Credit Act 1974 (c. 39); and“services” means anything other than goods or land.

184 Related arrangements: requirement of members’ approval

(1) A company may not—(a) take part in an arrangement under which—

(i) another person enters into a transaction that, if it had beenentered into by the company, would have required approvalunder section 180 or 182, and

(ii) that person, in pursuance of the arrangement, obtains a benefitfrom the company or a subsidiary of the company, or

(b) arrange for the assignment to it, or assumption by it, of any rights,obligations or liabilities under a transaction that, if it had been enteredinto by the company, would have required such approval,

unless the transaction (that is, the arrangement in question) has been approvedby a resolution of the members of the company.

(2) If the director or connected person for whom the transaction is entered into isa director of its holding company or a person connected with such a director,

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the transaction must also have been approved by a resolution of the membersof the holding company.






(4) The matters to be disclosed are—(a) the matters that would have to be disclosed if the company were

seeking approval of the transaction to which the arrangement relates,(b) the nature of the arrangement, and(c) the extent of the company’s liability under the arrangement or any

transaction connected with it.





(6) In determining for the purposes of this section whether a transaction is one thatwould have required approval under section 180 or 182 if it had been enteredinto by the company, the transaction shall be treated as having been enteredinto on the date of the arrangement.

185 Exception for expenditure on company business

(1) Approval is not required under section 180 or 182 (requirement of members’approval for loans etc) for anything done by a company—

(a) to provide a director of the company or of its holding company, or aperson connected with any such director, with funds to meetexpenditure incurred or to be incurred by him—

(i) for the purposes of the company, or(ii) for the purpose of enabling him properly to perform his duties

as an officer of the company, or(b) to enable any such person to avoid incurring such expenditure.

(2) This section does not authorise a company to enter into a transaction if theaggregate of—

(a) the value of the transaction in question, and(b) the value of any relevant existing transactions or arrangements,

exceeds £50,000.

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186 Exception for expenditure on defending proceedings etc

(1) Approval is not required under section 180 or 182 (requirement of members’approval for loans etc) for anything done by a company—

(a) to provide a director of the company or of its holding company withfunds to meet expenditure incurred or to be incurred by him—

(i) in defending any criminal or civil proceedings in connectionwith any alleged negligence, default, breach of duty or breachof trust by him in relation to the company, or

(ii) in connection with an application for relief (see subsection (5)),or

(b) to enable any such director to avoid incurring such expenditure,if it is done on the following terms.

(2) The terms are—(a) that the loan is to be repaid, or (as the case may be) any liability of the

company incurred in connection with the matter is to be discharged, inthe event of—

(i) the director being convicted in the proceedings,(ii) judgment being given against him in the proceedings, or

(iii) the court refusing to grant him relief on the application; and(b) that it is to be so repaid or discharged not later than—

(i) the date when the conviction becomes final,(ii) the date when the judgment becomes final, or

(iii) the date when the refusal of relief becomes final.

(3) For this purpose a conviction, judgment or refusal of relief becomes final—(a) if not appealed against, at the end of the period for bringing an appeal;(b) if appealed against, when the appeal (or any further appeal) is disposed

of.

(4) An appeal is disposed of—(a) if it is determined and the period for bringing any further appeal has

ended, or(b) if it is abandoned or otherwise ceases to have effect.

(5) The reference in subsection (1)(a)(ii) to an application for relief is to anapplication for relief under—

section 759 (general power of court to grant relief in case of honest andreasonable conduct), or

section 144(3) or (4) of the Companies Act 1985 (c. 6) (power of court togrant relief in case of acquisition of shares by innocent nominee).

187 Exceptions for minor and business transactions

(1) Approval is not required under section 180 for a company to make a loan orquasi loan, or to give a guarantee or provide security in connection with a loanor quasi-loan, if the aggregate of—

(a) the value of the transaction, and(b) the value of any other relevant transactions or arrangements,

does not exceed £10,000.

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(2) Approval is not required under section 182 for a company to enter into a credittransaction, or to give a guarantee or provide security in connection with acredit transaction, if the aggregate of—

(a) the value of the transaction (that is, of the credit transaction, guaranteeor security), and

(b) the value of any other relevant transactions or arrangements,does not exceed £15,000.

(3) Approval is not required under section 182 for a company to enter into a credittransaction, or to give a guarantee or provide security in connection with acredit transaction, if—

(a) the transaction is entered into by the company in the ordinary course ofthe company’s business, and

(b) the value of the transaction is not greater, and the terms on which it isentered into are not more favourable, than it is reasonable to expect thecompany would have offered to, or in respect of, a person of the samefinancial standing but unconnected with the company.

188 Exceptions for intra-group transactions

(1) Approval is not required under section 180 for—(a) the making of a loan or quasi-loan to an associated body corporate, or(b) the giving of a guarantee or provision of security in connection with a

loan or quasi-loan made to an associated body corporate.

(2) Approval is not required under section 182—(a) to enter into a credit transaction as creditor for the benefit of an

associated body corporate, or(b) to give a guarantee or provide security in connection with a credit

transaction entered into by any person for the benefit of an associatedbody corporate.

189 Exceptions for money-lending companies

(1) Approval is not required under section 180 for the making of a loan or quasi-loan, or the giving of a guarantee or provision of security in connection with aloan or quasi-loan, by a money-lending company if—

(a) the transaction (that is, the loan, quasi-loan, guarantee or security) isentered into by the company in the ordinary course of the company’sbusiness, and

(b) the value of the transaction is not greater, and its terms are not morefavourable, than it is reasonable to expect the company would haveoffered to a person of the same financial standing but unconnected withthe company.

(2) A “money-lending company” means a company whose ordinary businessincludes the making of loans or quasi-loans, or the giving of guarantees orprovision of security in connection with loans or quasi-loans.

(3) The condition specified in subsection (1)(b) does not of itself prevent acompany from making a loan—

(a) for the purpose of facilitating the purchase, for use as the director’sonly or main residence, of the whole or part of any dwelling-housetogether with any land to be occupied and enjoyed with it,

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(b) for the purpose of improving a dwelling-house or part of a dwelling-house so used or any land occupied and enjoyed with it, or

(c) in substitution for any loan made by any person and falling withinparagraph (a) or (b) above,

if loans of that description are ordinarily made by the company to itsemployees and the terms of the loan in question are no more favourable thanthose on which such loans are ordinarily made.

190 Other relevant transactions or arrangements

(1) This section has effect for determining what are “other relevant transactions orarrangements” for the purposes of any exception to section 180 or 182.In the following provisions “the relevant exception” means the exception forthe purposes of which that falls to be determined.

(2) Other relevant transactions or arrangements are those previously entered into,or entered into at the same time as the transaction or arrangement in questionin relation to which the following conditions are met.

(3) Where the transaction or arrangement in question is entered into—(a) for a director of the company entering into it, or(b) for a person connected with such a director,

the conditions are that the transaction or arrangement was (or is) entered intoby virtue of the relevant exception by that company or by any of itssubsidiaries.

(4) Where the transaction or arrangement in question is entered into—(a) for a director of the holding company of the company entering into it,

or(b) for a person connected with such a director,

the conditions are that the transaction or arrangement was (or is) entered intoby virtue of the relevant exception by the holding company or by any of itssubsidiaries.

(5) A transaction or arrangement entered into by a company that at the time it wasentered into—

(a) was a subsidiary of the company entering into the transaction orarrangement in question, or

(b) was a subsidiary of that company’s holding company,is not a relevant transaction or arrangement if, at the time the question ariseswhether the transaction or arrangement in question falls within a relevantexception, it is no longer such a subsidiary.

191 The value of transactions and arrangements

(1) For the purposes of sections 180 to 194 (loans etc)—(a) the value of a transaction or arrangement is determined as follows, and(b) the value of any other relevant transaction or arrangement is taken to

be the value so determined reduced by any amount by which theliabilities of the person for whom the transaction or arrangement wasmade have been reduced.

(2) The value of a loan is the amount of its principal.

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(3) The value of a quasi-loan is the amount, or maximum amount, that the personto whom the quasi-loan is made is liable to reimburse the creditor.

(4) The value of a credit transaction is the price that it is reasonable to expect couldbe obtained for the goods, services or land to which the transaction relates ifthey had been supplied (at the time the transaction is entered into) in theordinary course of business and on the same terms (apart from price) as theyhave been supplied, or are to be supplied, under the transaction in question.

(5) The value of a guarantee or security is the amount guaranteed or secured.

(6) The value of an arrangement to which section 184 (related arrangements)applies is the value of the transaction to which the arrangement relates.

(7) If the value of a transaction or arrangement is not capable of being expressedas a specific sum of money—

(a) whether because the amount of any liability arising under thetransaction or arrangement is unascertainable, or for any other reason,and

(b) whether or not any liability under the transaction or arrangement hasbeen reduced,

its value is deemed to exceed £50,000.

192 The person for whom a transaction or arrangement is entered into

For the purposes of sections 180 to 194 (loans etc) the person for whom atransaction or arrangement is entered into is—

(a) in the case of a loan or quasi-loan, the person to whom it is made;(b) in the case of a credit transaction, the person to whom goods, land or

services are supplied, sold, hired, leased or otherwise disposed ofunder the transaction;

(c) in the case of a guarantee or security, the person for whom thetransaction is made in connection with which the guarantee or securityis entered into;

(d) in the case of an arrangement within section 184 (relatedarrangements), the person for whom the transaction is made to whichthe arrangement relates.

193 Loans etc: civil consequences of contravention

(1) This section applies where a company enters into a transaction incontravention of section 180, 182 or 184 (requirement of members’ approval forloans etc).

(2) The transaction is voidable at the instance of the company, unless—(a) restitution of any money or other asset that was the subject-matter of

the transaction is no longer possible,(b) the company has been indemnified for any loss or damage resulting

from the transaction, or(c) rights acquired in good faith, for value and without actual notice of the

contravention by a person who is not a party to the transaction wouldbe affected by the avoidance.

(3) Whether or not the transaction has been avoided, each of the persons specifiedin subsection (4) is liable—

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(a) to account to the company for any gain that he has made directly orindirectly by the transaction, and

(b) (jointly and severally with any other person so liable under this section)to indemnify the company for any loss or damage resulting from thetransaction.

(4) The persons so liable are—(a) the person for whom the company entered into the transaction, and(b) any director of the company who authorised the transaction.

This is subject to subsections (5) and (6).

(5) In the case of a transaction entered into by a company with a person connectedwith a director of the company or its holding company, that director is notliable if he shows that he took all reasonable steps to secure the company’scompliance with section 180, 182 or 184.

(6) In any case a person so connected, or a director who authorised the transaction,is not liable if he shows that, at the time the transaction was entered into, he didnot know the relevant circumstances constituting the contravention.

(7) Nothing in this section shall be read as excluding the operation of any otherenactment or rule of law by virtue of which the transaction may be called inquestion or any liability to the company may arise.

194 Loans etc: effect of subsequent affirmation

Where a transaction is entered into by a company in contravention of section180, 182 or 184 (requirement of members’ approval for loans etc) but, within areasonable period, it is affirmed—

(a) in the case of a contravention of subsection (1) of that section, byresolution of the members of the company, and

(b) in the case of a contravention of subsection (2) of that section, byresolution of the members of the holding company,

the transaction may no longer be avoided under section 193.

Payments for loss of office

195 Payments for loss of office

(1) In this Chapter a “payment for loss of office” means a payment made to adirector or past director of a company—

(a) by way of compensation for loss of office as director of the company,(b) by way of compensation for loss, while director of the company or in

connection with his ceasing to be a director of it, of—(i) any other office or employment in connection with the

management of the affairs of the company, or(ii) any office (as director or otherwise) or employment in

connection with the management of the affairs of anysubsidiary undertaking of the company, or

(c) as consideration for or in connection with his retirement from his officeas director of the company, or

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(d) as consideration for or in connection with his retirement, while directorof the company or in connection with his ceasing to be a director of it,from—

(i) any other office or employment in connection with themanagement of the affairs of the company, or

(ii) any office (as director or otherwise) or employment inconnection with the management of the affairs of anysubsidiary undertaking of the company.

(2) The references to compensation and consideration include benefits otherwisethan in cash and references in this Chapter to payment have a correspondingmeaning.

(3) For the purposes of sections 197 to 201 (payments requiring members’approval)—

(a) payment to a person connected with a director, or(b) payment to any person at the direction of, or for the benefit of, a

director or a person connected with him,is treated as payment to the director.

(4) References in those sections to payment by a person include payment byanother person at the direction of, or on behalf of, the person referred to.

196 Amounts taken to be payments for loss of office

If in connection with any such transfer as is mentioned in section 198 or 199(payment in connection with transfer of undertaking, property or shares)—

(a) the price to be paid to a director of the company whose office is to beabolished or who is to retire from office for any shares in the companyheld by him is in excess of the price which could at the time have beenobtained by other holders of like shares, or

(b) any valuable consideration is given by a person other than thecompany to a director of the company whose office is to be abolishedor who is to retire from office,

the excess or, as the case may be, the money value of the consideration is takenfor the purposes of those sections to have been a payment for loss of office.

197 Payment by company: requirement of members’ approval

(1) A company may not make a payment for loss of office to a director of thecompany unless the payment the payment has been approved by resolution ofthe members of the company.

(2) A company may not make a payment for loss of office to a director of itsholding company unless the proposal has been approved by resolution of themembers of each of those companies.

(3) A resolution approving a payment to which this section applies must not bepassed unless a memorandum setting out particulars of the proposed payment(including its amount) is made available to the members of the company whoseapproval is sought—


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(b) in the case of a resolution at a meeting, by being made available forinspection by the members both—







198 Payment in connection with transfer of undertaking etc: requirement of members’ approval

(1) No payment for loss of office may be made by any person to a director of acompany in connection with the transfer of the whole or any part of theundertaking or property of the company unless the payment has beenapproved by resolution of the members of the company

(2) No payment for loss of office may be made by any person to a director of acompany in connection with the transfer of the whole or any part of theundertaking or property of a subsidiary of the company unless the paymenthas been approved by resolution of the members of each of the companies.










(5) A payment made in pursuance of an arrangement—(a) entered into as part of the agreement for the transfer in question, or

within one year before or two years after that agreement, and

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(b) to which the company whose undertaking or property is transferred, orany person to whom the transfer is made, is privy,

is presumed, except in so far as the contrary is shown, to be a payment to whichthis section applies.

199 Payment in connection with share transfer: requirement of members’ approval

(1) No payment for loss of office may be made by any person to a director of acompany in connection with a transfer of shares in the company, or in asubsidiary of the company, resulting from a takeover bid unless the paymenthas been approved by resolution of the relevant shareholders

(2) The relevant shareholders are the holders of the shares to which the bid relatesand of other holders of shares of the same class as any of those shares.






(4) Neither the person making the offer, nor any associate of his (as defined insection 430E of the Companies Act 1985 (c. 6)), is entitled to vote on theresolution, but—

(a) where the resolution is proposed as a written resolution, they areentitled (if they would otherwise be so entitled) to be sent a copy of it,and

(b) at any meeting to consider the resolution they are entitled (if theywould otherwise be so entitled) to be given notice of the meeting, toattend and speak and if present (in person or by proxy) to counttowards the quorum.

(5) If at a meeting to consider the resolution a quorum is not present, and after themeeting has been adjourned to a later date a quorum is again not present, thepayment is (for the purposes of this section) deemed to have been approved.

(6) No approval is required under this section on the part of shareholders in—(a) a body corporate that is not—




(7) A payment made in pursuance of an arrangement—

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(a) entered into as part of the agreement for the transfer in question, orwithin one year before or two years after that agreement, and

(b) to which the company whose shares are the subject of the bid, or anyperson to whom the transfer is made, is privy,

is presumed, except in so far as the contrary is shown, to be a payment to whichthis section applies.

200 Exception for payments in discharge of legal obligations etc

(1) Approval is not required under section 197, 198 or 199 (payments requiringmembers’ approval) for a payment made in good faith—

(a) in discharge of an existing legal obligation (as defined below),(b) by way of damages for breach of an such obligation,(c) by way of settlement or compromise of any claim arising in connection

with the termination of a person’s office or employment, or(d) by way of pension in respect of past services.

(2) In relation to a payment within section 197 (payment by company) an existinglegal obligation means an obligation of the company, or any of its subsidiaries,that was not entered into in connection with, or in consequence of, the eventgiving rise to the payment for loss of office.

(3) In relation to a payment within section 198 or 199 (payment in connection withtransfer of undertaking, property or shares) an existing legal obligation meansan obligation of the person making the payment that was not entered into forthe purposes of, in connection with or in consequence of, the transfer inquestion.

(4) A payment part of which falls within subsection (1) above and part of whichdoes not is treated as if the parts were separate payments.

201 Exception for small payments

(1) Approval is not required under section 197, 198 or 199 (payments requiringmembers’ approval) if—

(a) the payment in question is made by the company or any of itssubsidiaries, and

(b) the amount or value of the payment, together with the amount or valueof any other relevant payments, does not exceed £200.

(2) For this purpose “other relevant payments” are payments for loss of office inrelation to which the following conditions met.

(3) Where the payment in question is one to which section 197 (payment bycompany) applies, the conditions are that the other payment was or is paid—

(a) by the company making the payment in question or any of itssubsidiaries,

(b) to the director to whom that payment is made, and(c) in connection with the same event.

(4) Where the payment in question is one to which section 198 or 199 applies(payment in connection with transfer of undertaking, property or shares), theconditions are that the other payment was (or is) paid in connection with thesame transfer—

(a) to the director to whom the payment in question was made, and

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(b) by the company making the payment or any of its subsidiaries.

202 Payments made without approval: civil consequences

(1) If a payment is made in contravention of section 197 (payment by company)—(a) it is held by the recipient on trust for the company making the payment,

and(b) any director who authorised the payment is jointly and severally liable

to indemnify the company that made the payment for any loss resultingfrom it.

(2) If a payment is made in contravention of section 198 (payment in connectionwith transfer of undertaking etc), it is held by the recipient on trust for thecompany whose undertaking or property is or is proposed to be transferred.

(3) If a payment is made in contravention of section 199 (payment in connectionwith share transfer)—

(a) it is held by the recipient on trust for persons who have sold their sharesas a result of the offer made, and

(b) the expenses incurred by the recipient in distributing that sum amongstthose persons shall be borne by him and not retained out of that sum.

(4) If a payment is in contravention of section 197 and section 198, subsection (2)of this section applies rather than subsection (1).

(5) If a payment is in contravention of section 197 and section 199, subsection (3)of this section applies rather than subsection (1), unless the court directsotherwise.

Supplementary

203 Transactions requiring members’ approval: application of provisions to shadow directors

(1) For the purposes of—(a) sections 171 and 172(directors’ service contracts),(b) sections 173 to 179 (property transactions),(c) sections 180 to 194 (loans etc), and(d) sections 195 to 202 (payments for loss of office),

a shadow director is treated as a director.

(2) Any reference in those provisions to loss of office as a director does not applyin relation to loss of a person’s status as a shadow director.

204 Transactions requiring members’ approval: nature of resolution required

(1) The resolution of the members of a company required by any provision of thisChapter is an ordinary resolution.

(2) This is subject to anything in the company’s articles requiring a higher majority(or unanimity).

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CHAPTER 5

DIRECTORS’ SERVICE CONTRACTS

205 Directors’ service contracts

(1) For the purposes of this Part a director’s “service contract”, in relation to acompany, means a contract under which—

(a) a director of the company undertakes personally to perform services (asdirector or otherwise) for the company, or for a subsidiary of thecompany, or

(b) services (as director or otherwise) that a director of the companyundertakes personally to perform are made available by a third partyto the company, or to a subsidiary of the company.

(2) The provisions of this Part relating to directors’ service contracts apply to theterms of a person’s appointment as a director of a company.They are not restricted to contracts for the performance of services outside thescope of the ordinary duties of a director.

206 Copy of contract or memorandum of terms to be available for inspection

(1) A company must keep available for inspection—(a) a copy of every director’s service contract with the company or with a

subsidiary of the company, or(b) if the contract is not in writing, a written memorandum setting out the

terms of the contract.

(2) All the copies and memoranda must be kept available for inspection at—(a) the company’s registered office;(b) the place where its register of members is kept available for inspection

(if not at its registered office); or(c) its principal place of business (if that is situated in the part of United

Kingdom in which the company is registered).

(3) The copies and memoranda must be retained by the company for at least oneyear from the date of termination or expiry of the contract and must be keptavailable for inspection during that time.

(4) The company must give notice to the registrar—(a) of the place at which the copies and memoranda are kept available for

inspection, and(b) of any change in that place,

unless they have at all times been kept at the company’s registered office.

(5) If default is made in complying with subsection (1), (2) or (3), or default is madefor 14 days in complying with subsection (4), an offence is committed by everyofficer of the company who is in default.


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(7) The provisions of this section apply to a variation of a director’s servicecontract as they apply to the original contract.

207 Right of member to inspect and request copy

(1) Every copy or memorandum required to be kept under section 206 must beopen to inspection by any member of the company without charge.

(2) Any member of the company is entitled, on request and on payment of suchfee as may be prescribed, to be provided with a copy of any such copy ormemorandum.The copy must be provided within seven days after the request is received bythe company.

(3) If an inspection required under subsection (1) is refused, or default is made incomplying with subsection (2), an offence is committed by every officer of thecompany who is in default.


(5) In the case of any such refusal or default the court may by order compel animmediate inspection or, as the case may be, direct that the copy required besent to the person requiring it.

208 Directors’ service contracts: application of provisions to shadow directors

A shadow director is treated as a director for the purposes of the provisions ofthis Chapter.

CHAPTER 6

CONTRACTS WITH SOLE MEMBERS WHO ARE DIRECTORS

209 Contract with sole member who is also a director

(1) This section applies where—(a) a limited company having only one member enters into a contract with

the sole member,(b) the sole member is also a director of the company, and(c) the contract is not entered into in the ordinary course of the company’s

business.

(2) The company must, unless the contract is in writing, ensure that the terms ofthe contract are either—

(a) set out in a written memorandum, or(b) recorded in the minutes of the first meeting of the directors of the

company following the making of the contract.

(3) If a company fails to comply with this section an offence is committed by everyofficer of the company who is in default.

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(5) For the purposes of this section a shadow director is treated as a director.

(6) Failure to comply with this section in relation to a contract does not affect thevalidity of the contract.

(7) Nothing in this section shall be read as excluding the operation of any otherenactment or rule of law applying to contracts between a company and adirector of the company.

CHAPTER 7

DIRECTORS’ LIABILITIES

Provision protecting directors from liability

210 Provisions protecting directors from liability

(1) Any provision that purports to exempt a director of a company (to any extent)from any liability that would otherwise attach to him in connection with anynegligence, default, breach of duty or breach of trust in relation to the companyis void.

(2) Any provision by which a company directly or indirectly provides anindemnity (to any extent) for a director of the company, or of an associatedcompany, against any liability attaching to him in connection with anynegligence, default, breach of duty or breach of trust in relation to the companyof which he is a director is void, except as permitted by—

(a) section 211 (provision of insurance),(b) section 212 (qualifying third party indemnity provisions).

(3) This section applies to any provision, whether contained in a company’sarticles or in any contract with the company or otherwise.

211 Provision of insurance

Section 210(2) (voidness of provisions for indemnifying directors) does notprevent a company from purchasing and maintaining for a director of thecompany, or of an associated company, insurance against any such liability asis mentioned in that subsection.

212 Qualifying third party indemnity provision

(1) Section 210(2) (voidness of provisions for indemnifying directors) does notapply to qualifying third party indemnity provision.

(2) Third party indemnity provision means provision for indemnity againstliability incurred by the director to a person other than the company or anassociated company.Such provision is qualifying third party indemnity provision if the followingrequirements are met.

(3) The provision must not provide any indemnity against—

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(a) any liability of the director to pay—(i) a fine imposed in criminal proceedings, or

(ii) a sum payable to a regulatory authority by way of a penalty inrespect of non-compliance with any requirement of a regulatorynature (however arising); or

(b) any liability incurred by the director—(i) in defending criminal proceedings in which he is convicted, or

(ii) in defending civil proceedings brought by the company, or anassociated company, in which judgment is given against him, or

(iii) in connection with an application for relief (see subsection (6))in which the court refuses to grant him relief.

(4) The references in subsection (3)(b) to a conviction, judgment or refusal of reliefare to the final decision in the proceedings.

(5) For this purpose—(a) a conviction, judgment or refusal of relief becomes final—

(i) if not appealed against, at the end of the period for bringing anappeal, or

(ii) if appealed against, at the time when the appeal (or any furtherappeal) is disposed of; and

(b) an appeal is disposed of—(i) if it is determined and the period for bringing any further

appeal has ended, or(ii) if it is abandoned or otherwise ceases to have effect.

(6) The reference in subsection (3)(b)(iii) to an application for relief is to anapplication for relief under—

section 759 (general power of court to grant relief in case of honest andreasonable conduct), or

section 144(3) or (4) of the Companies Act 1985 (c. 6) (power of court togrant relief in case of acquisition of shares by innocent nominee).

213 Qualifying third party indemnity provision to be disclosed in directors’ report

(1) This section requires disclosure of qualifying third party indemnity provisionin the directors’ report.

(2) If when a directors’ report is approved any qualifying third party indemnityprovision (whether made by the company or otherwise) is in force for thebenefit of one or more directors of the company, the report must state that suchprovision is in force.

(3) If at any time during the financial year to which a directors’ report relates anysuch provision was in force for the benefit of one or more persons who werethen directors of the company, the report must state that such provision was inforce.

(4) If when a directors’ report is approved qualifying third party indemnityprovision made by the company is in force for the benefit of one or moredirectors of an associated company, the report must state that such provisionis in force.

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(5) If at any time during the financial year to which a directors’ report relates anysuch provision was in force for the benefit of one of more persons who werethen directors of an associated company, the report must state that suchprovision was in force.

214 Copy of qualifying third party indemnity provision to be available for inspection

(1) This section has effect where qualifying third party indemnity provision ismade for a director of a company, and applies—

(a) to the company of which he is a director (whether the provision is madeby that company or an associated company), and

(b) where the provision is made by an associated company, to thatcompany.

(2) That company or, as the case may be, each of them must keep available forinspection—

(a) a copy of the qualifying third party indemnity provision, or(b) if the provision is not in writing, a written memorandum setting out its

terms.

(3) The copy or memorandum must be kept available for inspection at—(a) the company’s registered office;(b) the place where its register of members is kept available for inspection

(if not at its registered office); or(c) its principal place of business (if that is situated in the part of United

Kingdom in which the company is registered).

(4) The copy or memorandum must be retained by the company for at least oneyear from the date of termination or expiry of the provision and must be keptavailable for inspection during that time.

(5) The company must give notice to the registrar—(a) of the place at which the copy or memorandum is kept available for

inspection, and(b) of any change in that place,

unless it has at all times been kept at the company’s registered office.

(6) If default is made in complying with subsection (2), (3) or (4), or default is madefor 14 days in complying with subsection 54), an offence is committed by everyofficer of the company who is in default.


(8) The provisions of this section apply to a variation of a qualifying third partyindemnity provision as they apply to the original provision.

215 Right of member to inspect and request copy

(1) Every copy or memorandum required to be kept by a company under section214 must be open to inspection by any member of the company without charge.

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(2) Any member of the company is entitled, on request and on payment of suchfee as may be prescribed, to be provided with a copy of any such copy ormemorandum.The copy must be provided within seven days after the request is received bythe company.

(3) If an inspection required under subsection (1) is refused, or default is made incomplying with subsection (2), an offence is committed by every officer of thecompany who is in default.



Ratification of acts giving rise to liability

216 Ratification of acts of directors

(1) This section applies to the ratification by a company of conduct by a directoramounting to negligence, default, breach of duty or breach of trust in relationto the company.

(2) The decision of the company to ratify such conduct—(a) must be taken by the members, and(b) may be taken by ordinary resolution, subject to anything in the

company’s articles requiring a higher majority (or unanimity).

(3) Where the resolution is proposed as a written resolution, members with apersonal interest, direct or indirect, in the ratification are not eligible members.

(4) Where the resolution is proposed at a meeting, it is passed only if the necessarymajority is obtained disregarding votes against the resolution by memberswith a personal interest, direct or indirect, in the ratification.This does not prevent such members from attending, being counted towardsthe quorum and taking part in the proceedings at any meeting at which thedecision is considered.

(5) For the purposes of this section—(a) “conduct” includes acts and omissions;(b) “director” includes a former director; and(c) a shadow director is treated as a director.

(6) Nothing in this section affects—(a) the validity of a decision taken by unanimous consent of the members

of the company, or(b) any power of the directors to agree not to sue, or to settle or release a

claim made by them on behalf of the company.

(7) This section does not affect any other enactment or rule of law as to therequirements for valid ratification or any rule of law as to acts that areincapable of being ratified by the company.

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CHAPTER 8

DIRECTORS’ RESIDENTIAL ADDRESSES: NON-DISCLOSURE CERTIFICATE

217 Issue of non-disclosure certificate

(1) An individual who is, or is to be, a director of a company may apply to theregistrar for a non-disclosure certificate in relation to of his usual residentialaddress.

(2) The application must state the residential address in relation to which it ismade.

(3) If any fee payable in connection with the application is paid, then, subject tosection 684 (defective delivery), the registrar must—

(a) issue the certificate applied for, and(b) if the individual does not already have a unique identifier (see section

694), allocate one to him.

(4) In the Companies Acts an address in relation to which a non-disclosurecertificate is in force is referred to as a “protected address”.

218 Effect of non-disclosure certificate: the company

(1) This section applies where—(a) a non-disclosure certificate is in force, and(b) the individual to whom the certificate was issued has given notice to

the company of—(i) the protected address,

(ii) his unique identifier,(iii) a service address, and(iv) the country or state (or part of the United Kingdom) in which he

is usually resident.

(2) The company must make available for inspection in the register of directors(instead of the protected address) a statement of—

(a) the individual’s unique identifier and service address, and(b) the country or state (or part of the United Kingdom) in which he is

usually resident.

(3) The company must notify those particulars (and not the protected address) tothe registrar where it would otherwise be obliged to notify the individual’susual residential address.

(4) The company must not use or disclose the protected address except—(a) for communicating with the individual to whom the certificate was

issued, or(b) in accordance with section 221 (disclosure under court order).

219 Effect of non-disclosure certificate: the registrar

(1) This section applies where a non-disclosure certificate is in force.

(2) The registrar must omit the protected address as stated—

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(a) on the application for a non-disclosure certificate or on a notification ofchange of address under section 222, or

(b) on any other document where a residential address would normally berequired to be notified,

from the material on the register that is available for public inspection.

(3) If a protected address is stated as mentioned in subsection (2)(b), the registrarmay treat the document as not properly delivered.

(4) The registrar is not obliged—(a) to check documents other than those mentioned in subsection (2) to

ensure the absence of a protected address, or(b) to omit from the material that is available for public inspection

anything registered before the certificate was issued.

(5) The registrar must not use or disclose the protected address except—(a) as permitted by section 220 (permitted use or disclosure by registrar),

or(b) in accordance with section 221 (disclosure under court order).

220 Permitted use or disclosure by the registrar

(1) The registrar may use a protected address for communicating with theindividual to whom the certificate was issued.

(2) The registrar may disclose a protected address—(a) to a public authority specified for the purposes of this section by

regulations made by the Secretary of State, or(b) to a credit reference agency.

(3) The Secretary of State may make provision by regulations—(a) specifying conditions for the disclosure of protected addresses in

accordance with this section, and(b) providing for the charging of fees.

(4) In this section—“credit reference agency” a person carrying on a business comprising the

furnishing of information relevant to the financial standing ofindividuals, being information collected by the agency for thatpurpose; and

“public authority” includes any person or body having functions of apublic nature.


221 Disclosure under court order

(1) The court may make an order for the disclosure of a protected address by thecompany or by the registrar if—

(a) there is evidence that service of documents at the service addressprovided in place of the protected address is not effective to bring themto the notice of the person having the benefit of the certificate, or

(b) it is necessary or expedient for the residential address to be provided inconnection with the enforcement of an order or decree of the court,

and the court is otherwise satisfied that it is appropriate to make the order.

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(2) An order for disclosure by the registrar is to be made only if the company doesnot have the address or has been dissolved.

(3) The order may be made on the application of a liquidator, creditor or memberof the company, or any other person appearing to the court to have a sufficientinterest.

(4) The order must specify the persons to whom, and purposes for which,disclosure is authorised.

222 Non-disclosure certificate: change of address

(1) This section applies where a protected address ceases to be the usualresidential address of the individual to whom it was issued.

(2) The individual must give notice of the change within 14 days—(a) to the company (that is, to every company of which he is a director),

and(b) to the registrar.

The notices must state what the individual’s usual residential address now is.

(3) If notice is given in accordance with this section, the non-disclosure certificatecontinues in force and the new address becomes a protected address.

(4) If an individual fails to give notice in accordance with this section, he commitsan offence.

(5) An individual guilty of such an offence is liable on summary conviction to afine not exceeding level 5 on the standard scale and, for continuedcontravention, a daily default fine not exceeding one-fiftieth of level 5 on thestandard scale.

223 Revocation of non-disclosure certificate

(1) The individual to whom a non-disclosure certificate was issued may revoke itby notice to the registrar.

(2) The registrar may revoke a non-disclosure certificate if—(a) communications sent by the registrar to the individual and requiring a

response within a specified period remain unanswered;(b) the individual—

(i) provided (or caused to be provided) to the registrar any false,misleading or inaccurate information regarding his residentialaddress, or

(ii) fails to give notice to the register under section 222(2) (notice ofchange of address); or

(c) there is evidence that service of documents at any service addressprovided in place of the protected address is not effective to bring themto the notice of the individual.

(3) The registrar must give notice to the individual to whom the certificate wasissued of the proposal to revoke it.

(4) The notice must—(a) state the grounds on which it is proposed to revoke the certificate, and

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(b) specify a period within which representations may be made before thecertificate is revoked.

(5) It must be sent to the individual at the protected address, unless it appears tothe registrar that service at that address may be ineffective to bring it to theindividual’s notice, in which case it may be sent to any service addressprovided in place of the protected address.

(6) The registrar must take account of any representations received within thespecified period.

224 Effect of revocation

(1) Where a non-disclosure certificate is revoked, the residential address to whichit applied (the “former protected address”) shall become available for publicinspection, as follows.

(2) The registrar must register the former protected address as the individual’saddress in place of the notified service address (or if more than one serviceaddress was notified, all of them).

(3) The registrar must notify each company of which the individual is a director—(a) of the revocation of the certificate, and(b) of the residential address now registered as the individual’s address.

(4) On receipt of the notification, the company must make the former protectedaddress available for inspection in its register of directors rather than theservice address.

(5) If the company has been notified by the individual of a more recent address ashis usual residential address, it must—

(a) make that address available in its register of directors, and(b) give notice to the registrar as on a change of registered particulars.

225 Lapse of non-disclosure certificate

(1) A non-disclosure certificate ceases to have effect—(a) if it was issued with a view to an appointment being made and the

appointment is not registered within three months of the certificatebeing issued;

(b) if the individual to whom the certificate was issued ceases to beregistered as a director and after ten years no further appointment as adirector has been registered;

(c) following the death of the individual to whom it was issued, when theregistrar receives notice of the termination of all of the individuals'sappointments together with a certified copy of a death certificate.

(2) Where a non-disclosure certificate ceases to have effect under this section, theregistrar must remove from the register the application for the certificate andany notifications of changes of address under section 222.

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CHAPTER 9


Provision for employees on cessation or transfer of business

226 Power to make provision for employees on cessation or transfer of business

(1) The powers of the directors of a company include (if they would not otherwisedo so) power to make provision for the benefit of persons employed orformerly employed by the company, or any of its subsidiaries, in connectionwith the cessation or the transfer to any person of the whole or part of theundertaking of the company or that subsidiary.

(2) This power is exercisable notwithstanding the general duty imposed by section156 (duty to promote the success of the company).

(3) In the case of a company that is a charity it is exercisable notwithstanding anyrestrictions on the directors’ powers (or the company’s capacity) flowing fromthe objects of the company.

(4) The power may only be exercised if sanctioned—(a) by a resolution of the company, or(b) by a resolution of the directors,

in accordance with the following provisions.

(5) The resolution of the company required is an ordinary resolution, subject toanything in the company’s articles requiring a higher majority (or unanimity).

(6) A resolution of the directors—(a) must be authorised by the company’s articles, and(b) is not sufficient sanction for payments to or for the benefit of directors,

former directors or shadow directors.

(7) Any other requirements of the company’s articles as to the exercise of thepower conferred by this section must be complied with.

(8) Any payment under this section must be made—(a) before the commencement of any winding up of the company, and(b) out of profits of the company that are available for dividend.

Records of meetings of directors

227 Minutes of directors’ meetings

(1) Every company must cause minutes of all proceedings at meetings of itsdirectors to be recorded.

(2) The records must be kept for at least ten years from the date of the meeting.


(4) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and, for

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continued contravention, a daily default fine not exceeding one-tenth of level3 on the standard scale.

228 Minutes as evidence

(1) Minutes recorded in accordance with section 227, if purporting to beauthenticated by the chairman of the meeting or by the chairman of the nextdirectors’ meeting, are evidence of the proceedings at the meeting.

(2) Where minutes have been made in accordance with that section of theproceedings of a meeting of directors, then, until the contrary is proved—

(a) the meeting is deemed duly held and convened,(b) all proceedings at the meeting are deemed to have duly taken place,

and(c) all appointments at the meeting are deemed valid.

Meaning of "director" and "shadow director"

229 “Director”

In the Companies Acts “director” includes any person occupying the positionof director, by whatever name called.

230 “Shadow director”

(1) In the Companies Acts “shadow director”, in relation to a company, means aperson in accordance with whose directions or instructions the directors of thecompany are accustomed to act.

(2) A person is not to be regarded as a shadow director by reason only that thedirectors act on advice given by him in a professional capacity.

(3) A body corporate is not to be regarded as a shadow director of any of itssubsidiary companies for the purposes of—

Chapter 2 (general duties of directors),Chapter 4 (transactions requiring members’ approval), orChapter 6 (contract with sole member who is also a director)],

by reason only that the directors of the subsidiary are accustomed to act inaccordance with its directions or instructions.

Other definitions

231 Persons connected with a director

(1) This section defines what is meant by references in this Part to a person being“connected” with a director of a company (or a director being “connected” witha person).

(2) The following persons (and only those persons) are connected with a directorof a company—

(a) members of the director’s family (see section 232);(b) a body corporate with which the director is connected (as defined in

section 233);

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(c) a person acting in his capacity as trustee of a trust—(i) the beneficiaries of which include the director or a person who

by virtue of paragraph (a) or (b) is connected with him, or(ii) the terms of which confer a power on the trustees that may be

exercised for the benefit of the director or any such person,other than a trust for the purposes of an employees’ share scheme or apension scheme;

(d) a person acting in his capacity as partner—(i) of the director, or

(ii) of a person who, by virtue of paragraph (a), (b) or (c), isconnected with that director;

(e) a firm that is legal person under the law by which it is governed and inwhich—

(i) the director is a partner,(ii) a partner is a person who, by virtue of paragraph (a), (b) or (c)

is connected with the director, or(iii) a partner is a firm in which the director is a partner or in which

there is a partner who, by virtue of paragraph (a), (b) or (c), isconnected with the director.

(3) References in this Part to a person connected with a director of a company donot include a person who is himself a director of the company.

232 Members of a director’s family

(1) This section defines what is meant by references in this Part to members of adirector’s family.

(2) For the purposes of this Part the members of a director’s family are—(a) the director’s spouse or civil partner;(b) any other person (whether of a different sex or the same sex) with

whom the director lives as partner in an enduring family relationship;(c) the director’s children or step-children;(d) any children or step-children of a person within paragraph (b) (and

who are not children or step-children of the director) who live with thedirector and have not attained the age of 18;

(e) the director’s parents.

(3) Subsection (2)(b) does not apply if the other person is the director’sgrandparent or grandchild, sister, brother, aunt or uncle, or nephew or niece.

233 Director “connected with” a body corporate

(1) This section defines what is meant by references in this Part to a director being“connected with” a body corporate.

(2) A director is connected with a body corporate if, but only if, he and the personsconnected with him together—

(a) are interested in shares comprised in the equity share capital of thatbody corporate of a nominal value equal to at least 20% of that sharecapital, or

(b) are entitled to exercise or control the exercise of more than 20% of thevoting power at any general meeting of that body.

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(3) The rules set out in Schedule 1 (references to interest in shares or debentures)apply for the purposes of this section.

(4) References in this section to voting power the exercise of which is controlled bya director include voting power whose exercise is controlled by a bodycorporate controlled by him.

(5) Shares in a company held as treasury shares, and any voting rights attached tosuch shares, are disregarded for the purposes of this section.

(6) For the avoidance of circularity in the application of section 231 (meaning of“connected person”) —

(a) a body corporate with which a director is connected is not treated forthe purposes of this section as connected with him unless it is alsoconnected with him by virtue of subsection (2)(c) or (d) of that section(connection as trustee or partner); and

(b) a trustee of a trust the beneficiaries of which include (or may include) abody corporate with which a director is connected is not treated for thepurposes of this section as connected with a director by reason only ofthat fact.

234 Director “controlling” a body corporate

(1) This section defines what is meant by references in this Part to a director“controlling” a body corporate.

(2) A director of a company is taken to control a body corporate if, but only if—(a) he or any person connected with him—

(i) is interested in any part of the equity share capital of that body,or

(ii) is entitled to exercise or control the exercise of any part of thevoting power at any general meeting of that body, and

(b) he, the persons connected with him and the other directors of thatcompany, together—

(i) are interested in more than 50% of that share capital, or(ii) are entitled to exercise or control the exercise of more than 50%

of that voting power.

(3) The rules set out in Schedule 1 (references to interest in shares or debentures)apply for the purposes of this section.

(4) References in this section to voting power the exercise of which is controlled bya director include voting power whose exercise is controlled by a bodycorporate controlled by him.

(5) Shares in a company held as treasury shares, and any voting rights attached tosuch shares, are disregarded for the purposes of this section.

(6) For the avoidance of circularity in the application of section 231 (meaning of“connected person”) —

(a) a body corporate with which a director is connected is not treated forthe purposes of this section as connected with him unless it is alsoconnected with him by virtue of subsection (2)(c) or (d) of that section(connection as trustee or partner); and

(b) a trustee of a trust the beneficiaries of which include (or may include) abody corporate with which a director is connected is not treated for the

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purposes of this section as connected with a director by reason only ofthat fact.

235 Associated bodies corporate

(1) For the purposes of this Part bodies corporate are associated if one is asubsidiary of the other or both are subsidiaries of the same body corporate.

(2) References to an “associated company” have a corresponding meaning.

236 References to company’s constitution

(1) References in this Part to a company’s constitution include—(a) any resolution or other decision come to in accordance with the

constitution, and(b) any decision by the members of the company, or a class of members,

that is treated by virtue of any enactment or rule of law as equivalent toa decision by the company.

(2) This is in addition to the matters mentioned in section 18 (general provision asto matters contained in company’s constitution).

General

237 Power to increase financial limits

(1) The Secretary of State may by order substitute for any sum of money specifiedin this Part a larger sum specified in the order.

(2) An order under this section shall be made by statutory instrument which shallbe subject to annulment in pursuance of a resolution of either House ofParliament.

(3) An order does not have effect in relation to anything done or not done beforeit comes into force.Accordingly, proceedings in respect of any liability (whether civil or criminal)incurred before that time may be continued or instituted as if the order had notbeen made.

238 Transactions under foreign law

For the purposes of this Part it is immaterial whether the law that (apart fromthis Act) governs an arrangement or transaction is the law of the UnitedKingdom, or a part of it, or not.

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Chapter 1 — Derivative claims in England and Wales or Northern Ireland

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PART 11

DERIVATIVE CLAIMS AND ACTIONS BY MEMBERS

CHAPTER 1

DERIVATIVE CLAIMS IN ENGLAND AND WALES OR NORTHERN IRELAND

239 Derivative claims

(1) This Chapter applies to proceedings in England and Wales or Northern Irelandby a member of a company—

(a) in respect of a cause of action vested in the company, and(b) seeking relief on behalf of the company.

This is referred to in this Chapter as a “derivative claim”.

(2) A derivative claim may only be brought—(a) under this Chapter, or(b) in pursuance of an order of the court in proceedings under section 459

of the Companies Act 1985 (c. 6) (proceedings for protection ofmembers against unfair prejudice).

(3) A derivative claim under this Chapter may be brought only in respect of acause of action arising from an actual or proposed act or omission involvingnegligence, default, breach of duty or breach of trust by a director of thecompany.The cause of action may be against the director or another person (or both).

(4) It is immaterial whether the cause of action arose before or after the personseeking to bring or continue the derivative claim became a member of thecompany.

(5) For the purposes of this Chapter—(a) “director” includes a former director;(b) a shadow director is treated as a director; and(c) references to a member of a company include a person who is not a

member but to whom shares in the company have been transferred ortransmitted by operation of law.

240 Application for permission to continue derivative claim

(1) A member of a company who brings a derivative claim under this Chaptermust apply to court for permission (in Northern Ireland, leave) to continue it.

(2) The court may—(a) give permission (or leave) to continue the claim on such terms as it

thinks fit,(b) refuse permission (or leave) and dismiss the claim, or(c) adjourn the proceedings on the application and give such directions as

it thinks fit.

241 Application for permission to continue claim as a derivative claim

(1) This section applies where—

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(a) a company has brought a claim, and(b) the cause of action on which the claim is based could be pursued as a

derivative claim under this Chapter.

(2) A member of the company may apply to the court for permission (in NorthernIreland, leave) to continue the claim as a derivative claim on the ground that—

(a) the manner in which the company commenced or continued the claimamounts to an abuse of the process of the court,

(b) the company has failed to prosecute the claim diligently, and(c) it is appropriate for the member to continue the claim as a derivative

claim.

(3) The court may—(a) give permission (or leave) to continue the claim as a derivative claim on

such terms as it thinks fit,(b) refuse permission (or leave) and dismiss the application, or(c) adjourn the proceedings on the application and give such directions as

it thinks fit.

242 Whether permission to be given

(1) The following provisions have effect where a member of a company applies forpermission (in Northern Ireland, leave) under section 240 or 241.

(2) Permission (or leave) must be refused if the court is satisfied—(a) that a person acting in accordance with section 156 (duty to promote the

success of the company) would not seek to continue the claim, or(b) where the cause of action arises from an act or omission that is yet to

occur, that the act or omission has been authorised by the company, or(c) where the cause of action arises from an act or omission that has

already occurred, that the act or omission—(i) was authorised by the company before it occurred or

(ii) has been ratified by the company since it occurred.

(3) In considering whether to give permission (or leave) the court must take intoaccount, in particular—

(a) whether the member is acting in good faith in seeking to continue theclaim;

(b) the importance that a person acting in accordance with section 156(duty to promote the success of the company) would attach tocontinuing it;

(c) where the cause of action results from an act or omission that is yet tooccur, whether the act or omission could be, and in the circumstanceswould be likely to be—

(i) authorised by the company before it occurs, or(ii) ratified by the company after it occurs;

(d) where the cause of action arises from an act or omission that hasalready occurred, whether the act or omission could be, and in thecircumstances would be likely to be, ratified by the company;

(e) whether the company has decided not to pursue the claim;(f) whether the act or omission in respect of which the claim is brought

gives rise to a cause of action that the member could pursue in his ownright rather than on behalf of the company.

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(4) The Secretary of State may by regulations—(a) amend subsection (2) so as to alter or add to the circumstances in which

permission (or leave) is to be refused;(b) amend subsection (3) so as to alter or add to the matters that the court

is required to take account in considering whether to give permission(or leave).

(5) Before making any such regulations the Secretary of State shall consult suchpersons as he considers appropriate.


243 Application for permission to continue derivative claim brought by another member

(1) This section applies where a member of a company (“the claimant”)—(a) has brought a derivative claim,(b) has continued as a derivative claim a claim brought by the company, or(c) has continued a derivative claim under this section.

(2) Another member of the company (“the applicant”) may apply to the court forpermission (in Northern Ireland, leave) to continue the claim on the groundthat—

(a) the manner in which the proceedings have been commenced orcontinued by the claimant amounts to an abuse of the process of thecourt,

(b) the claimant has failed to prosecute the claim diligently, and(c) it is appropriate for the applicant to continue the claim as a derivative

claim.

(3) The court may—(a) give permission (or leave) to continue the claim on such terms as it

thinks fit,(b) refuse permission (or leave) and dismiss the application, or(c) adjourn the proceedings on the application and give such directions as

it thinks fit.

CHAPTER 2

DERIVATIVE ACTIONS IN SCOTLAND

244 Derivative actions

(1) In Scotland, a member of a company may raise an action in respect of an act oromission specified in subsection (3) in order to protect the interests of thecompany and obtain a remedy on its behalf.

(2) A member of a company may raise such an action only under subsection (1).

(3) The act or omission referred to in subsection (1) is any actual or proposed actor omission involving—

(a) negligence, default, breach of duty or breach of trust by a director of thecompany, or

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(b) a director putting himself in a position where his personal interestsconflict with his duties to the company.

(4) An action may be raised under subsection (1) against (either or both)—(a) the director referred to in subsection (3), or(b) another person.

(5) This section does not affect—(a) any right of a member of a company to raise an action in respect of an

act or omission specified in subsection (3) in order to protect his owninterests and obtain a remedy on his own behalf, or

(b) the court’s power to make an order under section 461(2)(c) of theCompanies Act 1985 (c. 6) or anything done under such an order.

(6) In this Chapter—(a) an action raised under subsection (1) is referred to as a “derivative

action”,(b) the act or omission in respect of which it is raised is referred to as the

“cause of action”,(c) “director” includes a former director,(d) references to a director include a shadow director, and(e) references to a member of a company include a person who is not a

member but to whom shares in the company have been transferred ortransmitted by operation of law.

245 Requirement for leave and notice

(1) A derivative action may be raised by a member of a company only—(a) with the leave of the court, and(b) if—

(i) the member has given notice to the company in accordance withsubsection (2), and

(ii) the period of notice has expired without the company havingraised an action in respect of the cause of action.

(2) The notice referred to in subsection (1)(b)(i) is a notice—(a) specifying the cause of action,(b) summarising the facts on which the derivative action is to be based, and(c) stating that, unless within the period of 28 days beginning with the date

of service of the notice the company raises an action in respect of thecause of action, the member intends to raise a derivative action inrespect of it.

(3) The court may, on cause shown, dispense with or modify the requirementunder subsection (1)(b).

246 Granting of leave

(1) The court must refuse leave to raise a derivative action if satisfied—(a) that a person acting in accordance with section 156 (duty to promote the

success of the company) would not seek to continue the claim, or(b) where the cause of action is an act or omission that is yet to occur, that

the act or omission has been authorised by the company, or

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(c) where the cause of action is an act or omission that has alreadyoccurred, that the act or omission—

(i) was authorised by the company before it occurred, or(ii) has been ratified by the company since it occurred.

(2) In considering whether to grant leave to raise a derivative action, the courtmust take into account, in particular—

(a) whether the member is acting in good faith in seeking to raise theaction,

(b) the importance that a person acting in accordance with section 156(duty to promote the success of the company) would attach to raising it,

(c) where the cause of action is an act or omission that is yet to occur,whether the act or omission could be, and in the circumstances wouldbe likely to be—

(i) authorised by the company before it occurs, or(ii) ratified by the company after it occurs,

(d) where the cause of action is an act or omission that has alreadyoccurred, whether the act or omission could be, and in thecircumstances would be likely to be, ratified by the company,

(e) whether the company has decided not to raise an action in respect of thesame cause of action,

(f) whether the cause of action is one in respect of which the member couldraise an action in his own right rather than on behalf of the company.

(3) The Secretary of State may by regulations—(a) amend subsection (1) so as to alter or add to the circumstances in which

leave is to be refused,(b) amend subsection (2) so as to alter or add to the matters that the court

is required to take account in considering whether to grant leave.

(4) Before making any such regulations the Secretary of State shall consult suchpersons as he considers appropriate.


PART 12

COMPANY SECRETARIES

General

247 Private company not required to have secretary

(1) A private company is not required to have a secretary.

(2) In the case of a private company—(a) anything authorised or required to be given or sent to, or served on, the

company by being sent to its secretary—(i) may be given or sent to, or served on, the company itself, and

(ii) if addressed to the secretary shall be treated as addressed to thecompany; and

(b) anything else required or authorised to be done by or to the secretaryof the company may be done by or to—

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(i) a director, or(ii) a person authorised generally or specifically in that behalf by

the directors.

248 Public company required to have secretary

A public company must have a secretary.

249 Direction requiring public company to appoint secretary

(1) If it appears to the Secretary of State that a public company is in breach ofsection 248 (requirement to have secretary), the Secretary of State may give thecompany a direction under this section.

(2) The direction must state that the company appears to be in breach of thatsection and specify—

(a) what the company must do in order to comply with the direction, and(b) the period within which it must do so.

That period must be not less than one month or more than three months afterthe date on which the direction is given.

(3) The direction must also inform the company of the consequences of failing tocomply.

(4) Where the company is in breach of section 248 it must comply with thedirection by—

(a) making the necessary appointment, and(b) giving notice of it under section 253,

before the end of the period specified in the direction.

(5) If the company has already made the necessary appointment, it must complywith the direction by giving notice of it under section 253 before the end of theperiod specified in the direction.





Provisions applying to secretaries of public companies

250 Qualifications of secretaries of public companies

(1) It is the duty of the directors of a public company to take all reasonable stepsto secure that the secretary (or each joint secretary) of the company—

(a) is a person who appears to them to have the requisite knowledge andexperience to discharge the functions of secretary of the company, and

(b) has one or more of the following qualifications.

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(2) The qualifications are—(a) that he has held the office of secretary of a public company for at least

three of the five years immediately preceding his appointment assecretary;

(b) that he is a member of any of the bodies specified in subsection (3);(c) that he is a barrister, advocate or solicitor called or admitted in any part

of the United Kingdom;(d) that he is a person who, by virtue of his holding or having held any

other position or his being a member of any other body, appears to thedirectors to be capable of discharging the functions of secretary of thecompany.

(3) The bodies referred to in subsection (2)(b) are—(a) the Institute of Chartered Accountants in England and Wales;(b) the Institute of Chartered Accountants of Scotland;(c) the Chartered Association of Certified Accountants;(d) the Institute of Chartered Accountants in Ireland;(e) the Institute of Chartered Secretaries and Administrators;(f) the Chartered Institute of Management Accountants;(g) the Chartered Institute of Public Finance and Accountancy.

251 Discharge of functions where office vacant or secretary unable to act

Where in the case of a public company the office of secretary is vacant, or thereis for any other reason no secretary capable of acting, anything required orauthorised to be done by or to the secretary may be done—

(a) by or to an assistant or deputy secretary (if any), or(b) if there is no assistant or deputy secretary or none capable of acting, by

or to any person authorised generally or specially in that behalf by thedirectors.

252 Duty to keep register of secretaries

(1) A public company must keep a register of its secretaries.

(2) The register—(a) must contain the required particulars (see sections 254 to 256) of the

person who is, or persons who are, the secretary or joint secretaries ofthe company, and

(b) must be kept available for inspection at the company’s registered office.

(3) The register must be open to the inspection—(a) of any member of the company without charge, and(b) of any other person on payment of such fee as may be prescribed.

(4) If default is made in complying with subsection (1) or (2), or if an inspectionrequired under this section is refused, an offence is committed by—

(a) the company, and(b) every officer of the company who is in default


(5) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 5 on the standard scale and, for

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(6) In the case of a refusal of inspection of the register, the court may by ordercompel an immediate inspection of it.

253 Duty to notify registrar of changes

(1) A public company must, within the period of 14 days from the occurrence of—(a) any change in its secretary, or(b) any change in the particulars contained in its register of secretaries,

give notice to the registrar of the change and of the date on which it occurred.

(2) Notice of a person having become secretary, or one of joint secretaries, of thecompany must be accompanied by a consent by that person to act in therelevant capacity.

(3) If default is made in complying with this section, an offence is committed byevery officer of the company who is in default.For this purpose a shadow director is treated as an officer of the company.


Supplementary

254 Particulars of secretaries to be registered: individuals

(1) A public company’s register of secretaries must contain the followingparticulars in the case of an individual—

(a) name and any former name;(b) address.

(2) For the purposes of this section “name” means a person’s Christian name (orother forename) and surname, except that in the case of—

(a) a peer or(b) an individual usually known by a title

the title may be stated instead of his Christian name (or other forename) andsurname or in addition to either or both of them.

(3) For the purposes of this section a “former name” means a name by which theindividual was formerly known for business purposes.Where a person is or was formerly known by more than one such name, eachof them must be stated.

(4) It is not necessary for the register to contain particulars of a former name in thefollowing cases—

(a) in the case of a peer or an individual normally known by a British title,where the name is one by which the person was known previous to theadoption of or succession to the title;

(b) in the case of any person, where the former name—

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(i) was changed or disused before the person attained the age of 18years, or

(ii) has been changed or disused for 20 years or more.

(5) The address required to be stated in the register is a service address.This may be stated to be “The company’s registered office”.

255 Particulars of secretaries to be registered: corporate secretaries and firms

(1) A public company’s register of secretaries must contain the followingparticulars in the case of a body corporate, or a firm that is legal person underthe law by which it is governed—

(a) corporate or firm name;(b) registered or principal office;(c) in the case of an EEA company to which the First Company Law

Directive applies, particulars of—(i) the register in which the company file mentioned in Article 3 of

that Directive is kept (including details of the relevant state),and

(ii) the registration number in that register;(d) in any other case, particulars of—

(i) the legal form of the company or firm and the law by which it isgoverned, and

(ii) if applicable, the register in which it is entered (including detailsof the state) and its registration number in that register.

(2) If all the partners in a firm are joint secretaries it is sufficient to state theparticulars that would be required if the firm were a legal person and the firmhad been appointed secretary.

256 Particulars of secretaries to be registered: power to make regulations

(1) The Secretary of State may make provision by regulations amending—section 254 (particulars of secretaries to be registered: individuals), orsection 255 (particulars of secretaries to be registered: corporate

secretaries and firms),so as to add to or remove items from the particulars required to be containedin a public company’s register of secretaries.


257 Acts done by person in dual capacity

In the case of a public company, a provision requiring or authorising a thing tobe done by or to a director and the secretary of a company is not satisfied by itsbeing done by or to the same person acting both as director and as, or in placeof, the secretary.

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PART 13

RESOLUTIONS AND MEETINGS

CHAPTER 1

GENERAL PROVISIONS ABOUT RESOLUTIONS

258 Resolutions

(1) A resolution of the members (or of a class of members) of a private companymust be passed—

(a) as a written resolution in accordance with Chapter 2 of this Part, or(b) at a meeting of the members (to which the provisions of Chapter 3 of

this Part apply).

(2) A resolution of the members (or of a class of members) of a public companymust be passed at a meeting of the members (to which the provisions ofChapter 3 and, where relevant, Chapter 4 of this Part apply).

(3) Nothing in this Part affects any enactment or rule of law as to—(a) things done otherwise than by passing a resolution,(b) circumstances in which a resolution is or is not treated as having been

passed, or(c) cases in which a person is precluded from alleging that a resolution has

not been duly passed.

259 Ordinary resolutions

(1) An ordinary resolution of the members of a company or of a class of membersof a company means a resolution that is passed by a simple majority.

(2) A written resolution is passed by a simple majority if it is passed by membersrepresenting a simple majority of the total voting rights of eligible members(see Chapter 2).

(3) A resolution passed at a meeting on a show of hands is passed by a simplemajority if it is passed by a simple majority of—

(a) the members who, being entitled to do so, vote in person on theresolution, and

(b) the persons who vote on the resolution as duly appointed proxies ofmembers entitled to vote on it.

(4) A resolution passed on a poll taken at a meeting is passed by a simple majorityif it is passed by members representing a simple majority of the total votingrights of members who (being entitled to do so) vote in person or by proxy onthe resolution.

(5) Anything that may be done by ordinary resolution may also be done by specialresolution.

260 Special resolutions

(1) A special resolution of the members of a company (or of a class of members) ofa company means a resolution passed by a majority of not less than 75%.

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(2) A written resolution is passed by a majority of not less than 75% if it is passedby members representing not less than 75% of the total voting rights of eligiblemembers (see Chapter 2).

(3) Where a resolution of a private company is passed as a written resolution—(a) the resolution is not a special resolution unless it stated that it was

proposed as a special resolution, and(b) if the resolution so stated, it may only be passed as a special resolution.

(4) A resolution passed at a meeting on a show of hands is passed by a majority ofnot less than 75% if it is passed by not less than 75% of—

(a) the members who, being entitled to do so, vote in person on theresolution, and

(b) the persons who vote on the resolution as duly appointed proxies ofmembers entitled to vote on it.

(5) A resolution passed on a poll taken at a meeting is passed by a majority of notless than 75% if it is passed by members representing not less than 75% of thetotal voting rights of the members who (being entitled to do so) vote in personor by proxy on the resolution.

(6) Where a resolution is passed at a meeting —(a) the resolution is not a special resolution unless the notice of the meeting

included the text of the resolution and specified the intention topropose the resolution as a special resolution, and

(b) if the notice of the meeting so specified, the resolution may only bepassed as a special resolution.

261 Votes: general rules

(1) On a vote on a written resolution—(a) in the case of a company having a share capital, every member has one

vote in respect of each share or each £10 of stock held by him, and(b) in any other case, every member has one vote.

(2) On a vote on a resolution on a show of hands at a meeting—(a) every member present in person has one vote, and(b) every proxy present who has been duly appointed by a member

entitled to vote on the resolution has one vote.

(3) On a vote on a resolution on a poll taken at a meeting—(a) in the case of a company having a share capital, every member has one

vote in respect of each share or each £10 of stock held by him, and(b) in any other case, every member has one vote.

(4) The provisions of this section have effect subject to any provision of thecompany’s articles.

262 Votes: specific requirements

(1) Where a member entitled to vote on a resolution has appointed one proxy only,and the company’s articles provide that the proxy has fewer votes in a vote ona resolution on a show of hands taken at a meeting than the member wouldhave if he were present in person—

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(a) the provision about how many votes the proxy has on a show of handsis void, and

(b) the proxy has the same number of votes on a show of hands as themember who appointed him would have if he were present at themeeting.

(2) Where a member entitled to vote on a resolution has appointed more than oneproxy, subsection (2) applies as if the references to the proxy were referencesto the proxies taken together.

(3) In relation to a resolution required or authorised by an enactment, if a privatecompany’s articles provide that a member has a different number of votes inrelation to a resolution when it is passed as a written resolution and when it ispassed on a poll taken at a meeting—

(a) the provision about how many votes a member has in relation to theresolution passed on a poll is void, and

(b) a member has the same number of votes in relation to the resolutionwhen it is passed on a poll as he has when it is passed as a writtenresolution.

263 Votes of joint holders of shares

(1) In the case of joint holders of shares of a company, only the vote of the seniorholder who votes (and any proxies duly authorised by him) may be counted bythe company.

(2) For the purposes of this section, the senior holder of a share is determined bythe order in which the names of the joint holders appear in the register ofmembers.

(3) Subsections (1) and (2) have effect subject to any provision of the company’sarticles.

264 Effect of provision in company’s articles as to admissibility of votes

(1) This section applies where—(a) a person votes on a resolution of a company,(b) that person was not entitled to vote as he did, and(c) the company’s articles provide that an objection to a person’s

entitlement to vote must be made in accordance with a procedurespecified in the articles.

(2) The person is deemed to have been entitled to vote as he did if—(a) no objection to his entitlement to vote is made in accordance with the

procedure, or (b) at least one objection to his entitlement to vote is made in accordance

with the procedure, and each such objection is rejected in accordancewith it.

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CHAPTER 2

WRITTEN RESOLUTIONS

General provisions about written resolutions

265 Written resolutions of private companies

(1) In the Companies Acts a “written resolution” means a resolution of a privatecompany proposed and passed in accordance with this Chapter.

(2) The following may not be passed as a written resolution—(a) a resolution under section 152 removing a director before the expiration

of his period of office;(b) a resolution under section 497 removing an auditor before the

expiration of his term of office.

(3) A resolution may be proposed as a written resolution—(a) by the directors of a private company (see section 268), or(b) by the members of a private company (see sections 269 to 271).

(4) References in enactments passed or made before this Chapter comes into forceto—

(a) a resolution of a company in general meeting, or(b) a resolution of a meeting of a class of members of the company,

have effect as if they included references to a written resolution of themembers, or of a class of members, of a private company (as appropriate).

(5) A written resolution of a private company has effect as if passed (as the casemay be)—

(a) by the company in general meeting, or(b) by a meeting of a class of members of the company,

and references in enactments passed or made before this section comes intoforce to a meeting at which a resolution is passed or to members voting infavour of a resolution shall be construed accordingly.

266 Eligible members

(1) In relation to a resolution proposed as a written resolution of a privatecompany, the eligible members are the members who would have beenentitled to vote on the resolution on the circulation date of the resolution (seesection 267).

(2) If the persons entitled to vote on a written resolution change during the courseof the day that is the circulation date of the resolution, the eligible members arethe persons entitled to vote on the resolution at the time that the first copy ofthe resolution is sent or submitted to a member for his agreement.

Circulation of written resolutions

267 Circulation date

References in this Part to the circulation date of a written resolution are to thedate on which copies of it are sent or submitted to members in accordance with

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this Chapter (or if copies are sent or submitted to members on different days,to the first of those days).

268 Circulation of written resolutions proposed by directors

(1) This section applies to a resolution proposed as a written resolution by thedirectors of the company.

(2) The company must send or submit a copy of the resolution to every eligiblemember.

(3) The company must do so—(a) by sending copies at the same time (so far as reasonably practicable) to

all eligible members in hard copy form, in electronic form or by meansof a website, or

(b) if it is possible to do so without undue delay, by submitting the samecopy to each eligible member in turn (or different copies to each of anumber of eligible members in turn),

or by sending copies to some members in accordance with paragraph (a) andsubmitting a copy or copies to other members in accordance with paragraph(b).

(4) The copy of the resolution must be accompanied by a statement informing themember—

(a) how to signify agreement to the resolution (see section 272), and(b) as to the date by which the resolution must be passed if it is not to lapse

(see section 273).

(5) In the event of default in complying with this section, an offence is committedby every officer of the company who is in default.


maximum.

(7) The validity of the resolution, if passed, is not affected by a failure to complywith this section.

269 Members’ power to require circulation of written resolution

(1) The members of a private company may require the company to circulate aresolution that may properly be moved and is proposed to be moved as awritten resolution.

(2) Any resolution may properly be moved as a written resolution unless—(a) it would, if passed, be ineffective (whether by reason of inconsistency

with any enactment or the company’s constitution or otherwise),(b) it is defamatory of any person, or(c) it is frivolous or vexatious.

(3) Where the members require a company to circulate a resolution they mayrequire the company to circulate with it a statement of not more than 1,000words on the subject matter of the resolution.

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(4) A company is required to circulate the resolution and any accompanyingstatement once it has received requests that it do so from membersrepresenting not less than the requisite percentage of the total voting rights ofall members entitled to vote on the resolution.

(5) The “requisite percentage” is 5% or such lower percentage as is specified forthis purpose in the company’s articles.

(6) A request—(a) may be in hard copy form or in electronic form,(b) must identify the resolution and any accompanying statement, and(c) must be authenticated by the person or persons making it.

(7) A company is not required to circulate a resolution unless it has received a sumor the tender of a sum reasonably sufficient to meet the company’s expenses incomplying with section 270 (circulation of written resolution proposed bymembers).

270 Circulation of written resolution proposed by members

(1) A company that is required under section 269 to circulate a resolution mustsend or submit to every eligible member—

(a) a copy of the resolution, and(b) (subject to section 271) a copy of any accompanying statement.

(2) The company must do so—(a) by sending copies at the same time (so far as reasonably practicable) to

all eligible members in hard copy form, in electronic form or by meansof a website, or

(b) if it is possible to do so without undue delay, by submitting the samecopy to each eligible member in turn (or different copies to each of anumber of eligible members in turn),

or by sending copies to some members in accordance with paragraph (a) andsubmitting a copy or copies to other members in accordance with paragraph(b).

(3) The company must send or submit the copies (or, if copies are sent orsubmitted to members on different days, the first of those copies) not morethan 21 days after it becomes subject to the requirement under section 269 tocirculate the resolution.

(4) The copy of the resolution must be accompanied by guidance as to—(a) how to signify agreement to the resolution (see section 272), and(b) the date by which the resolution must be passed if it is not to lapse (see

section 273).

(5) The expenses of the company in complying with this section must be paid bythe members who requested the circulation of the resolution, unless thecompany otherwise resolves.


(7) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to a fine;

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(b) on summary conviction, to a fine not exceeding the statutorymaximum.

(8) The validity of the resolution, if passed, is not affected by a failure to complywith this section.

271 Application not to circulate members’ statement

(1) A company is not required to circulate a members’ statement under section 270if, on an application by the company or another person who claims to beaggrieved, the court is satisfied that the rights conferred by section 269 and thatsection are being abused.

(2) The court may order the members who requested the circulation of thestatement to pay the whole or part of the company’s costs (in Scotland,expenses) on such an application, even if they are not parties to the application.

Agreeing to written resolutions

272 Procedure for signifying agreement to written resolution

(1) A member signifies his agreement to a proposed written resolution when thecompany receives from him (or from someone acting on his behalf) anauthenticated document—

(a) identifying the resolution to which it relates, and(b) indicating his agreement to the resolution.

(2) The document must be sent to the company in hard copy form or in electronicform.

(3) A member’s agreement to a written resolution, once signified, may not berevoked.

(4) A written resolution is passed when the required majority of eligible membershave signified their agreement to it.

273 Period for agreeing to written resolution

(1) A proposed written resolution lapses if it is not passed before the end of— (a) the period specified for this purpose in the company’s articles, or(b) if none is specified, the period of 28 days beginning with the circulation

date.

(2) The agreement of a member to a written resolution is ineffective if signifiedafter the expiry of that period.

Supplementary

274 Sending documents relating to written resolutions by electronic means

(1) Where a company has given an electronic address in any document containingor accompanying a proposed written resolution, it is deemed to have agreedthat any document or information relating to that resolution may be sent byelectronic means to that address (subject to any conditions or limitationsspecified in the document).

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(2) In this section “electronic address” means any address or number used for thepurposes of sending or receiving documents or information by electronicmeans.

275 Publication of written resolution on website

(1) This section applies where a company sends—(a) a written resolution, or(b) a statement relating to a written resolution,

to a person by means of a website.

(2) The resolution or statement is not validly sent for the purposes of this Chapterunless the resolution is available on the website throughout the periodbeginning with the circulation date and ending on the date on which theresolution lapses under section 273.

(3) For the purposes of this section, a failure to make a resolution or statementavailable on a website throughout the period mentioned in subsection (2) mustbe disregarded if—

(a) it is made available on the website for part of that period, and(b) the failure to make it available throughout that period is wholly

attributable to circumstances that it would not be reasonable to haveexpected the company to prevent or avoid.

276 Relationship between this Chapter and provisions of company’s articles

A provision of the articles of a private company is void in so far as it wouldhave the effect that a resolution that is required by or otherwise provided forin an enactment could not be proposed and passed as a written resolution.

CHAPTER 3

RESOLUTIONS AT MEETINGS

General provisions about resolutions at meetings

277 Resolutions at general meetings

A resolution of the members of a company is validly passed at a generalmeeting if—

(a) notice of the meeting and of the resolution is given, and(b) the meeting is held and conducted,

in accordance with the provisions of this Chapter (and, where relevant,Chapter 4) and the company’s articles.

Calling meetings

278 Directors’ power to call general meetings

The directors of a company may call a general meeting of the company.

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279 Members’ power to require directors to call general meeting

(1) The members of a company may require the directors to call a general meetingof the company.

(2) The directors are required to call a general meeting once the company hasreceived requests to do so from—

(a) members who hold at least 10% of such of the paid-up capital of thecompany as carries the right of voting at general meetings of thecompany (excluding any paid-up capital held as treasury shares); or

(b) in the case of a company not having a share capital, members whorepresent at least 10% of the total voting rights of all the membershaving a right to vote at general meetings.

(3) A request— (a) must state the general nature of the business to be dealt with at the

meeting, and(b) may include the text of a resolution that may properly be moved and is

intended to be moved at the meeting.

(4) A resolution may properly be moved at a meeting unless—(a) it would, if passed, be ineffective (whether by reason of inconsistency


(5) A request— (a) may be in hard copy form or in electronic form, and(b) must be authenticated by the person or persons making it.

280 Directors’ duty to call meetings required by members

(1) Directors required under section 279 to call a general meeting of the companymust call a meeting—

(a) within 21 days from the date on which they become subject to therequirement, and

(b) to be held on a date not more than 28 days after the date of the noticeconvening the meeting.

(2) If the requests received by the company identify a resolution intended to bemoved at the meeting, the notice of the meeting must include notice of theresolution.

(3) The business that may be dealt with at the meeting includes a resolution ofwhich notice is given in accordance with this section.

(4) If the resolution is to be proposed as a special resolution, the directors aretreated as not having duly called the meeting if they do not give the requirednotice of the resolution in accordance with section 260.

281 Power of members to call meeting at company’s expense

(1) If the directors—(a) are required under section 279 to call a meeting, and(b) do not do so in accordance with section 280,

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the members who requested the meeting, or any of them representing morethan one half of the total voting rights of all of them, may themselves call ageneral meeting.

(2) Where the requests received by the company included the text of a resolutionintended to be moved at the meeting, the notice of the meeting must includenotice of the resolution.

(3) The meeting must be called for a date not more than three months after the dateon which the directors become subject to the requirement to call a meeting.

(4) The meeting must be called in the same manner, as nearly as possible, as thatin which meetings are required to be called by directors of the company.

(5) The business which may be dealt with at the meeting includes a resolution ofwhich notice is given in accordance with this section.

(6) Any reasonable expenses incurred by the members requesting the meeting byreason of the failure of the directors duly to call a meeting must be reimbursedby the company.

(7) Any sum so reimbursed shall be retained by the company out of any sums dueor to become due from the company by way of fees or other remuneration inrespect of their services to such of the directors as were in default.

282 Power of court to order meeting

(1) This section applies if for any reason it is impracticable— (a) to call a meeting of a company in any manner in which meetings of that

company may be called, or(b) to conduct the meeting in the manner prescribed by the company’s

articles or this Act.

(2) The court may, either of its own motion or on the application—(a) of a director of the company, or(b) of a member of the company who would be entitled to vote at the

meeting,order a meeting to be called, held and conducted in any manner the courtthinks fit.

(3) Where such an order is made, the court may give such ancillary orconsequential directions as it thinks expedient.

(4) Such directions may include a direction that one member of the companypresent at the meeting be deemed to constitute a quorum.

(5) A meeting called, held and conducted in accordance with an order under thissection is deemed for all purposes to be a meeting of the company duly called,held and conducted.

Notice of meetings

283 Notice required of general meeting

(1) A general meeting of a private company (other than an adjourned meeting)must be called by notice of at least 14 days.

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(2) A general meeting of a public company (other than an adjourned meeting)must be called by notice of—

(a) in the case of an annual general meeting, at least 21 days, and(b) in any other case, at least 14 days.

(3) The company’s articles may require a longer period of notice than thatspecified in subsection (1) or (2).

(4) A general meeting may be called by shorter notice than that otherwise requiredif shorter notice is agreed by the members.This does not apply to an annual general meeting of a public company.

(5) The shorter notice must be agreed to by a majority in number of the membershaving a right to attend and vote at the meeting, being a majority who—

(a) together hold not less than the requisite percentage in nominal value ofthe shares giving a right to attend and vote at the meeting (excludingany shares in the company held as treasury shares), or

(b) in the case of a company not having a share capital, together representnot less than the requisite percentage of the total voting rights at thatmeeting of all the members.

(6) The requisite percentage is—(a) in the case of a private company, 90% or such higher percentage (not

exceeding 95%) as may be specified in the company’s articles;(b) in the case of a public company, 95%.

284 Manner in which notice to be given

Notice of a general meeting of a company must be given—(a) in hard copy form,(b) in electronic form, or(c) by means of a website (see section 285),

or partly by one such means and partly by another.

285 Publication of notice of meeting on website

(1) Notice of a meeting is not validly given by a company by means of a websiteunless it is given in accordance with this section.

(2) When the company notifies a member of the presence of the notice on thewebsite the notification must—

(a) state that it concerns a notice of a company meeting,(b) specify the place, date and time of the meeting, and(c) in the case of a public company, state whether the meeting will be an

annual general meeting.

(3) The notice must be available on the website throughout the period beginningwith the date of that notification and ending with the conclusion of themeeting.

(4) For the purposes of this section, a failure to make a resolution or statementavailable on a website throughout the period mentioned in subsection (3) mustbe disregarded if—

(a) it is made available on the website for part of that period, and

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(b) the failure to make it available throughout that period is whollyattributable to circumstances that it would not be reasonable to haveexpected the company to prevent or avoid.

286 Persons entitled to receive notice of meetings

(1) Notice of a general meeting of a company must be sent to—(a) every member of the company, and(b) every director.

(2) In subsection (1), the reference to members includes any person who is entitledto a share in consequence of the death or bankruptcy of a member, if thecompany has been notified of their entitlement.

(3) This section has effect subject to—(a) any enactment, and(b) any provision of the company’s articles.

287 Contents of notices of meetings

(1) Notice of a general meeting of a company must state—(a) the time and date of the meeting, and(b) the place of the meeting.

(2) Notice of a general meeting of a company must state the general nature of thebusiness to be dealt with at the meeting.This subsection has effect subject to any provision of the company’s articles.

288 Resolution requiring special notice

(1) Where by any provision of the Companies Acts special notice is required of aresolution, the resolution is not effective unless notice of the intention to moveit has been given to the company at least 28 days before the meeting at whichit is moved.

(2) The company must, where practicable, give its members notice of any suchresolution in the same manner and at the same time as it gives notice of themeeting.

(3) Where that is not practicable, the company must give its members notice atleast 14 days before the meeting—

(a) by advertisement in a newspaper having an appropriate circulation, or(b) in any other manner allowed by the company’s articles.

(4) If, after notice of the intention to move such a resolution has been given to thecompany, a meeting is called for a date 28 days or less after the notice has beengiven, the notice is deemed to have been properly given, though not givenwithin the time required.

289 Accidental failure to give notice of resolution or meeting

(1) Where a company gives notice of—(a) a general meeting, or(b) a resolution intended to be moved at a general meeting,

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any accidental failure to give notice to one or more persons shall bedisregarded for the purpose of determining whether notice of the meeting orresolution (as the case may be) is duly given.

(2) Except in relation to notice given under—(a) section 280 (notice of meetings required by members),(b) section 281 (notice of meetings called by members), or(c) section 314 (notice of resolutions at AGMs proposed by members),

subsection (1) has effect subject to any provision of the company’s articles.

Members’ statements

290 Members’ power to require circulation of statements

(1) The members of a company may require the company to circulate, to membersof the company entitled to receive notice of a general meeting, a statement ofnot more than 1,000 words with respect to—

(a) a matter referred to in a proposed resolution to be dealt with at thatmeeting, or

(b) other business to be dealt with at that meeting.

(2) A company is required to circulate a statement once it has received requestsfrom—

(a) members representing at least 5% of the total voting rights of all themembers who have a relevant right to vote (excluding any voting rightsattached to any shares in the company held as treasury shares), or

(b) at least 100 members who have a relevant right to vote and hold sharesin the company on which there has been paid up an average sum, permember, of at least £100.

(3) In subsection (2), a “relevant right to vote” means—(a) in relation to a statement with respect to a matter referred to in a

proposed resolution, a right to vote on that resolution at the meeting towhich the requests relate, and

(b) in relation to any other statement, a right to vote at the meeting towhich the requests relate.

(4) A request—(a) may be in hard copy form or in electronic form,(b) must identify the statement to be circulated,(c) must be authenticated by the person or persons making it, and(d) must be received by the company at least one week before the meeting

to which it relates.

(5) A company is not required to circulate a statement unless one week before themeeting it has received a sum or the tender of a sum reasonably sufficient tomeet the company’s expenses in complying with section 291 (company’s dutyto circulate members’ statement).

(6) Subsection (5) does not apply where—(a) the meeting to which the requests relate is an annual general meeting

of a public company, and(b) the company has received requests sufficient to satisfy subsection (2) on

or before the company’s accounting reference date.

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291 Company’s duty to circulate members’ statement

(1) A company that is required under section 290, to circulate a statement mustsend a copy of it to each member of the company entitled to receive notice ofthe meeting—

(a) in the same manner as the notice of the meeting, and(b) at the same time as, or as soon as reasonably practicable after, it gives

notice of the meeting.

(2) Subsection (1) has effect subject to section 292 (application not to circulatemembers’ statement).

(3) The expenses of the company in complying with this section must be paid bythe members who requested the circulation of the statement, unless thecompany otherwise resolves.

(4) Subsection (3) does not apply where—(a) the meeting to which the requests relate is the meeting at which the

company’s annual accounts are to be laid, and(b) requests sufficient to require the company to circulate the statement

were received before the end of the financial year preceding themeeting.



maximum.

292 Application not to circulate members’ statement

(1) A company is not required to circulate a members’ statement under section 291if, on an application by the company or another person who claims to beaggrieved, the court is satisfied that the rights conferred by section 290 and thatsection are being abused.

(2) The court may order the members who requested the circulation of thestatement to pay the whole or part of the company’s costs (in Scotland,expenses) on such an application, even if they are not parties to the application.

Procedure at meetings

293 Quorum at meetings

(1) In the case of a company limited by shares or guarantee and having only onemember, one qualifying person present at a meeting is a quorum.

(2) In any other case, subject to the provisions of the company’s articles, twoqualifying persons present at a meeting are a quorum, unless—

(a) each is a qualifying person only because he is authorised under section298 to act as the representative of a corporation in relation to themeeting, and they are representatives of the same corporation; or

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(b) each is a qualifying person only because he is appointed as proxy of amember in relation to the meeting, and they are proxies of the samemember.

(3) For the purposes of this section a “qualifying person” means—(a) an individual who is a member of the company,(b) a person authorised under section 298 (representation of corporations

at meetings) to act as the a representative of a corporation in relation tothe meeting, or

(c) a person appointed as proxy of a member in relation to the meeting.

294 Chairman of meeting

(1) A member may be elected to be the chairman of a general meeting by aresolution of the company passed at the meeting.

(2) Subsection (1) is subject to any provision of the company’s articles that stateswho may or may not be chairman.

295 Declaration by chairman on a show of hands

(1) On a vote on a resolution at a meeting on a show of hands, a declaration by thechairman that the resolution—

(a) has or has not been passed, or(b) passed with a particular majority,

is conclusive evidence of that fact without proof of the number or proportionof the votes recorded in favour of or against the resolution.

(2) An entry in respect of such a declaration in minutes of the meeting recorded inaccordance with section 329 is also conclusive evidence of that fact withoutsuch proof.

(3) This section does not have effect if a poll is demanded in respect of theresolution (and is not subsequently withdrawn).

296 Right to demand a poll

(1) A provision of a company’s articles is void in so far as it would have the effectof excluding the right to demand a poll at a general meeting on any questionother than—

(a) the election of the chairman of the meeting, or(b) the adjournment of the meeting.

(2) A provision of a company’s articles is void in so far as it would have the effectof making ineffective a demand for a poll on a question which is made—

(a) by not less than 5 members having the right to vote on the resolution; or(b) by a member or members representing not less than 10% of the total

voting rights of all the members having the right to vote on theresolution (excluding any voting rights attached to any shares in thecompany held as treasury shares); or

(c) by a member or members holding shares in the company conferring aright to vote on the resolution, being shares on which an aggregate sumhas been paid up equal to not less than 10% of the total sum paid up onall the shares conferring that right (excluding shares in the company

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conferring a right to vote on the resolution which are held as treasuryshares).

297 Voting on a poll

On a poll taken at a general meeting of a company, a member entitled to morethan one vote need not, if he votes, use all his votes or cast all the votes he usesin the same way.

298 Representation of corporations at meetings

(1) If a corporation (whether or not a company within the meaning of this Act) isa member of a company, it may by resolution of its directors or other governingbody authorise a person or persons to act as its representative orrepresentatives at any meeting of the company.

(2) Where the corporation authorises only one person, he is entitled to exercise thesame powers on behalf of the corporation as the corporation could exercise ifit were an individual shareholder of the company.

(3) Where the corporation authorises more than one person, any one of them isentitled to exercise the same powers on behalf of the corporation as thecorporation could exercise if it were an individual shareholder of the company.

(4) Where the corporation authorises more than one person and more than one ofthem purport to exercise a power under subsection (3)—

(a) if they purport to exercise the power in the same way, the power istreated as exercised in that way,

(b) if they do not purport to exercise the power in the same way, the poweris treated as not exercised.

Proxies

299 Rights to appoint proxies

(1) A member of a company is entitled to appoint another person as his proxy toexercise all or any of his rights to attend and to speak and vote at a meeting ofthe company.

(2) In the case of a company having a share capital, a member may appoint morethan one proxy in relation to a meeting, provided that each proxy is appointedto exercise the rights attached to a different share or shares held by him, or (asthe case may be) to a different £10, or multiple of £10, of stock held by him.

300 Notice of meeting to contain statement of rights

(1) In every notice calling a meeting of a company there must appear, withreasonable prominence, a statement informing the member of—

(a) his rights under section 299, and(b) any more extensive rights conferred by the company’s articles to

appoint more than one proxy.

(2) Failure to comply with this section does not affect the validity of the meetingor of anything done at the meeting.

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(3) If this section is not complied with as respects any meeting, an offence iscommitted by every officer of the company who is in default.


301 Company-sponsored invitations to appoint proxies

(1) If for the purposes of a meeting there are issued at the company’s expenseinvitations to members to appoint as proxy a specified person or a number ofspecified persons, the invitations must be issued to all members entitled to voteat the meeting.

(2) Subsection (1) is not contravened if—(a) there is issued to a member at his request a form of appointment

naming the proxy or a list of persons willing to act as proxy, and(b) the form or list is available on request to all members entitled to vote at

the meeting.

(3) If subsection (1) is contravened as respects a meeting, an offence is committedby every officer of the company who is in default.


302 Notice required of appointment of proxy etc.

(1) This section applies to—(a) the appointment of a proxy, and(b) any document necessary to show the validity of, or otherwise relating

to, the appointment of a proxy.

(2) Any provision of the company’s articles is void in so far as it would have theeffect of requiring any such appointment or document to be received by thecompany or another person earlier than the following time—

(a) in the case of a meeting or adjourned meeting, 48 hours before the timefor holding the meeting or adjourned meeting;

(b) in the case of a poll taken more than 48 hours after it was demanded, 24hours before the time appointed for the taking of the poll;

(c) in the case of a poll taken not more than 48 hours after it wasdemanded, the time at which it was demanded.

(3) In calculating the periods mentioned in subsection (2) no account shall be takenof any part of a Saturday or Sunday, Christmas Day, Good Friday or any daythat is a bank holiday in the part of the United Kingdom in which the companyis registered.

303 Chairing meetings

(1) A proxy may be elected to be the chairman of a general meeting by a resolutionof the company passed at the meeting.

(2) Subsection (1) is subject to any provision of the company’s articles that stateswho may or who may not be chairman.

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304 Right of proxy to demand a poll

(1) The appointment of a proxy to vote on a matter at a meeting of a companyauthorises the proxy to demand, or join in demanding, a poll on that matter.

(2) In applying the provisions of section 296(2) (requirements for effectivedemand), a demand by a proxy counts—

(a) for the purposes of paragraph (a), as a demand by the member;(b) for the purposes of paragraph (b), as a demand by a member

representing the voting rights that the proxy is authorised to exercise;(c) for the purposes of paragraph (c), as a demand by a member holding

the shares to which those rights are attached.

305 Notice required of termination of proxy’s authority

(1) This section applies to notice that the authority of a person to act as proxy isterminated (“notice of termination”).

(2) The termination of the authority of a person to act as proxy does not affect—(a) whether he counts in deciding whether there is a quorum at a meeting,(b) the validity of anything he does as chairman of a meeting, or(c) the validity of a poll demanded by him at a meeting,

unless the company receives notice of the termination before thecommencement of the meeting.

(3) The termination of the authority of a person to act as proxy does not affect thevalidity of a vote given by that person unless the company receives notice ofthe termination—

(a) before the commencement of the meeting or adjourned meeting atwhich the vote is given, or

(b) in the case of a poll taken more than 48 hours after it is demanded,before the time appointed for taking the poll.

(4) If the company’s articles require or permit members to give notice oftermination to a person other than the company, the references above to thecompany receiving notice have effect as if they were or (as the case may be)included a reference to that person.

(5) Subsections (2) and (3) have effect subject to any provision of the company’sarticles which has the effect of requiring notice of termination to be received bythe company or another person at a time earlier than that specified in thosesubsections.This is subject to subsection (6).

(6) Any provision of the company’s articles is void in so far as it would have theeffect of requiring notice of termination to be received by the company oranother person earlier than the following time—

(a) in the case of a meeting or adjourned meeting, 48 hours before the timefor holding the meeting or adjourned meeting;

(b) in the case of a poll taken more than 48 hours after it was demanded, 24hours before the time appointed for the taking of the poll;

(c) in the case of a poll taken not more than 48 hours after it wasdemanded, the time at which it was demanded.

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(7) In calculating the periods mentioned in subsection (3)(b) and (6) no accountshall be taken of any part of a Saturday or Sunday, Christmas Day, GoodFriday or any day that is a bank holiday in the part of the United Kingdom inwhich the company is registered.

306 Saving for more extensive rights conferred by articles

Nothing in sections 299 to 305 (proxies) prevents a company’s articles fromconferring more extensive rights on members or proxies than are conferred bythose sections.

Adjourned meetings

307 Resolution passed at adjourned meeting

Where a resolution is passed at an adjourned meeting of a company, theresolution is for all purposes to be treated as having been passed on the date onwhich it was in fact passed, and is not to be deemed passed on any earlier date.

Electronic communications

308 Sending documents relating to meetings etc. in electronic form

(1) Where a company has given an electronic address in a notice calling a meeting,it is deemed to have agreed that any document or information relating toproceedings at the meeting may be sent by electronic means to that address(subject to any conditions or limitations specified in the notice).

(2) Where a company has given an electronic address—(a) in an instrument of proxy sent out by the company in relation to the

meeting, or(b) in an invitation to appoint a proxy issued by the company in relation to

the meeting,it is deemed to have agreed that any document or information relating toproxies for that meeting may be sent by electronic means to that address(subject to any conditions or limitations specified in the notice).

(3) In subsection (2), documents relating to proxies include—(a) the appointment of a proxy in relation to a meeting,(b) any document necessary to show the validity of, or otherwise relating

to, the appointment of a proxy, and(c) notice of the termination of the authority of a proxy.

(4) In this section “electronic address” means any address or number used for thepurposes of sending or receiving documents or information by electronicmeans.

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Application to class meetings

309 Application to class meetings

(1) The provisions of this Chapter apply (with necessary modifications) in relationto a meeting of holders of a class of shares as they apply in relation to a generalmeeting.This is subject to subsections (2) and (3).

(2) The following provisions of this Chapter do not apply in relation to a meetingof holders of a class of shares—

(a) sections 279 to 281 (members’ power to require directors to call generalmeeting), and

(b) section 282 (power of court to order meeting).

(3) The following provisions (in addition to those mentioned in subsection (2)) donot apply in relation to a meeting in connection with the variation of rightsattached to a class of shares (a “variation of class rights meeting”)—

(a) section 293 (quorum), and(b) section 296 (right to demand a poll).

(4) The quorum for a variation of class rights meeting is—(a) for a meeting other than an adjourned meeting, two persons present

holding at least one-third in nominal value of the issued shares of theclass in question (excluding any shares of that class held as treasuryshares);

(b) for an adjourned meeting, one person present holding shares of theclass in question.

(5) For the purposes of subsection (4), where a person is present by proxy orproxies, he is treated as holding only the shares in respect of which thoseproxies are authorised to exercise voting rights.

(6) At a variation of class rights meeting, any holder of shares of the class inquestion present may demand a poll.

(7) For the purposes of this section—(a) any alteration of a provision contained in a company’s articles for the

variation of the rights attached to a class of shares, or the insertion ofany such provision into the articles, is itself to be treated as a variationof those rights, and

(b) references to the variation of rights attached to a class of shares includereferences to their abrogation.

310 Application to class meetings: companies without a share capital

(1) The provisions of this Chapter apply (with necessary modifications) in relationto a meeting of a class of members of a company without a share capital as theyapply in relation to a general meeting.This is subject to subsections (2) and (3).

(2) The following provisions of this Chapter do not apply in relation to a meetingof a class of members—

(a) sections 279 to 281 (members’ power to require directors to call generalmeeting), and

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(b) section 282 (power of court to order meeting).

(3) The following provisions (in addition to those mentioned in subsection (2)) donot apply in relation to a meeting in connection with the variation of the rightsof a class of members (a “variation of class rights meeting”)—

(a) section 293 (quorum), and(b) section 296 (right to demand a poll).

(4) The quorum for a variation of class rights meeting is—(a) for a meeting other than an adjourned meeting, two members of the

class present (in person or by proxy) who together represent at leastone-third of the voting rights of the class;

(b) for an adjourned meeting, one member of the class present (in personor by proxy).

(5) At a variation of class rights meeting, any member present (in person or byproxy) may demand a poll.


variation of the rights of a class of members, or the insertion of any suchprovision into the articles, is itself to be treated as a variation of thoserights, and

(b) references to the variation of rights of a class of members includereferences to their abrogation.

CHAPTER 4

PUBLIC COMPANIES: ADDITIONAL REQUIREMENTS FOR AGMS

311 Public companies: annual general meeting

(1) Every public company must hold a general meeting as its annual generalmeeting in each period of 6 months beginning with the day following itsaccounting reference date (in addition to any other meetings held during thatperiod).

(2) A company that fails to comply with subsection (1) as result of giving of noticeunder section 365 (alteration of accounting reference date)—

(a) specifying a new accounting reference date, and(b) stating that the current accounting reference period or the previous

accounting reference period is to be shortened,shall be treated as if it had complied with subsection (1) if it holds a generalmeeting as its annual general meeting within 3 months of giving that notice.

(3) If a company fails to comply with subsection (1), an offence is committed byevery officer of the company who is in default.


maximum.

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312 Public companies: notice of AGM

(1) A notice calling an annual general meeting of a public company must state thatthe meeting is an annual general meeting.

(2) An annual general meeting may be called by shorter notice than that requiredby section 283(2) or by the company’s articles (as the case may be), if all themembers entitled to attend and vote at the meeting agree to the shorter notice.

313 Public companies: members’ power to require circulation of resolutions for AGMs

(1) The members of a public company may require the company to give, tomembers of the company entitled to receive notice of the next annual generalmeeting, notice of a resolution which may properly be moved and is intendedto be moved at that meeting.

(2) A resolution may properly be moved at an annual general meeting unless—(a) it would, if passed, be ineffective (whether by reason of inconsistency


(3) A company is required to give notice of a resolution once it has receivedrequests that it do so from—

(a) members representing at least 5% of the total voting rights of all themembers who have a right to vote on the resolution at the annualgeneral meeting to which the requests relate (excluding any votingrights attached to any shares in the company held as treasury shares),or

(b) at least 100 members who have a right to vote on the resolution at theannual general meeting to which the requests relate and hold shares inthe company on which there has been paid up an average sum, permember, of at least £100.

(4) A request—(a) may be in hard copy form or in electronic form,(b) must identify the resolution of which notice is to be given,(c) must be authenticated by the person or persons making it, and(d) must be received by the company not later than—

(i) 6 weeks before the annual general meeting to which therequests relate, or

(ii) if later, the time at which notice is given of that meeting.

(5) A company is not required to give notice of a resolution unless by the timereferred to in subsection (4)(d) the company has received a sum or the tenderof a sum reasonably sufficient to meet the company’s expenses in complyingwith section 314 (public companies: company’s duty to circulate members’resolutions for AGMs).

(6) Subsection (5) does not apply where the company has received requestssufficient to require the company to give notice of the resolution before the endof the financial year preceding the meeting.

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314 Public companies: company’s duty to circulate members’ resolutions for AGMs

(1) A company that is required under section 313 to give notice of a resolutionmust send a copy of it to each member of the company entitled to receive noticeof the annual general meeting—

(a) in the same manner as notice of the meeting, and(b) at the same time as, or as soon as reasonably practicable after, it gives

notice of the meeting.

(2) The expenses of the company in complying with this section must be paid bythe members who requested the circulation of the resolution, unless thecompany otherwise resolves.

(3) Subsection (2) does not apply if requests sufficient to require the company tocirculate the statement were received before the end of the financial year forwhich accounts are to be laid at the meeting.

(4) The business which may be dealt with at an annual general meeting includes aresolution of which notice is given in accordance with this section.



maximum.

CHAPTER 5

ADDITIONAL REQUIREMENTS FOR QUOTED COMPANIES

Website publication of poll results

315 Results of poll to be made available on website

(1) Where a poll is taken at a general meeting of a quoted company, the companymust ensure that the following information is made available on a website—

(a) the date of the meeting,(b) the text of the resolution or, as the case may be, a description of the

subject matter of the poll,(c) the number of votes cast in favour, and(d) the number of votes cast against.

(2) The provisions of section 327 (requirements as to website availability) apply.

(3) In the event of default in complying with this section (or with the requirementsof section 327 as it applies for the purposes of this section), an offence iscommitted by every officer of the company who is in default.

(4) A person guilty of an offence under subsection (3) is liable on summaryconviction to a fine not exceeding level 3 on the standard scale.

(5) Failure to comply with this section (or the requirements of section 327) does notaffect the validity of—

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(a) the poll, or(b) the resolution or other business (if passed or agreed to) to which the

poll relates.

(6) This section only applies to polls taken after this section comes into force.

Independent report on poll

316 Members’ power to require independent report on poll

(1) The members of a quoted company may require the directors to obtain anindependent report on any poll taken, or to be taken, at a general meeting ofthe company.

(2) The directors are required to obtain an independent report if they receiverequests to do so from—

(a) members representing not less than 5% of the total voting rights of allthe members who have a right to vote on the matter to which the pollrelates (excluding any voting rights attached to any shares in thecompany held as treasury shares), or

(b) not less than 100 members who have a right to vote on the matter towhich the poll relates and hold shares in the company on which therehas been paid up an average sum, per member, of not less than £100.

(3) Where the requests relate to more than one poll, subsection (2) must besatisfied in relation to each of them.

(4) A request—(a) may be in hard copy form or in electronic form,(b) must identify the poll or polls to which it relates,(c) must be authenticated by the person or persons making it, and(d) must be received by the company not later than one week after the date

on which the poll is taken.

317 Appointment of independent assessor

(1) Directors who are required under section 316 to obtain an independent reporton a poll or polls must appoint a person they consider to be appropriate (an“independent assessor”) to prepare a report for the company on it or them.

(2) The appointment must be made within one week after the company beingrequired to obtain the report.

(3) The directors must not appoint a person who—(a) does not meet the independence requirement in section 318, or(b) has another role in relation to any poll on which he is to report

(including, in particular, a role in connection with collecting orcounting votes or with the appointment of proxies).



(6) If at the meeting no poll on which a report is required is taken—

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(a) the directors are not required to obtain a report from the independentassessor, and

(b) his appointment ceases (but without prejudice to any right to be paidfor work done before the appointment ceased).

318 Independence requirement

(1) A person may not be appointed as an independent assessor—(a) if he is—

(i) an officer or employee of the company, or(ii) a partner or employee of such a person, or a partnership of

which such a person is a partner;(b) if he is—

(i) an officer or employee of an associated undertaking of thecompany, or

(ii) a partner or employee of such a person, or a partnership ofwhich such a person is a partner;

(c) if there exists between—(i) the person or an associate of his, and

(ii) the company or an associated undertaking of the company,a connection of any such description as may be specified by regulationsmade by the Secretary of State.

(2) An auditor of the company is not regarded as an officer or employee of thecompany for this purpose.

(3) In this section— “associated undertaking” means—

(a) a parent undertaking or subsidiary undertaking of the companyperson, or

(b) a subsidiary undertaking of a parent undertaking of thecompany; and

“associate” has the meaning given by section 319.


319 Meaning of “associate”

(1) This section defines “associate” for the purposes of section 318 (independencerequirement).

(2) In relation to an individual, “associate” means—(a) that individual’s spouse or civil partner or minor child or step-child,(b) any body corporate of which that individual is a director, and(c) any employee or partner of that individual.

(3) In relation to a body corporate, “associate” means—(a) any body corporate of which that body is a director,(b) any body corporate in the same group as that body, and(c) any employee or partner of that body or of any body corporate in the

same group.

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(4) In relation to a partnership that is a legal person under the law by which it isgoverned, “associate” means—

(a) any body corporate of which that partnership is a director,(b) any employee of or partner in that partnership, and(c) any person who is an associate of a partner in that partnership.

(5) In relation to a partnership that is not a legal person under the law by which itis governed, “associate” means any person who is an associate of any of thepartners.

(6) In this section, in relation to a limited liability partnership, for “director” read“member”.

320 Effect of appointment of a partnership

(1) This section applies where a partnership that is not a legal person under thelaw by which it is governed is appointed as an independent assessor.

(2) Unless a contrary intention appears, the appointment is of the partnership assuch and not of the partners.

(3) Where the partnership ceases, the appointment is to be treated as extendingto—

(a) any partnership that succeeds to the practice of that partnership, or(b) any other person who succeeds to that practice having previously

carried it on in partnership.

(4) For the purposes of subsection (3)—(a) a partnership is regarded as succeeding to the practice of another

partnership only if the members of the successor partnership aresubstantially the same as those of the former partnership, and

(b) a partnership or other person is regarded as succeeding to the practiceof a partnership only if it or he succeeds to the whole or substantiallythe whole of the business of the former partnership.

(5) Where the partnership ceases and the appointment is not treated undersubsection (3) as extending to any partnership or other person, theappointment may with the consent of the company be treated as extending toa partnership, or other person, who succeeds to—

(a) the business of the former partnership, or(b) such part of it as is agreed by the company is to be treated as comprising

the appointment.

321 The independent assessor’s report

(1) The report of the independent assessor must state his opinion whether—(a) the procedures adopted in connection with the poll or polls were

adequate;(b) the votes cast (including proxy votes) were fairly and accurately

recorded and counted;(c) the validity of members’ appointments of proxies was fairly assessed;(d) the notice of the meeting complied with section 300 (notice of meeting

to contain statement of rights to appoint proxy);

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(e) section 301 (company-sponsored invitations to appoint proxies) wascomplied with in relation to the meeting.

(2) The report must give his reasons for the opinions stated.

(3) If he is unable to form an opinion on any of those matters, the report mustrecord that fact and state the reasons for it.

(4) The report must state the name of the independent assessor.

322 Rights of independent assessor: right to attend meeting etc

(1) Where an independent assessor has been appointed to report on a poll, he isentitled to attend—

(a) the meeting at which the poll may be taken, and(b) any subsequent proceedings in connection with the poll.

(2) He is also entitled to be provided by the company with a copy of—(a) the notice of the meeting, and(b) any other communication provided by the company in connection with

the meeting to persons who have a right to vote on the matter to whichthe poll relates.

(3) The rights conferred by this section are only to be exercised to the extent thatthe independent assessor considers necessary for the preparation of his report.

(4) If the independent assessor is a firm, the right under subsection (1) to attendthe meeting and any subsequent proceedings in connection with the poll isexercisable by an individual authorised by the firm in writing to act as itsrepresentative for that purpose.

323 Rights of independent assessor: right to information

(1) The independent assessor is entitled to access to the company’s recordsrelating to—

(a) any poll on which he is to report;(b) the meeting at which the poll or polls may be, or were, taken.

(2) The independent assessor may require anyone who at any material time was—(a) a director or secretary of the company,(b) an employee of the company,(c) a person holding or accountable for any of the company’s records,(d) a member of the company, or(e) an agent of the company,

to provide him with information or explanations for the purpose of preparinghis report.

(3) For this purpose “agent” includes the company’s bankers, solicitors andauditor.

(4) A statement made by a person in response to a requirement under this sectionmay not be used in evidence against him in criminal proceedings exceptproceedings for an offence under section 324 (offences relating to provision ofinformation).

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(5) A person is not required by this section to disclose information in respect ofwhich a claim to legal professional privilege (in Scotland, to confidentiality ofcommunications) could be maintained in legal proceedings.

324 Offences relating to provision of information

(1) A person who fails to comply with a requirement under section 323 withoutdelay commits an offence unless it was not reasonably practicable for him toprovide the required information or explanation.


(3) A person commits an offence who knowingly or recklessly makes to anindependent assessor a statement (oral or written) that—

(a) conveys or purports to convey any information or explanations whichthe independent assessor requires, or is entitled to require, undersection 323, and

(b) is misleading, false or deceptive in a material particular.

(4) A person guilty of an offence under subsection (3) is liable—(a) on conviction on indictment, to imprisonment for a term not exceeding

two years or a fine (or both);(b) on summary conviction—

(i) in England and Wales, to imprisonment for a term notexceeding twelve months or to a fine not exceeding thestatutory maximum (or both);

(ii) in Scotland or Northern Ireland, to imprisonment for a term notexceeding six months, or to a fine not exceeding the statutorymaximum (or both).

(5) Nothing in this section affects any right of an auditor to apply for an injunctionto enforce any of his rights under section 322 or 323.

325 Information to be made available on website

(1) Where an independent assessor has been appointed to report on a poll, thecompany must ensure that the following information is made available on awebsite—

(a) the fact of his appointment,(b) his identity,(c) the text of the resolution or, as the case may be, a description of the

subject matter of the poll to which his appointment relates, and(d) a copy of a report by him which complies with section 321.




(5) Failure to comply with this section (or the requirements of section 327) does notaffect the validity of—

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(a) the poll, or(b) the resolution or other business (if passed or agreed to) to which the

poll relates.

Supplementary

326 Application of provisions to class meetings

(1) The provisions of—section 315 (results of poll to be made available on website), andsections 316 to 325 (independent report on poll),

apply (with any necessary modifications) in relation to a meeting of holders ofa class of shares of a quoted company in connection with the variation of therights attached to such shares as they apply in relation to a general meeting ofthe company.


variation of the rights attached to a class of shares, or the insertion ofany such provision into the articles, is itself to be treated as a variationof those rights, and

(b) references to the variation of rights attached to a class of shares includereferences to their abrogation.

327 Requirements as to website availability

(1) The following provisions apply for the purposes of—section 315 (results of poll to be made available on website), andsection 325 (report of independent observer to be made available on

website).

(2) The information must be made available on a website that—(a) is maintained by or on behalf of the company, and(b) identifies the company in question.

(3) Access to the information on the website, and the ability to obtain a hard copyof the information from the website, must not be conditional on the paymentof a fee or otherwise restricted.

(4) The information—(a) must be made available as soon as reasonably practicable, and(b) must be kept available throughout the period of two years beginning

with the date on which it is first made available on a website inaccordance with this section.

(5) A failure to make information available on a website throughout the periodspecified in subsection (4)(b) is disregarded if—

(a) the information is made available on the website for part of that period,and

(b) the failure is wholly attributable to circumstances that it would not bereasonable to have expected the company to prevent or avoid.

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328 Power to limit or extend the types of company to which provisions of this Chapter apply

(1) The Secretary of State may by regulations—(a) limit the types of company to which some or all of the provisions of this

Chapter apply, or(b) extend some or all of the provisions of this Chapter to additional types

of company.

(2) Regulations under this section extending the application of any provision ofthis Chapter are subject to affirmative resolution procedure.

(3) Any other regulations under this section are subject to negative resolutionprocedure.

(4) Regulations under this section may—(a) amend the provisions of this Chapter (apart from this section);(b) repeal and re-enact provisions of this Chapter with modifications of

form or arrangement, whether or not they are modified in substance;(c) contain such consequential, incidental and supplementary provisions

(including provisions amending, repealing or revoking enactments) asthe Secretary of State thinks fit.

CHAPTER 6

RECORDS OF RESOLUTIONS AND MEETINGS

329 Records of resolutions and meetings etc

(1) Every company must keep records comprising— (a) copies of all resolutions of members passed otherwise than at general

meetings,(b) minutes of all proceedings of general meetings, and(c) details provided to the company in accordance with section 331

(decisions of sole member).

(2) The records must be kept for at least ten years from the date of the resolution,meeting or decision (as appropriate).



330 Records as evidence of resolutions etc

(1) This section applies to the records kept in accordance with section {329.

(2) The record of a resolution passed otherwise than at a general meeting, ifpurporting to be signed by a director of the company or by the companysecretary, is evidence of the passing of the resolution.

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(3) Where there is a record of a written resolution of a private company, therequirements of this Act with respect to the passing of the resolution aredeemed to be complied with unless the contrary is proved.

(4) The minutes of proceedings of a general meeting, if purporting to be signed bythe chairman of that meeting or by the chairman of the next general meeting,are evidence (in Scotland, sufficient evidence) of the proceedings at themeeting.

(5) Where there is a record of proceedings of a general meeting of a company,then, until the contrary is proved—

(a) the meeting is deemed duly held and convened,(b) all proceedings at the meeting are deemed to have duly taken place,

and(c) all appointments at the meeting are deemed valid.

331 Records of decisions by sole member

(1) This section applies to a company limited by shares or by guarantee that hasonly one member.

(2) Where the member takes any decision that—(a) may be taken by the company in general meeting, and(b) has effect as if agreed by the company in general meeting,

he must (unless that decision is taken by way of a written resolution) providethe company with details of that decision.

(3) If a person fails to comply with this section he commits an offence.


(5) Failure to comply with this section does not affect the validity of any decisionreferred to in subsection (2).

332 Inspection of records of resolutions and meetings

(1) The company must at all times—(a) keep available for inspection at its registered office the records referred

to in section 329 (records of resolutions etc) relating to the previous tenyears, and

(b) open those records to inspection by any member without charge.

(2) Any member is entitled on payment of such fee as may be prescribed to befurnished with a copy of any of those records.

(3) If an inspection required under this section is refused or if a copy requestedunder this section is not sent, an offence is committed by every officer of thecompany who is in default.


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(5) In the case of any such refusal or default, the court may by order compel animmediate inspection of the records or direct that the copies required be sentto the persons who requested them.

333 Records of resolutions and meetings of class of members

The provisions of this Chapter apply (with necessary modifications) in relationto resolutions and meetings of—

(a) holders of a class of shares, and(b) in the case of a company without a share capital, a class of members,

as they apply in relation to resolutions of members generally and to generalmeetings.

CHAPTER 7


334 Meaning of “quoted company”

In this Part “quoted company” has the same meaning as in Part 15 of this Act.

PART 14

CONTROL OF POLITICAL DONATIONS AND EXPENDITURE

Introductory

335 Introductory

This Part has effect for controlling—(a) political donations made by companies to political parties, to other

political organisations and to independent election candidates, and(b) political expenditure incurred by companies.

Donations and expenditure to which this Part applies

336 Political parties, organisations etc to which this Part applies

(1) This Part applies to a political party if—(a) it is registered under Part 2 of the Political Parties, Elections and

Referendums Act 2000 (c. 41), or(b) it carries on, or proposes to carry on, activities for the purposes of or in

connection with the participation of the party in any election orelections to public office held in a member State other than the UnitedKingdom.

(2) This Part applies to an organisation (a “political organisation”) if it carries on,or proposes to carry on, activities that are capable of being reasonably regardedas intended—

(a) to affect public support for a political party to which, or an independentelection candidate to whom, this Part applies, or

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(b) to influence voters in relation to any national or regional referendumheld under the law of the United Kingdom or another member State.

(3) This Part applies to an independent election candidate at any election to publicoffice held in the United Kingdom or another member State.

(4) This Part applies in relation to political expenditure that is capable of beingreasonably regarded as intended to affect public support for—

(a) a political party or other political organisation to which this Partapplies, or

(b) an independent election candidate to whom this Part applies.

(5) Any reference in the following provisions of this Part to a political party,political organisation or independent election candidate, or to politicalexpenditure, is to a party, organisation, independent candidate or expenditureto which this Part applies.

337 Meaning of “political donation”

(1) The following provisions have effect for the purposes of this Part as regards themeaning of “political donation”.

(2) In relation to a political party or other political organisation—(a) “political donation” means anything that in accordance with sections 50

to 52 of the Political Parties, Elections and Referendums Act 2000(c. 41)—

(i) constitutes a donation for the purposes of Chapter 1 of Part 4 ofthat Act (control of donations to registered parties), or

(ii) would constitute such a donation reading references in thosesections to a registered party as references to any political partyor other political organisation,

and(b) section 53 of that Act applies, in the same way, for the purpose of

determining the value of a donation.

(3) In relation to an independent election candidate—(a) “political donation” means anything that, in accordance with sections

50 to 52 of that Act, would constitute a donation for the purposes ofChapter 1 of Part 4 of that Act (control of donations to registeredparties) reading references in those sections to a registered party asreferences to the independent election candidate,and

(b) section 53 of that Act applies, in the same way, for the purpose ofdetermining the value of a donation.

338 Meaning of “political expenditure”

(1) In this Part “political expenditure”, in relation to a company, meansexpenditure incurred by the company on—

(a) the preparation, publication or dissemination of advertising or otherpromotional or publicity material—

(i) of whatever nature, and(ii) however published or otherwise disseminated,

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that, at the time of publication or dissemination, is capable of beingreasonably regarded as intended to affect public support for a politicalparty or an independent election candidate, or

(b) activities on the part of the company that are capable of beingreasonably regarded as intended—

(i) to affect public support for a political party or an independentelection candidate, or

(ii) to influence voters in relation to any national or regionalreferendum held under the law of a member State.

(2) For the purposes of this Part a political donation does not count as politicalexpenditure.

Authorisation required for donations or expenditure

339 Authorisation required for donations or expenditure

(1) A company must not—(a) make a political donation to a political party or other political

organisation, or to an independent election candidate, or(b) incur any political expenditure,

unless the donation or expenditure is authorised in accordance with thefollowing provisions.

(2) The donation or expenditure must be authorised—(a) in the case of a company that is not a subsidiary of another company,

by a resolution of the members of the company;(b) in the case of a company that is a subsidiary of another company by—

(i) a resolution of the members of the company, and(ii) a resolution of the members of any relevant holding company.

(3) No resolution is required on the part of a company that is a wholly-ownedsubsidiary of a UK company.

(4) For the purposes of subsection (2)(b)(ii) a “relevant holding company” meansa company that, at the time the donation was made or the expenditure wasincurred—

(a) was a holding company of the company by which the donation wasmade or the expenditure was incurred,

(b) was a UK company, and(c) was not a subsidiary of a body corporate that was itself a subsidiary of

a UK company.

(5) For the purposes of this section a “UK company” means a body corporatethat—

(a) is a company as defined in section 1 of this Act, or(b) is registered under the Companies Acts by virtue of section 655 (bodies

not formed under Companies Acts but authorised to register).

(6) The resolution or resolutions required by this section—(a) must comply with section 340 (form of authorising resolution), and(b) must be passed before the donation is made or the expenditure

incurred.

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(7) Nothing in this section enables a company to be authorised to do anything thatit could not lawfully do apart from this section.

340 Form of authorising resolution

(1) A resolution conferring authorisation for the purposes of this Part may relateto—

(a) the company passing the resolution,(b) one or more subsidiaries of that company, or(c) the company passing the resolution and one or more subsidiaries of

that company.

(2) For each company to which it relates the resolution may authorise donationsor expenditure under one or more of the following heads—

(a) donations to political parties or independent election candidates;(b) donations to political organisations other than political parties;(c) political expenditure.

(3) The resolution must be expressed in general terms conforming with subsection(2) and must not purport to authorise particular donations or expenditure.

(4) For each of the companies to which it relates and each of the specified headsthe resolution must authorise donations or, as the case may be, expenditure upto a specified amount in the period for which the resolution has effect (seesection 342).

341 Majority required for authorising resolution

(1) A resolution conferring authorisation for the purposes of this Part may be anordinary resolution.

(2) This is subject to anything in the company’s articles requiring a higher majority(or unanimity).

342 Period for which resolution has effect

(1) A resolution conferring authorisation for the purposes of this Part has effect fora period of four years beginning with the date on which it is passed unless thedirectors determine, or the articles require, that it is to have effect for a shorterperiod beginning with that date.

(2) The power of the directors to make a determination under this section is subjectto any provision of the articles that operates to prevent them from doing so.

Remedies in case of unauthorised donations or expenditure

343 Liability of directors in case of unauthorised donation or expenditure

(1) This section applies where a company has made a political donation orincurred political expenditure without the authorisation required by this Part.

(2) The responsible directors are jointly and severally liable—(a) to make good to the company the amount of the unauthorised donation

or expenditure, with interest, and

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(b) to compensate the company for any loss or damage sustained by it as aresult of the unauthorised donation or expenditure having been made.

(3) The responsible directors are—(a) those who, at the time the unauthorised donation was made or the

unauthorised expenditure was incurred, were directors of the companyby which the donation was made or the expenditure was incurred, and

(b) where that company was a subsidiary of another company, those whoat that time were directors of any relevant holding company.

(4) For the purposes of subsection (3)(b) a “relevant holding company” means acompany that, at the time the donation was made or the expenditure wasincurred—

(a) was a holding company of the company by which the donation wasmade or the expenditure was incurred,

(b) was a UK company, and(c) was not a subsidiary of—

(i) another UK company, or(ii) a body corporate which was itself a subsidiary of a UK

company.

(5) For the purposes of this section a “UK company” is a body corporate which—(a) is a company as defined in section 1 of this Act, or(b) is registered under the Companies Acts by virtue of section 655 (bodies

not formed under Companies Acts but authorised to register.

(6) The interest referred to in subsection (2)(a) is interest on the amount of theunauthorised donation or expenditure, so far as not made good to thecompany—

(a) in respect of the period beginning with the date when the donation wasmade or the expenditure was incurred, and

(b) at such rate as the Secretary of State may prescribe by regulations.Section 352(2) (construction of references to date when donation made orexpenditure incurred) does not apply for the purposes of this subsection.

(7) Where only part of a donation or expenditure was unauthorised, this sectionapplies only to so much of it was unauthorised.

344 Enforcement of directors’ liabilities by shareholder action

(1) Any liability of any person under section 343 is enforceable by proceedingsbrought under this section in the name of the company by an authorised groupof members of the company.This is in addition to being enforceable by proceedings brought by thecompany.

(2) An “authorised group” means—(a) the holders of not less than 5% in nominal value of the company’s

issued share capital,(b) if the company is not limited by shares, not less than 5% of its members,

or(c) not less than 50 of the company’s members.

(3) A group of members of a company may not bring proceedings under thissection unless—

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(a) the group has given written notice to the company stating—(i) the cause of action and a summary of the facts on which the

proceedings are to be based,(ii) the names and addresses of the members of the company

comprising the group, and(iii) the grounds on which it is alleged that those members

constitute an authorised group; and(b) not less than 28 days have elapsed between the date of the giving of the

notice to the company and the bringing of the proceedings.

(4) Where such a notice is given to a company, any director may apply to the courtwithin the period of 28 days beginning with the date of the giving of the noticefor an order directing that the proposed proceedings shall not be brought, onone or more of the following grounds—

(a) that the unauthorised amount has been made good to the company;(b) that proceedings to enforce the liability have been brought, and are

being pursued with due diligence, by the company;(c) that the members proposing to bring proceedings under this section do

not constitute an authorised group.

(5) Where an application is made on the ground mentioned in subsection (4)(b),the court may as an alternative to directing that the proposed proceedingsunder this section are not to be brought, direct—

(a) that such proceedings may be brought on such terms and conditions asthe court thinks fit, and

(b) that the proceedings brought by the company—(i) shall be discontinued, or

(ii) may be continued on such terms and conditions as the courtthinks fit.

(6) The members by whom proceedings are brought under this section owe thesame duties to the company in relation to the proceedings as would be owedby the directors of the company if the proceedings were being brought by thecompany itself.But proceedings to enforce any such duty may be brought by the companyonly with the permission of the court.

(7) Proceedings brought under this section may not be discontinued or settled bythe group except with the permission of the court, which may be given on suchterms as the court thinks fit.

(8) Nothing in this section affects any right a member of a company may have tobring or continue a claim under Part 11 of this Act (derivative claims or actionsby members).

345 Costs of shareholder action

(1) This section applies in relation to proceedings brought under section 344 by anauthorised group of members of a company (“the group”).

(2) The group may apply to the court for an order directing the company toindemnify the group in respect of costs incurred or to be incurred by the groupin connection with the proceedings.The court may make such an order on such terms as it thinks fit.

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(3) The group is not entitled to be paid any such costs out of the assets of thecompany except by virtue of such an order.

(4) If no such order has been made with respect to the proceedings, then—(a) if the company is awarded costs in connection with the proceedings, or

it is agreed that costs incurred by the company in connection with theproceedings should be paid by any defendant, the costs shall be paid tothe group; and

(b) if any defendant is awarded costs in connection with the proceedings,or it is agreed that any defendant should be paid costs incurred by himin connection with the proceedings, the costs shall be paid by thegroup.

(5) In the application of this section to Scotland for “costs” read “expenses” and for“defendant” read “defender”.

346 Information for purposes of shareholder action

(1) Where proceedings have been brought under section 344 by an authorisedgroup, the group is entitled to require the company to provide it with allinformation relating to the subject matter of the proceedings that is in thecompany’s possession or under its control or which is reasonably obtainable byit.

(2) If the company, having been required by the group to do so, refuses to providethe group with all or any of that information, the court may, on an applicationmade by the group, make an order directing—

(a) the company, and(b) any of its officers or employees specified in the application,

to provide the group with the information in question in such form and by suchmeans as the court may direct.

Exemptions

347 Trade unions

(1) A trade union is not a political organisation for the purposes of this Part.

(2) For this purpose “trade union” has the meaning given by section 1 of the TradeUnion and Labour Relations (Consolidation) Act 1992 (c. 52) or Article 3 of theIndustrial Relations (Northern Ireland) Order 1992.

348 Subscription for membership of trade association

(1) A subscription paid to a trade association for membership of the association isnot a political donation for the purposes of this Part.

(2) For this purpose—“trade association” means an organisation formed for the purpose of

furthering the trade interests of its members, or of persons representedby its members, and

“subscription” does not include a payment to the association to the extentthat it is made for the purpose of financing any particular activity of theassociation.

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349 All-party parliamentary groups

(1) An all-party parliamentary group is not a political organisation for thepurposes of this Part.

(2) An “all-party parliamentary group” means an all-party group composed ofmembers of one or both of the Houses of Parliament (or of such members andother persons).

350 Political expenditure exempted by order

(1) Authorisation under this Part is not needed for political expenditure that isexempt by virtue of an order of the Secretary of State under this section.

(2) An order may confer an exemption in relation to—(a) companies of any description or category specified in the order, or(b) expenditure of any description or category so specified (whether

framed by reference to goods, services or other matters in respect ofwhich such expenditure is incurred or otherwise),

or both.

(3) If or to the extent that a expenditure is exempt from the requirement ofauthorisation under this Part by virtue of an order under this section, it shallbe disregarded in determining what donations are authorised by anyresolution of the company passed for the purposes of this Part.

(4) An order under this section is subject to affirmative resolution procedure.

351 Donations not amounting to more than £5,000 in any twelve month period

(1) Authorisation under this Part is not needed for a donation except to the extentthat the total amount of—

(a) that donation, and(b) other relevant donations made in the period of 12 months ending with

the date on which that donation is made,exceeds £5,000.

(2) In this section—“donation” means a donation to a political party or other political

organisation or to an independent election candidate; and“other relevant donations” means—

(a) in relation to a donation made by a company that is not asubsidiary, donations made by that company or by any of itssubsidiaries;

(b) in relation to a company that is a subsidiary, donations made bythat company, by any holding company of that company or byany other subsidiary of any such holding company.

(3) If or to the extent that a donation is exempt by virtue of this section from therequirement of authorisation under this Part, it shall be disregarded indetermining what donations are authorised by any resolution passed for thepurposes of this Part.

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(1) In this Part—“director” includes shadow director; and“organisation” includes any body corporate or unincorporated

association and any combination of persons.

(2) Except as otherwise provided, any reference in this Part to the time at which adonation is made or expenditure is incurred is, in a case where the donation ismade or expenditure incurred in pursuance of a contract, any earlier time atwhich that contract is entered into by the company.

PART 15

ACCOUNTS AND REPORTS

CHAPTER 1

INTRODUCTION

General

353 Scheme of this Part

(1) The requirements of this Part as to accounts and reports apply in relation toeach financial year of a company.

(2) In certain respects different provisions apply to different kinds of company.

(3) The main distinctions for this purpose are—(a) between companies subject to the small companies regime (see section

354) and companies that are not subject to that regime; and(b) between quoted companies (see section 358) and companies that are not

quoted.

(4) In this Part, where provisions do not apply to all kinds of company—(a) provisions applying to companies subject to the small companies

regime appear before the provisions applying to other companies,(b) provisions applying to private companies appear before the provisions

applying to public companies, and(c) provisions applying to quoted companies appear after the provisions

applying to other companies.

Companies subject to the small companies regime

354 Companies subject to the small companies regime

The small companies regime for accounts and reports applies to a company fora financial year in relation to which the company—

(a) qualifies as small (see sections 355 and 356), and(b) is not excluded from the regime (see section 357).

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355 Companies qualifying as small: general

(1) A company qualifies as small in relation to a financial year if the qualifyingconditions are met—

(a) in the case of the company’s first financial year, in that year, and(b) in the case of any subsequent financial year, in that year and the

preceding year.

(2) A company is treated as qualifying as small in relation to a financial year (otherthan its first financial year)—

(a) if the qualifying conditions are not met in relation to the financial yearin question but it qualified under subsection (1) in relation to theprevious financial year; or

(b) if the qualifying conditions are met in relation to the financial year inquestion and it was treated as qualifying in relation to the previous yearby virtue of paragraph (a); or

(c) if the qualifying conditions are not met in relation to the financial yearin question but it qualified under paragraph (b) in relation to theprevious financial year.

(3) The qualifying conditions are met by a company in a year in which it satisfiestwo or more of the following requirements—

(4) For a period that is a company’s financial year but not in fact a year themaximum figures for turnover must be proportionately adjusted.

(5) The balance sheet total means the aggregate of the amounts shown as assets inthe company’s balance sheet.

(6) The number of employees means the average number of persons employed bythe company in the year, determined as follows—

(a) find for each month in the financial year the number of personsemployed under contracts of service by the company in that month(whether throughout the month or not),

(b) add together the monthly totals, and(c) divide by the number of months in the financial year.

(7) This section is subject to section 356 (companies qualifying as small: parentcompanies).

356 Companies qualifying as small: parent companies

(1) A parent company qualifies as a small company in relation to a financial yearonly if the group headed by it qualifies as a small group.

(2) A group qualifies as small in relation to a financial year if the qualifyingconditions are met—

(a) in the case of the parent company’s first financial year, in that year, and

1. Turnover Not more than £5.6 million

2. Balance sheet total Not more than £2.8 million

3. Number of employees Not more than 50

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(b) in the case of any subsequent financial year, in that year and thepreceding year.

(3) A group is treated as qualifying as small in relation to a financial year (otherthan the parent company’s first financial year)—




(4) The qualifying conditions are met by a group in a year in which it satisfies twoor more of the following requirements—

(5) The aggregate figures are ascertained by aggregating the relevant figuresdetermined in accordance with section 355 for each member of the group.

(6) In relation to the aggregate figures for turnover and balance sheet total—“net” means after any set-offs and other adjustments made to eliminate

group transactions—(a) in the case of Companies Act accounts, in accordance with

regulations under section 377,(b) in the case of IAS accounts, in accordance with international

accounting standards; and“gross” means without those set-offs and other adjustments.

A company may satisfy the relevant requirements on the basis of either the netor the gross figure.

(7) The figures for each subsidiary undertaking shall be those included in itsindividual accounts for the relevant financial year, that is—

(a) if its financial year ends with that of the parent company, that financialyear, and

(b) if not, its financial year ending last before the end of the financial yearof the parent company.

If those figures cannot be obtained without disproportionate expense or unduedelay, the latest available figures shall be taken.

357 Companies excluded from the small companies regime

(1) The small companies regime does not apply to a company that is, or was at anytime within the financial year to which the accounts relate—

(a) a public company,

1. Aggregate turnover Not more than £5.6 million net (or£6.72 million gross)

2. Aggregate balance sheet total Not more than £2.8 million net (or£3.36 million gross)

3. Aggregate number of employees Not more than 50

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(b) a company that—(i) has permission under Part 4 of the Financial Services and

Markets Act 2000 (c. 8) to carry on a regulated activity, or(ii) carries on insurance market activity, or

(c) a member of an ineligible group.

(2) A group is ineligible if any of its members is—(a) a public company,(b) a body corporate (other than a company) whose shares are admitted to

trading on a regulated market in an EEA state, or(c) a person who—

(i) has permission under Part 4 of the Financial Services andMarkets Act 2000 to carry on a regulated activity, or

(ii) carries on insurance market activity.

Quoted and unquoted companies

358 Quoted and unquoted companies

(1) For the purposes of this Part a company is a quoted company in relation to afinancial year if it is a quoted company immediately before the end of that year.

(2) A “quoted company” means a company whose equity share capital—(a) has been included in the official list in accordance with the provisions

of Part 6 of the Financial Services and Markets Act 2000, or(b) is officially listed in an EEA State, or(c) is admitted to dealing on either the New York Stock Exchange or the

exchange known as Nasdaq.In paragraph (a) “the official list” has the meaning given by section 103(1) of theFinancial Services and Markets Act 2000.

(3) An “unquoted company” means a company that is not a quoted company.

(4) The Secretary of State may by regulations amend or replace the provisions ofsubsections (1) to (2) so as to limit or extend the application of some or all of theprovisions of this Part that are expressed to apply to quoted companies.

(5) Regulations under this section extending the application of any such provisionof this Part are subject to affirmative resolution procedure.

(6) Any other regulations under this section are subject to negative resolutionprocedure.

CHAPTER 2

ACCOUNTING RECORDS

359 Duty to keep accounting records

(1) Every company must keep adequate accounting records.

(2) Adequate accounting records means records that are sufficient—(a) to show and explain the company’s transactions,

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(b) to disclose with reasonable accuracy, at any time, the financial positionof the company at that time, and

(c) to enable the directors to ensure that any accounts required to beprepared comply with the requirements of this Act (and, whereapplicable, of Article 4 of the IAS Regulation).

(3) Accounting records must, in particular, contain—(a) entries from day to day of all sums of money received and expended by

the company and the matters in respect of which the receipt andexpenditure takes place, and

(b) a record of the assets and liabilities of the company.

(4) If the company’s business involves dealing in goods, the accounting recordsmust contain—

(a) statements of stock held by the company at the end of each financialyear of the company,

(b) all statements of stocktakings from which any statement of stock as ismentioned in paragraph (a) has been or is to be prepared, and

(c) except in the case of goods sold by way of ordinary retail trade,statements of all goods sold and purchased, showing the goods and thebuyers and sellers in sufficient detail to enable all these to be identified.

(5) A parent company that has a subsidiary undertaking in relation to which theabove requirements do not apply must take reasonable steps to secure that theundertaking keeps such accounting records as to enable the directors of theparent company to ensure that any accounts required to be prepared under thisPart comply with the requirements of this Act (and, where applicable, ofArticle 4 of the IAS Regulation).

360 Duty to keep accounting records: offence

(1) If a company fails to comply with any provision of section 359 (duty to keepaccounting records), an offence is committed by every officer of the companywho is in default.

(2) It is a defence for a person charged with such an offence to show that he actedhonestly and that in the circumstances in which the company’s business wascarried on the default was excusable.

(3) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to imprisonment for a term not exceeding




361 Where and for how long records to be kept

(1) A company’s accounting records—(a) must be kept at its registered office or such other place as the directors

think fit, and

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(b) must at all times be open to inspection by the company’s officers.

(2) If accounting records are kept at a place outside the United Kingdom, accountsand returns with respect to the business dealt with in the accounting records sokept must be sent to, and kept at, a place in the United Kingdom, and must atall times be open to such inspection.

(3) The accounts and returns to be sent to the United Kingdom must be such asto—

(a) disclose with reasonable accuracy the financial position of the businessin question at intervals of not more than six months, and

(b) enable the directors to ensure that the accounts required to be preparedunder this Part comply with the requirements of this Act (and, whereapplicable, of Article 4 of the IAS Regulation).

(4) Accounting records that a company is required by section 359 to keep must bepreserved by it—

(a) in the case of a private company, for three years from the date on whichthey are made;

(b) in the case of a public company, for six years from the date on whichthey are made.

(5) Subsection (4) is subject to any provision contained in rules made under section411 of the Insolvency Act 1986 (c. 45) (company insolvency rules) or Article 359of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).

362 Where and for how long records to be kept: offences

(1) If a company fails to comply with any provision of subsections (1) to (3) ofsection 361 (requirements as to keeping of accounting records), an offence iscommitted by every officer of the company who is in default.

(2) It is a defence for a person charged with such an offence to show that he actedhonestly and that in the circumstances in which the company’s business wascarried on the default was excusable.

(3) An officer of a company commits an offence if he—(a) fails to take all reasonable steps for securing compliance by the

company with subsection (4) of that section (period for which recordsto be preserved), or

(b) intentionally causes any default by the company under that subsection.





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CHAPTER 3

A COMPANY’S FINANCIAL YEAR

363 A company’s financial year

(1) A company’s financial year is determined as follows.

(2) Its first financial year—(a) begins with the first day of its first accounting reference period, and(b) ends with the last day of that period or such other date, not more than

seven days before or after the end of that period, as the directors maydetermine.

(3) Subsequent financial years—(a) begin with the day immediately following the end of the company’s

previous financial year, and(b) end with the last day of its next accounting reference period or such

other date, not more than seven days before or after the end of thatperiod, as the directors may determine.

(4) In relation to an undertaking that is not a company, references in this Act to itsfinancial year are to any period in respect of which a profit and loss account ofthe undertaking is required to be made up (by its constitution or by the lawunder which it is established), whether that period is a year or not.

(5) The directors of a parent company must secure that, except where in theiropinion there are good reasons against it, the financial year of each of itssubsidiary undertakings coincides with the company’s own financial year.

364 Accounting reference periods and accounting reference date

(1) A company’s accounting reference periods are determined according to itsaccounting reference date in each calendar year.

(2) The accounting reference date of a company incorporated in Great Britainbefore 1st April 1996 is—

(a) the date specified by notice to the registrar in accordance with section224(2) of the Companies Act 1985 (c. 6) (notice specifying accountingreference date given within nine months of incorporation), or

(b) failing such notice—(i) in the case of a company incorporated before 1st April 1990, 31st

March, and(ii) in the case of a company incorporated on or after 1st April 1990,

the last day of the month in which the anniversary of itsincorporation falls.

(3) The accounting reference date of a company incorporated in Northern Irelandbefore 22nd August 1997 is—

(a) the date specified by notice to the registrar in accordance with article232(2) of the Companies (Northern Ireland) Order 1986 (noticespecifying accounting reference date given within nine months ofincorporation), or

(b) failing such notice—

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(i) in the case of a company incorporated before the coming intooperation of Article 5 of the Companies (Northern Ireland)Order 1990, 31st March, and

(ii) in the case of a company incorporated after the coming intooperation of that Article, the last day of the month in which theanniversary of its incorporation falls.

(4) The accounting reference date of a company incorporated—(a) in Great Britain on or after 1st April 1996 and before the

commencement of this Act,(b) in Northern Ireland on or after 22nd August 1997 and before the

commencement of this Act, or(c) after the commencement of this Act,

is the last day of the month in which the anniversary of its incorporation falls.

(5) A company’s first accounting reference period is the period of more than sixmonths, but not more than 18 months, beginning with the date of itsincorporation and ending with its accounting reference date.

(6) Its subsequent accounting reference periods are successive periods of twelvemonths beginning immediately after the end of the previous accountingreference period and ending with its accounting reference date.

(7) This section has effect subject to the provisions of section 365 (alteration ofaccounting reference date).

365 Alteration of accounting reference date

(1) A company may by notice given to the registrar specify a new accountingreference date having effect in relation to—

(a) the company’s current accounting reference period and subsequentperiods, or

(b) the company’s previous accounting reference period and subsequentperiods.

A company’s “previous accounting reference period” means the oneimmediately preceding its current accounting reference period.

(2) The notice must state whether the current or previous accounting referenceperiod—

(a) is to be shortened, so as to come to an end on the first occasion on whichthe new accounting reference date falls or fell after the beginning of theperiod, or

(b) is to be extended, so as to come to an end on the second occasion onwhich that date falls or fell after the beginning of the period.

(3) A notice extending a company’s current or previous accounting referenceperiod is not effective if given less than five years after the end of an earlieraccounting reference period of the company that was extended under thissection.This does not apply—

(a) to a notice given by a company that is a subsidiary undertaking orparent undertaking of another EEA undertaking if the new accountingreference date coincides with that of the other EEA undertaking or,where that undertaking is not a company, with the last day of itsfinancial year, or

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(b) where the company is in administration under Part 2 of the InsolvencyAct 1986 (c. 45) or Part 3 of the Insolvency (Northern Ireland) Order1989 (SI 1989/2405 (N.I.19)), or

(c) where the Secretary of State directs that it should not apply, which hemay do with respect to a notice that has been given or that may begiven.

(4) A notice under this section may not be given in respect of a previousaccounting reference period if the period allowed for delivering accounts andreports to the registrar for that period (see section 420) has already expired.

(5) An accounting reference period may not be extended so as to exceed 18 monthsand a notice under this section is ineffective if the current or previousaccounting reference period as extended in accordance with the notice wouldexceed that limit.This does not apply where the company is in administration Part 2 of theInsolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989(SI 1989/2405 (N.I.19)).

(6) In this section “EEA undertaking” means an undertaking established under thelaw of any part of the United Kingdom or the law of any other EEA state.

CHAPTER 4

ANNUAL ACCOUNTS

General

366 Accounts to give true and fair view

(1) The directors of a company must not approve accounts for the purposes of thisChapter unless they are satisfied that they give a true and fair view of theassets, liabilities, financial position and profit or loss of the company.

(2) The auditor of a company in carrying out his functions under this Act inrelation to the company’s annual accounts must have regard to the directors’duty under subsection (1).

Individual accounts

367 Duty to prepare individual accounts

The directors of every company must prepare accounts for the company foreach of its financial years.Those accounts are referred to as the company’s “individual accounts”.

368 Individual accounts: applicable accounting framework

(1) A company’s individual accounts may be prepared—(a) in accordance with section 369 (“Companies Act individual accounts”),

or(b) in accordance with international accounting standards (“IAS

individual accounts”).

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This is subject to the following provisions of this section and to section 380(consistency of financial reporting within group).

(2) The individual accounts of a company that is a charity must be Companies Actindividual accounts.

(3) After the first financial year in which the directors of a company prepare IASindividual accounts (“the first IAS year”), all subsequent individual accountsof the company must be prepared in accordance with international accountingstandards unless there is a relevant change of circumstance.

(4) There is a relevant change of circumstance if, at any time during or after thefirst IAS year—

(a) the company becomes a subsidiary undertaking of anotherundertaking that does not prepare IAS individual accounts,

(b) the company ceases to be a company with securities admitted totrading on a regulated market in an EEA state, or

(c) a parent undertaking of the company ceases to be an undertaking withsecurities admitted to trading on a regulated market in an EEA state.

(5) If, having changed to preparing Companies Act individual accounts followinga relevant change of circumstance, the directors again prepare IAS individualaccounts for the company, subsections (4) and (5) apply again as if the firstfinancial year for which such accounts are again prepared were the first IASyear.

369 Companies Act individual accounts

(1) Companies Act individual accounts must comprise—(a) a balance sheet as at the last day of the financial year, and(b) a profit and loss account.

(2) The accounts must—(a) in the case of the balance sheet, give a true and fair view of the state of

affairs of the company as at the end of the financial year, and(b) in the case of the profit and loss account, give a true and fair view of the

profit or loss of the company for the financial year.

(3) The accounts must comply with provision made by the Secretary of State byregulations as to—

(a) the form and content of the balance sheet and profit and loss account,and

(b) additional information to be provided by way of notes to the accounts.

(4) If compliance with the regulations, and any other provision made by or underthis Act as to the matters to be included in a company’s individual accounts orin notes to those accounts, would not be sufficient to give a true and fair view,the necessary additional information must be given in the accounts or in a noteto them.

(5) If in special circumstances compliance with any of those provisions isinconsistent with the requirement to give a true and fair view, the directorsmust depart from that provision to the extent necessary to give a true and fairview.Particulars of any such departure, the reasons for it and its effect must be givenin a note to the accounts.

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370 IAS individual accounts

Where the directors of a company prepare IAS individual accounts, they muststate in the notes to the accounts that the accounts have been prepared inaccordance with international accounting standards.

Group accounts: small companies

371 Option to prepare group accounts

If at the end of a financial year a company subject to the small companiesregime is a parent company the directors, as well as preparing individualaccounts for the year, may prepare consolidated accounts for the group for theyear.Those accounts are referred to in this Act as the company’s “group accounts”.

Group accounts: other companies

372 Duty to prepare group accounts

(1) This section applies to companies that are not subject to the small companiesregime.

(2) If at the end of a financial year the company is a parent company the directors,as well as preparing individual accounts for the year, must prepareconsolidated accounts for the group for the year unless the company is exemptfrom that requirement.

(3) There are exemptions under-section 373 (company included in EEA accounts of larger group),section 374 (company included in non-EEA accounts of larger group), andsection 375 (company none of whose subsidiary undertakings need be

included in the consolidation).

(4) A company to which this section applies but which is exempt from therequirement to prepare group accounts, may do so.

(5) The accounts prepared under this section are referred to in this Act as thecompany’s “group accounts”.

373 Exemption for company included in EEA group accounts of larger group

(1) A company is exempt from the requirement to prepare group accounts if it isitself a subsidiary undertaking and its immediate parent undertaking isestablished under the law of an EEA State, in the following cases—

(a) where the company is a wholly-owned subsidiary of that parentundertaking;

(b) where that parent undertaking holds more than 50% of the shares in thecompany and notice requesting the preparation of group accounts hasnot been served on the company by shareholders holding inaggregate—

(i) more than half of the remaining shares in the company, or(ii) 5% of the total shares in the company.

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Such notice must be served not later than six months after the end of thefinancial year before that to which it relates.

(2) Exemption is conditional upon compliance with all of the followingconditions—

(a) the company must be included in consolidated accounts for a largergroup drawn up to the same date, or to an earlier date in the samefinancial year, by a parent undertaking established under the law of anEEA State;

(b) those accounts must be drawn up and audited, and that parentundertaking’s annual report must be drawn up, according to thatlaw—

(i) in accordance with the provisions of the Seventh Directive (83/349/EEC) (as modified, where relevant, by the provisions of theBank Accounts Directive (86/635/EEC) or the InsuranceAccounts Directive (91/674/EEC)), or

(ii) in accordance with international accounting standards;(c) the company must disclose in its individual accounts that it is exempt

from the obligation to prepare and deliver group accounts;(d) the company must state in its individual accounts the name of the

parent undertaking that draws up the group accounts referred to aboveand—

(i) if it is incorporated outside the United Kingdom, the country inwhich it is incorporated, or

(ii) if it is unincorporated, the address of its principal place ofbusiness;

(e) the company must deliver to the registrar, within the period allowedfor delivering its individual accounts, copies of—

(i) those group accounts, and(ii) the parent undertaking’s annual report,

together with the auditor’s report on them;(f) any requirement of Part 26 of this Act as to the delivery to the registrar

of a certified translation into English must be met in relation to anydocument comprised in the accounts and reports delivered inaccordance with paragraph (e).

(3) For the purposes of subsection (1)(b) shares held by a wholly-ownedsubsidiary of the parent undertaking, or held on behalf of the parentundertaking or a wholly-owned subsidiary, shall be attributed to the parentundertaking.

(4) The exemption does not apply to a company any of whose securities areadmitted to trading on a regulated market in an EEA state.

(5) Shares held by directors of a company for the purpose of complying with anyshare qualification requirement shall be disregarded in determining for thepurposes of this section whether the company is a wholly-owned subsidiary.

(6) In subsection (4) “securities” includes—(a) shares and stock,(b) debentures, including debenture stock, loan stock, bonds, certificates of

deposit and other instruments creating or acknowledgingindebtedness,

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(c) warrants or other instruments entitling the holder to subscribe forsecurities falling within paragraph (a) or (b), and

(d) certificates or other instruments that confer—(i) property rights in respect of a security falling within paragraph

(a), (b) or (c),(ii) any right to acquire, dispose of, underwrite or convert a

security, being a right to which the holder would be entitled ifhe held any such security to which the certificate or otherinstrument relates, or

(iii) a contractual right (other than an option) to acquire any suchsecurity otherwise than by subscription.

374 Exemption for company included in non-EEA group accounts of larger group

(1) A company is exempt from the requirement to prepare group accounts if it isitself a subsidiary undertaking and its parent undertaking is not establishedunder the law of an EEA State, in the following cases—

(a) where the company is a wholly-owned subsidiary of that parentundertaking;

(b) where that parent undertaking holds more than 50% of the shares in thecompany and notice requesting the preparation of group accounts hasnot been served on the company by shareholders holding inaggregate—

(i) more than half of the remaining shares in the company, or(ii) 5% of the total shares in the company.

Such notice must be served not later than six months after the end of thefinancial year before that to which it relates.

(2) Exemption is conditional upon compliance with all of the followingconditions—

(a) the company and all of its subsidiary undertakings must be included inconsolidated accounts for a larger group drawn up to the same date, orto an earlier date in the same financial year, by a parent undertaking;

(b) those accounts and, where appropriate, the group’s annual report,must be drawn up—

(i) in accordance with the provisions of the Seventh Directive (83/349/EEC) (as modified, where relevant, by the provisions of theBank Accounts Directive (86/635/EEC) or the InsuranceAccounts Directive (91/674/EEC)), or

(ii) in a manner equivalent to consolidated accounts andconsolidated annual reports so drawn up;

(c) the consolidated accounts must be audited by one or more personsauthorised to audit accounts under the law under which the parentundertaking which draws them up is established;

(d) the company must disclose in its individual accounts that it is exemptfrom the obligation to prepare and deliver group accounts;

(e) the company must state in its individual accounts the name of theparent undertaking which draws up the group accounts referred toabove and—

(i) if it is incorporated outside the United Kingdom, the country inwhich it is incorporated, or

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(ii) if it is unincorporated, the address of its principal place ofbusiness;

(f) the company must deliver to the registrar, within the period allowedfor delivering its individual accounts, copies of—

(i) the group accounts and,(ii) where appropriate, the consolidated annual report,

together with the auditor’s report on them;(g) any requirement of Part 26 of this Act as to the delivery to the registrar

of a certified translation into English must be met in relation to anydocument comprised in the accounts and reports delivered inaccordance with paragraph (f).

(3) For the purposes of subsection (1)(b), shares held by a wholly-ownedsubsidiary of the parent undertaking, or held on behalf of the parentundertaking or a wholly-owned subsidiary, are attributed to the parentundertaking.

(4) The exemption does not apply to a company any of whose securities areadmitted to trading on a regulated market in an EEA state.

(5) Shares held by directors of a company for the purpose of complying with anyshare qualification requirement shall be disregarded in determining for thepurposes of this section whether the company is a wholly-owned subsidiary.

(6) In subsection (4) “securities” includes—(a) shares and stock,(b) debentures, including debenture stock, loan stock, bonds, certificates of





security, being a right to which the holder would be entitled ifhe held any such security to which the certificate or otherinstrument relates, or


375 Exemption if no subsidiary undertakings need be included in the consolidation

A parent company is exempt from the requirement to prepare group accountsif under section 378 all of its subsidiary undertakings could be excluded fromconsolidation in Companies Act group accounts.

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Group accounts: general

376 Group accounts: applicable accounting framework

(1) The group accounts of certain parent companies are required by Article 4 of theIAS Regulation to be prepared in accordance with international accountingstandards (“IAS group accounts”).

(2) The group accounts of other companies may be prepared—(a) in accordance with section 377 (“Companies Act group accounts”), or(b) in accordance with international accounting standards (“IAS group

accounts”).This is subject to the following provisions of this section.

(3) The group accounts of a parent company that is a charity must be CompaniesAct group accounts.

(4) After the first financial year in which the directors of a parent company prepareIAS group accounts (“the first IAS year”), all subsequent group accounts of thecompany must be prepared in accordance with international accountingstandards unless there is a relevant change of circumstance.

(5) There is a relevant change of circumstance if, at any time during or after thefirst IAS year—

(a) the company becomes a subsidiary undertaking of anotherundertaking that does not prepare IAS group accounts,

(b) the company ceases to be a company with securities admitted totrading on a regulated market in an EEA state, or

(c) a parent undertaking of the company ceases to be an undertaking withsecurities admitted to trading on a regulated market in an EEA state.

(6) If, having changed to preparing Companies Act group accounts following arelevant change of circumstance, the directors again prepare IAS groupaccounts for the company, subsections (4) and (5) apply again as if the firstfinancial year for which such accounts are again prepared were the first IASyear.

377 Companies Act group accounts

(1) Companies Act group accounts must comprise—(a) a consolidated balance sheet dealing with the state of affairs of the

parent company and its subsidiary undertakings, and(b) a consolidated profit and loss account dealing with the profit or loss of

the parent company and its subsidiary undertakings.

(2) The accounts must give a true and fair view of the state of affairs as at the endof the financial year, and the profit or loss for the financial year, of theundertakings included in the consolidation as a whole, so far as concernsmembers of the company.

(3) The accounts must comply with provision made by the Secretary of State byregulations as to—

(a) the form and content of the consolidated balance sheet andconsolidated profit and loss account, and

(b) additional information to be provided by way of notes to the accounts.

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(4) If compliance with the regulations, and any other provision made by or underthis Act as to the matters to be included in a company’s group accounts or innotes to those accounts, would not be sufficient to give a true and fair view, thenecessary additional information must be given in the accounts or in a note tothem.

(5) If in special circumstances compliance with any of those provisions isinconsistent with the requirement to give a true and fair view, the directorsmust depart from that provision to the extent necessary to give a true and fairview.Particulars of any such departure, the reasons for it and its effect must be givenin a note to the accounts.

378 Companies Act group accounts: subsidiary undertakings included in the consolidation

(1) Where a parent company prepares Companies Act group accounts, all thesubsidiary undertakings of the company must be included in theconsolidation, subject to the following exceptions.

(2) A subsidiary undertaking may be excluded from consolidation if its inclusionis not material for the purpose of giving a true and fair view (but two or moreundertakings may be excluded only if they are not material taken together).

(3) A subsidiary undertaking may be excluded from consolidation where—(a) severe long-term restrictions substantially hinder the exercise of the

rights of the parent company over the assets or management of thatundertaking, or

(b) the information necessary for the preparation of group accounts cannotbe obtained without disproportionate expense or undue delay, or

(c) the interest of the parent company is held exclusively with a view tosubsequent resale.

(4) The reference in subsection (3)(a) to the rights of the parent company and thereference in subsection (3)(c) to the interest of the parent company are,respectively, to rights and interests held by or attributed to the company for thepurposes of the definition of “parent undertaking” (see section 761) in theabsence of which it would not be the parent company.

379 IAS group accounts

Where the directors of a company prepare IAS group accounts, they must statein the notes to those accounts that the accounts have been prepared inaccordance with international accounting standards.

380 Consistency of financial reporting within group

(1) The directors of a parent company must secure that the individual accountsof—

(a) the parent company, and(b) each of its subsidiary undertakings,

are all prepared using the same financial reporting framework, except to theextent that in their opinion there are good reasons for not doing so.

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(2) Subsection (1) does not apply if the directors do not prepare group accounts forthe parent company.

(3) Subsection (1) only applies to accounts of subsidiary undertakings that arerequired to be prepared under this Part.

(4) Subsection (1) does not require accounts of undertakings that are charities tobe prepared using the same financial reporting framework as accounts ofundertakings which are not charities.

(5) Subsection (1)(a) does not apply where the directors of a parent companyprepare IAS group accounts and IAS individual accounts.

381 Individual profit and loss account where group accounts prepared

(1) This section applies where—(a) a company prepares group accounts in accordance with this Act, and(b) the notes to the company’s individual balance sheet show the

company’s profit or loss for the financial year determined inaccordance with this Act.

(2) The profit and loss account need not contain the information specified insection 384 (information about employee numbers and costs)

(3) The company’s individual profit and loss account must be approved inaccordance with section 387(1) (approval by directors) but may be omittedfrom the company’s annual accounts for the purposes of the other provisionsof the Companies Acts.

(4) The exemption conferred by this section is conditional upon its being disclosedin the company’s annual accounts that the exemption applies.

Information to be given in notes to the accounts

382 Information about related undertakings

(1) The Secretary of State may make provision by regulations requiringinformation about related undertakings to be given in notes to a company’sannual accounts.

(2) The regulations—(a) may make different provision according to whether or not the company

prepares group accounts, and(b) may specify the descriptions of undertaking in relation to which they

apply, and make different provision in relation to different descriptionsof related undertaking.

(3) The regulations may provide that information need not be disclosed withrespect to an undertaking that—

(a) is established under the law of a country outside the United Kingdom,or

(b) carries on business outside the United Kingdom,if in the opinion of the directors of the company the disclosure would beseriously prejudicial to the business of that undertaking, or to the business ofthe company or any of its subsidiary undertakings, and the Secretary of Stateagrees that the information need not be disclosed.

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(4) Where advantage is taken of any such exemption, that fact must be stated in anote to the company’s annual accounts.

383 Information about related undertakings: alternative compliance

(1) This section applies where the directors of a company are of the opinion thatthe number of undertakings in respect of which the company is required todisclose information under any provision of regulations under section 382(related undertakings) is such that compliance with that provision wouldresult in information of excessive length being given in notes to the company’sannual accounts.

(2) The information need only be given in respect of—(a) the undertakings whose results or financial position, in the opinion of

the directors, principally affected the figures shown in the company’sannual accounts, and

(b) where the company prepares group accounts, undertakings excludedfrom consolidation.

(3) If advantage is taken of subsection (2)—(a) there must be included in the notes to the company’s annual accounts

a statement that the information is given only with respect to suchundertakings as are mentioned in that subsection, and

(b) the full information (both that which is disclosed in the notes to theaccounts and that which is not) must be annexed to the company’s nextannual return.

For this purpose the “next annual return” means that next delivered to theregistrar after the accounts in question have been approved under section 387.

(4) If a company fails to comply with subsection (3)(b), an offence is committedby—


(5) A person guilty of an offence under subsection (4) is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and, forcontinued contravention, a daily default fine not exceeding one-tenth of level3 on the standard scale.

384 Information about employee numbers and costs

(1) In the case of a company not subject to the small companies regime, thefollowing information with respect to the employees of the company must begiven in notes to the company’s annual accounts—

(a) the average number of persons employed by the company in thefinancial year, and

(b) the average number of persons so employed within each category ofpersons employed by the company.

(2) The categories by reference to which the number required to be disclosed bysubsection (1)(b) is to be determined must be such as the directors may selecthaving regard to the manner in which the company’s activities are organised.

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(3) The average number required by subsection (1)(a) or (b) is determined bydividing the relevant annual number by the number of months in the financialyear.

(4) The relevant annual number is determined by ascertaining for each month inthe financial year—

(a) for the purposes of subsection (1)(a), the number of persons employedunder contracts of service by the company in that month (whetherthroughout the month or not);

(b) for the purposes of subsection (1)(b), the number of persons in thecategory in question of persons so employed;

and adding together all the monthly numbers.

(5) In respect of all persons employed by the company during the financial yearwho are taken into account in determining the relevant annual number for thepurposes of subsection (1)(a) there must also be stated the aggregate amountsrespectively of—

(a) wages and salaries paid or payable in respect of that year to thosepersons;

(b) social security costs incurred by the company on their behalf; and(c) other pension costs so incurred.

This does not apply in so far as those amounts, or any of them, are statedelsewhere in the company’s accounts.

(6) In subsection (4)—“pension costs” includes any costs incurred by the company in respect

of—(a) any pension scheme established for the purpose of providing

pensions for persons currently or formerly employed by thecompany,

(b) any sums set aside for the future payment of pensions directlyby the company to current or former employees, and

(c) any pensions paid directly to such persons without having firstbeen set aside;

“social security costs” means any contributions by the company to anystate social security or pension scheme, fund or arrangement.

(7) Where the company prepares group accounts, this section applies as if theundertakings included in the consolidation were a single company.

385 Information about directors’ benefits: remuneration

(1) The Secretary of State may make provision by regulations requiringinformation to be given in notes to a company’s annual accounts aboutdirectors’ remuneration.

(2) The matters about which information may be required include—(a) gains made by directors on the exercise of share options;(b) benefits received or receivable by directors under long-term incentive

schemes;(c) payments for loss of office (as defined in section 195);(d) benefits receivable, and contributions for the purpose of providing

benefits, in respect of past services of a person as director or in anyother capacity while director;

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(e) consideration paid to or receivable by third parties for making availablethe services of a person as director or in any other capacity whiledirector.

(3) Without prejudice to the generality of subsection (1), regulations under thissection may make any such provision as was made immediately before thecommencement of this Part by Part 1 of Schedule 6 to the Companies Act 1985(c. 6).

(4) For the purposes of this section, and regulations made under it, amounts paidto or receivable by—

(a) a person connected with a director, or(b) a body corporate controlled by a director,

are treated as paid to or receivable by the director.The expressions “connected with” and “controlled by” in this subsection havethe same meaning as in Part 10 (company directors).

(5) It is the duty of—(a) any director of a company, and(b) any person who is or has at any time in the preceding five years been a

director of the company,to give notice to the company of such matters relating to himself as may benecessary for the purposes of regulations under this section.

(6) A person who makes default in complying with subsection (5) commits anoffence and is liable on summary conviction to a fine not exceeding level 3 onthe standard scale.

386 Information about directors’ benefits: advances, credit and guarantees

(1) In the case of a company that does not prepare group accounts, details of—(a) advances and credits granted by the company to its directors, and(b) guarantees of any kind entered into by the company on behalf of its

directors,must be shown in the notes to its individual accounts.

(2) In the case of a parent company that prepares group accounts, details of—(a) advances and credits granted to the directors of the parent company, by

that company or by any of its subsidiary undertakings, and(b) guarantees of any kind entered into on behalf of the directors of the

parent company, by that company or by any of its subsidiaryundertakings,

must be shown in the notes to the group accounts.

(3) The details required of an advance or credit are—(a) its amount,(b) an indication of the interest rate,(c) its main conditions, and(d) any amounts repaid.

(4) The details required of a guarantee are—(a) its main terms,(b) the amount of the maximum liability that may be incurred by the

company (or its subsidiary), and

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(c) any amount paid and any liability incurred by the company (or itssubsidiary) for the purpose of fulfilling the guarantee (including anyloss incurred by reason of enforcement of the guarantee).

(5) There must also be stated in the notes to the accounts the totals—(a) of amounts stated under subsection (3)(a)(b) of amounts stated under subsection (3)(d)(c) of amounts stated under subsection (4)(b), and(d) of amounts stated under subsection (4)(c).

(6) References in this section to the directors of a company are to the persons whowere a director at any time in the financial year to which the accounts relate.

(7) The requirements of this section apply in relation to every advance, credit orguarantee subsisting at any time in the financial year to which the accountsrelate—

(a) whenever it was entered into,(b) whether or not the person concerned was a director of the company in

question at the time it was entered into, and(c) in the case of an advance, credit or guarantee involving a subsidiary

undertaking of that company, whether or not that undertaking wassuch a subsidiary undertaking at the time it was entered into.

(8) Banking companies and the holding companies of credit institutions need onlystate the details required by subsection (3)(a) and (4)(b).

Approval and signing of accounts

387 Approval and signing of accounts

(1) A company’s annual accounts must be approved by the board of directors andsigned on behalf of the board by a director of the company.

(2) The signature must be on the company’s balance sheet.

(3) If the accounts are prepared in accordance with the provisions applicable tocompanies subject to the small companies regime, the balance sheet mustcontain a statement to that effect in a prominent position above the signature.

(4) If annual accounts are approved that do not comply with the requirements ofthis Act (and, where applicable, of Article 4 of the IAS Regulation), everydirector of the company who—

(a) knew that they did not comply, or was reckless as to whether theycomplied, and

(b) failed to take reasonable steps to secure compliance with thoserequirements or, as the case may be, to prevent the accounts from beingapproved,

commits an offence.


maximum.

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CHAPTER 5

DIRECTORS’ REPORT

Directors’ report

388 Duty to prepare directors’ report

(1) The directors of a company must prepare a directors’ report for each financialyear of the company.

(2) In the case of a quoted company, the directors’ report need not contain anyinformation included in the operating and financial review for that year (seesections 393 to 395).

(3) For a financial year in which—(a) the company is a parent company, and(b) the directors of the company prepare group accounts,

the directors’ report must be a consolidated report (a “group directors’ report”)relating to the company and its subsidiary undertakings included in theconsolidation.

(4) A group directors’ report may, where appropriate, give greater emphasis tothe matters that are significant to the company and its subsidiary undertakingsincluded in the consolidation, taken as a whole.

(5) In the case of failure to comply with the requirement to prepare a directors’report, an offence is committed by every person who—

(a) was a director of the company immediately before the end of the periodfor filing accounts and reports for the financial year in question, and

(b) failed to take all reasonable steps for securing compliance with thatrequirement.


maximum.

389 Contents of directors’ report: general

(1) The directors’ report for a financial year must state—(a) the names of the persons who, at any time during the financial year,

were directors of the company, and(b) the principal activities of the company in the course of the year.

(2) In relation to a group directors’ report subsection (1)(b) has effect as if thereference to the company was to the company and its subsidiary undertakingsincluded in the consolidation.

(3) Except in the case of a company subject to the small companies regime, thereport must state the amount (if any) that the directors recommend should bepaid by way of dividend.

(4) The Secretary of State may make provision by regulations as to other mattersthat must be disclosed in a directors’ report.

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Without prejudice to the generality of this power, the regulations may makeany such provision as was formerly made by Schedule 7 to the Companies Act1985.

390 Contents of directors’ report: business review

(1) This section applies to companies that are not subject to the small companiesregime.

(2) The directors’ report for a financial year must contain—(a) a fair review of the business of the company, and(b) a description of the principal risks and uncertainties facing the

company.

(3) The review required is a balanced and comprehensive analysis of—(a) the development and performance of the business of the company

during the financial year, and(b) the position of the company at the end of that year,

consistent with the size and complexity of the business.

(4) The review must, to the extent necessary for an understanding of thedevelopment, performance or position of the business of the company,include—

(a) analysis using financial key performance indicators, and(b) where appropriate, analysis using other key performance indicators,

including information relating to environmental matters and employeematters.

(5) The review must, where appropriate, include references to, and additionalexplanations of, amounts included in the company’s annual accounts.

(6) In this section, “key performance indicators” means factors by reference towhich the development, performance or position of the business of thecompany can be measured effectively.

(7) Where a company qualifies as medium-sized in relation to a financial year (seesections 443 to 445), the directors’ report for the year need not comply with therequirements of subsection (4) above so far as they relate to non-financialinformation.

(8) In relation to a group directors’ report this section has effect as if the referencesto the company were references to the company and its subsidiaryundertakings included in the consolidation.

391 Contents of directors’ report: statement as to disclosure to auditors

(1) This section applies to a company unless—(a) it is exempt for the financial year in question from the requirements of

Part 16 as to audit of accounts, and(b) the directors take advantage of that exemption.

(2) The directors’ report must contain a statement to the effect that, in the case ofeach of the persons who are directors at the time the report is approved—

(a) so far as the director is aware, there is no relevant audit information ofwhich the company’s auditor is unaware, and

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(b) he has taken all the steps that he ought to have taken as a director inorder to make himself aware of any relevant audit information and toestablish that the company’s auditor is aware of that information.

(3) “Relevant audit information” means information needed by the company’sauditor in connection with preparing his report.

(4) A director is regarded as having taken all the steps that he ought to have takenas a director in order to do the things mentioned in subsection (2)(b) if he has—

(a) made such enquiries of his fellow directors and of the company’sauditors for that purpose, and

(b) taken such other steps (if any) for that purpose,as are required by his duty as a director of the company to exercise reasonablecare, skill and diligence.

(5) Where a directors’ report containing the statement required by this section isapproved but the statement is false, every director of the company who—

(a) knew that the statement was false, or was reckless as to whether it wasfalse, and

(b) failed to take reasonable steps to prevent the report from beingapproved,

commits an offence.





392 Approval and signing of directors’ report

(1) The directors’ report must be approved by the board of directors and signedon behalf of the board by a director or the secretary of the company.

(2) If the report is prepared in accordance with the small companies regime, itmust contain a statement to that effect in a prominent position above thesignature.

(3) If a directors’ report is approved that does not comply with the requirementsof this Act, every director of the company who—

(a) knew that it not comply, or was reckless as to whether it complied, and(b) failed to take reasonable steps to secure compliance with those

requirements or, as the case may be, to prevent the report from beingapproved,

commits an offence.


maximum.

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Chapter 6 — Quoted companies: operating and financial review

180

CHAPTER 6

QUOTED COMPANIES: OPERATING AND FINANCIAL REVIEW

393 Duty to prepare operating and financial review

(1) The directors of a quoted company must prepare an operating and financialreview for each financial year.

(2) For a financial year in which—(a) the company is a parent company, and(b) the directors of the company prepare group accounts,

the operating and financial review must be a consolidated review (a “groupoperating and financial review”) relating to the company and its subsidiaryundertakings included in the consolidation.

(3) A group operating and financial review may, where appropriate, give greateremphasis to the matters that are significant to the company and its subsidiaryundertakings included in the consolidation, taken as a whole.

(4) In the case of failure to comply with the requirement to prepare an operatingand financial review, an offence is committed by every person who—


(b) failed to take all reasonable steps for securing compliance with thatrequirement.


maximum.

394 Objective and contents of operating and financial review

(1) The Secretary of State may make provision by regulations as to the objectiveand contents of an operating and financial review.Without prejudice to the generality of this power, the regulations may makeany such provision as was made, immediately before the commencement ofthis Part, by Schedule 7ZA to the Companies Act 1985.

(2) Nothing in the regulations requires the disclosure of information aboutimpending developments or about matters in the course of negotiation if thedisclosure would, in the opinion of the directors, be seriously prejudicial to theinterests of the company.

395 Approval and signing of operating and financial review

(1) The operating and financial review must be approved by the board of directorsand signed on behalf of the board by a director or the secretary of the company.

(2) If an operating and financial review is approved that does not comply with therequirements of this Act, every director of the company who—

(a) knew that it did not comply, or was reckless as to whether it complied,and

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(b) failed to take reasonable steps to secure compliance with thoserequirements or, as the case may be, to prevent the review from beingapproved,

commits an offence.


maximum.

CHAPTER 7

QUOTED COMPANIES: DIRECTORS’ REMUNERATION REPORT

396 Duty to prepare directors’ remuneration report

(1) The directors of a quoted company must prepare a directors’ remunerationreport for each financial year of the company.

(2) In the case of failure to comply with the requirement to prepare a directors’remuneration report, every person who—


(b) failed to take all reasonable steps for securing compliance with thatrequirement,

commits an offence.


maximum.

397 Contents of directors’ remuneration report

(1) The Secretary of State may make provision by regulations as to—(a) the information that must be contained in a directors’ remuneration

report,(b) how information is to be set out in the report, and(c) what is to be the auditable part of the report.

(2) Without prejudice to the generality of this power, the regulations may makeany such provision as was made, immediately before the commencement ofthis Part, by Schedule 7A to the Companies Act 1985 (c. 6).

(3) It is the duty of—(a) any director of a company, and(b) any person who is or has at any time in the preceding five years been a

director of the company,to give notice to the company of such matters relating to himself as may benecessary for the purposes of regulations under this section.

(4) A person who makes default in complying with subsection (3) commits anoffence and is liable on summary conviction to a fine not exceeding level 3 onthe standard scale.

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398 Approval and signing of directors’ remuneration report

(1) The directors’ remuneration report must be approved by the board of directorsand signed on behalf of the board by a director or the secretary of the company.

(2) If a directors’ remuneration report is approved that does not comply with therequirements of this Act, every director of the company who—

(a) knew that it did not comply, or was reckless as to whether it complied,and

(b) failed to take reasonable steps to secure compliance with thoserequirements or, as the case may be, to prevent the report from beingapproved,

commits an offence.


maximum.

CHAPTER 8

PUBLICATION OF ACCOUNTS AND REPORTS

Duty to circulate copies of accounts and reports

399 Duty to circulate copies of annual accounts and reports

(1) Every company must send a copy of its annual accounts and reports for eachfinancial year to—

(a) every member of the company,(b) every holder of the company’s debentures, and(c) every person who is entitled to receive notice of general meetings.

(2) Copies need not be sent to a person for whom the company does not have acurrent address.

(3) A company has a “current address” for a person if—(a) an address has been notified to the company by the person as one at

which documents may be sent to him, and(b) the company has no reason to believe that documents sent to him at

that address will not reach him.

(4) In the case of a company not having a share capital, copies need not be sent toanyone who is not entitled to receive notices of general meetings of thecompany.

(5) Where copies are sent out over a period of days, references in the CompaniesActs to the day on which copies are sent out shall be read as references to thelast day of that period.

(6) This section has effect subject to section 402 (option to provide summaryfinancial statement).

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400 Time allowed for sending out copies of accounts and reports

(1) The time allowed for sending out copies of the company’s annual accounts andreports is as follows.

(2) A private company must comply with section 399 not later than—(a) the end of the period allowed for filing its accounts and reports with the

registrar, or(b) if earlier, the date on which it actually delivers its accounts and reports

to the registrar.

(3) A public company must comply with section 399 not later than—(a) 14 days before the end of the period for filing its accounts and reports

with the registrar, or(b) if earlier, the date on which it actually delivers its accounts and reports

to the registrar.

(4) If in the case of a public company copies are sent out later than is required bysubsection (2), they shall, despite that, be deemed to have been duly sent if it isso agreed by all the members entitled to attend and vote at the general meetingof the company at which the accounts are laid.

401 Default in sending out copies of accounts and reports: offences

(1) If default is made in complying with section 399 or 400, an offence is committedby—



maximum.

Option to provide summary financial statement

402 Option to provide summary financial statement

(1) A company may—(a) in such cases as may be specified by regulations made by the Secretary

of State and(b) provided any conditions so specified are complied with,

provide a summary financial statement instead of copies of the accounts andreports required to be sent out by section 399.

(2) Copies of those reports and accounts must, however, be sent to any personentitled to be sent them in accordance with that section and who wishes toreceive them.

(3) The Secretary of State may make provision by regulations as to the manner inwhich it is to be ascertained, whether before or after a person becomes entitledto be sent a copy of those accounts and reports, whether he wishes to receivethem.

(4) A summary financial statement must comply with the requirements of—

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section 403 (form and contents of summary financial statement: unquotedcompanies).

section 404 (form and contents of summary financial statement: quotedcompanies).


403 Form and contents of summary financial statement: unquoted companies

(1) A summary financial statement by a company that is not a quoted companymust—

(a) be derived from the company’s annual accounts, and(b) be prepared in accordance with this section and regulations made

under it.

(2) The summary financial statement must be in such form, and contain suchinformation, as the Secretary of State may specify by regulations.The regulations may require the statement to include information derivedfrom the directors’ report.

(3) Nothing in this section or regulations made under it prevents a company fromincluding in a summary financial statement additional information derivedfrom the company’s annual accounts or the directors’ report.

(4) The summary financial statement must—(a) state that it is only a summary of information derived from the

company’s annual accounts;(b) state whether it contains additional information derived from the

directors’ report and, if so, that it does not contain the full text of thatreport;

(c) state how a person entitled to them can obtain a full copy of thecompany’s annual accounts and the directors’ report;

(d) contain a statement by the company’s auditor of his opinion as towhether the summary financial statement—

(i) is consistent with the company’s annual accounts and, whereinformation derived from the directors’ report is included in thestatement, with that report, and

(ii) complies with the requirements of this section and regulationsmade under it;

(e) state whether the auditor’s report on the annual accounts wasunqualified or qualified and, if it was qualified, set out the report in fulltogether with any further material needed to understand thequalification;

(f) state whether, in that report, the auditor’s statement under section 483(whether directors’ report consistent with accounts) was qualified orunqualified and, if it was qualified, set out the qualified statement infull together with any further material needed to understand thequalification;

(g) state whether that auditor’s report contained a statement under—(i) section 486(2)(a) or (b) (accounting records or returns

inadequate or accounts not agreeing with records and returns),or

(ii) section 486(3) (failure to obtain necessary information andexplanations),

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and if so, set out the statement in full.

(5) Regulations under this section may provide that any specified material may,instead of being included in the summary financial statement, be sentseparately at the same time as the statement.


404 Form and contents of summary financial statement: quoted companies

(1) A summary financial statement by a quoted company must—(a) be derived from the company’s annual accounts and the directors’

remuneration report, and(b) be prepared in accordance with this section and regulations made

under it.

(2) The summary financial statement must be in such form, and contain suchinformation, as the Secretary of State may specify by regulations.The regulations may require the statement to include information derivedfrom the directors’ report and operating and financial review.

(3) Nothing in this section or regulations made under it prevents a company fromincluding in a summary financial statement additional information derivedfrom the company’s annual accounts, the directors’ remuneration report, thedirectors’ report or the operating and financial review.

(4) The summary financial statement must—(a) state that it is only a summary of information derived from the

company’s annual accounts and the directors’ remuneration report;(b) state whether it contains additional information derived from the

directors’ report or the operating and financial review and, if so, that itdoes not contain the full text of that report or review;

(c) state how a person entitled to them can obtain a full copy of thecompany’s annual accounts, the directors’ remuneration report, thedirectors’ report and the operating and financial review;

(d) contain a statement by the company’s auditor of his opinion as towhether the summary financial statement—

(i) is consistent with the company’s annual accounts and thedirectors’ remuneration report and, where informationderived from the directors’ report or the operating and financialreview is included in the statement, with that report or review,and

(ii) complies with the requirements of this section and regulationsmade under it;

(e) state whether the auditor’s report on the annual accounts and theauditable part of the directors’ remuneration report was unqualified orqualified and, if it was qualified, set out the report in full together withany further material needed to understand the qualification;

(f) state whether that auditor’s report contained a statement under—(i) section 486(2)) (accounting records or returns inadequate or

accounts or directors’ remuneration report not agreeing withrecords and returns), or

(ii) section 486(3) (failure to obtain necessary information andexplanations),

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and if so, set out the statement in full;(f) state whether, in that report, the auditor’s statement under—

(i) section 483 (whether directors’ report consistent with accounts),or

(ii) section 484 (whether operating and financial review consistentwith accounts),

was qualified or unqualified and, if it was qualified, set out thequalified statement in full together with any further material needed tounderstand the qualification.

(5) Regulations under this section may provide that any specified material may,instead of being included in the summary financial statement, be sentseparately at the same time as the statement.


405 Summary financial statements: offences

(1) If default is made in complying with any provision of section 402, 403 or 404,or of regulations under any of those sections, an offence is committed by—



Quoted companies: requirements as to website publication

406 Quoted companies: annual accounts and reports to be made available on website

(1) A quoted company must ensure that its annual accounts and reports—(a) are made available on a website, and(b) remain so available until the annual accounts and reports for the

company’s next financial year are made available in accordance withthis section.




407 Quoted companies: preliminary statement of results to be made available on website

(1) This section applies where a quoted company prepares a preliminarystatement of its annual results in accordance with the requirements of listingrules or comparable requirements of the market on which the company’sequity share capital is admitted to trading.

(2) The company must ensure that the statement—

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(a) is made available on a website, and(b) remains so available until the annual accounts and reports for the

financial year are made available in accordance with section 406.


(4) A preliminary statement of the company’s annual results means informationpublished before publication of the company’s annual accounts and reportsthat is or purports to be—

(a) a balance sheet as at the end of the financial year, or(b) a profit and loss account for the financial year,

whether on an individual or a consolidated basis.




(1) The following provisions apply for the purposes of—section 406 (quoted companies: annual accounts and reports to be made

available on website), andsection 407 (quoted companies: preliminary results to be made available

on website).



(4) The information—(a) must be made available as soon as reasonably practicable, and(b) must be kept available throughout the period specified in the section in

question.

(5) A failure to make information available on a website throughout the periodreferred to in subsection (4)(b) is disregarded if—



Right of member or debenture holder to demand copies of accounts and reports

409 Right of member or debenture holder to copies of accounts and reports: unquoted companies

(1) A member of, or holder of debentures of, an unquoted company is entitled tobe provided, on demand and without charge, with a copy of—

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(a) the company’s last annual accounts,(b) the last directors’ report, and(c) the auditor’s report on those accounts (including the statement on that

report).

(2) The entitlement under this section is to a single copy of those documents, butthat is in addition to any copy to which a person may be entitled under section399.

(3) If a demand made under this section is not complied with within seven days,an offence is committed by—



410 Right of member or debenture holder to copies of accounts and reports: quoted companies

(1) A member of, or holder of debentures of, a quoted company is entitled to beprovided, on demand and without charge, with a copy of—

(a) the company’s last annual accounts,(b) the last directors’ remuneration report,(c) the last directors’ report,(d) the last operating and financial review, and(e) the auditor’s report on those accounts (including the report on the

directors’ remuneration report and the statements on the directors’report and operating and financial review).

(2) The entitlement under this section is to a single copy of those documents, butthat is in addition to any copy to which a person may be entitled under section399.

(3) If a demand made under this section is not complied with within seven days,an offence is committed by—



Requirements in connection with publication of accounts and reports

411 Name of signatory to be stated in published copies of accounts and reports

(1) Every copy of a document to which this section applies that is published by oron behalf of the company must state the name of the person who signed it onbehalf of the board.

(2) In the case of an unquoted company, this section applies to copies of—

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(a) the company’s balance sheet, and(b) the directors’ report.

(3) In the case of a quoted company, this section applies to copies of—(a) the company’s balance sheet,(b) the directors’ remuneration report,(c) the directors’ report, and(d) the operating and financial review.

(4) If a copy is published without the required statement of the signatory’s name,an offence is committed by—



412 Requirements in connection with publication of statutory accounts

(1) If a company publishes any of its statutory accounts, they must beaccompanied by—

(a) the auditor’s report on those accounts (unless the company is exemptfrom audit and the directors have taken advantage of that exemption),or

(b) where the company is exempt from audit by virtue of section 459(charity: accountant’s report in lieu of audit) and the directors takeadvantage of that exemption, the report made for the purposes of thatsection.

(2) A company that prepares statutory group accounts for a financial year mustnot publish its statutory individual accounts for that year without alsopublishing with them its statutory group accounts.

(3) A company’s “statutory accounts” are its accounts for a financial year asrequired to be delivered to the registrar under section 419.

(4) If a company contravenes any provision of this section, an offence is committedby—



(6) This section does not apply in relation to the provision by a company of asummary financial statement (see section 402).

413 Requirements in connection with publication of non-statutory accounts

(1) If a company publishes non-statutory accounts, it must publish with them astatement indicating—

(a) that they are not the company’s statutory accounts,(b) whether statutory accounts dealing with any financial year with which

the non-statutory accounts purport to deal have been delivered to theregistrar,

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(c) whether an auditor’s report has been made on the company’s statutoryaccounts for any such financial year, and if so whether the report—

(i) was qualified or unqualified, or included a reference to anymatters to which the auditor drew attention by way of emphasiswithout qualifying the report, or

(ii) contained a statement under section 486(2) (accounting recordsor returns inadequate or accounts or directors’ remunerationreport not agreeing with records and returns), or section 486(3)(failure to obtain necessary information and explanations); and

(d) whether any report has been made on the company’s statutoryaccounts for any such financial year for the purposes of section 459(small charities: accountant’s report in lieu of audit), and if so whetherthat report was qualified.

(2) The company must not publish with non-statutory accounts—(a) the auditor’s report on the company’s statutory accounts, or(b) where the company is exempt from audit under section 459, any report

made for the purposes of that section.

(3) References in this section to the publication by a company of “non-statutoryaccounts” are to the publication of—

(a) any balance sheet or profit and loss account relating to, or purportingto deal with, a financial year of the company, or

(b) an account in any form purporting to be a balance sheet or profit andloss account for the group consisting of the company and its subsidiaryundertakings relating to, or purporting to deal with, a financial year ofthe company,

otherwise than as part of the company’s statutory accounts.

(4) If a company contravenes any provision of this section, an offence is committedby—



(6) This section does not apply in relation to the provision by a company of asummary financial statement (see section 402).

414 Meaning of “publication” in relation to accounts and reports

(1) This section has effect for the purposes of—section 411 (name of signatory to be stated in published copies of accounts

and reports),section 412 (requirements in connection with publication of statutory

accounts), andsection 413 (requirements in connection with publication of non-statutory

accounts),

(2) For the purposes of those sections a company is regarded as publishing adocument if it publishes, issues or circulates it or otherwise makes it availablefor public inspection in a manner calculated to invite members of the publicgenerally, or any class of members of the public, to read it.

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Company Law Reform Bill [HL]Part 15 — Accounts and reportsChapter 9 — Public companies: laying of accounts and reports before general meeting

191

CHAPTER 9

PUBLIC COMPANIES: LAYING OF ACCOUNTS AND REPORTS BEFORE GENERAL MEETING

415 Public companies: laying of accounts and reports before general meeting

(1) The directors of a public company must lay before the company in generalmeeting copies of its annual accounts and reports.

(2) This section must be complied with not later than the end of the period forfiling the company’s annual accounts and reports with the registrar (seesection 420).

416 Public companies: offence of failure to lay accounts and reports

(1) If the requirements of section 415 (public companies: laying of accounts andreports before general meeting) are not complied with before the end of theperiod allowed, every person who immediately before the end of that periodwas a director of the company commits an offence.

(2) It is a defence for a person charged with such an offence to prove that he tookall reasonable steps for securing that those requirements would be compliedwith before the end of that period.

(3) It is not a defence to prove that the documents in question were not in factprepared as required by this Part.


CHAPTER 10

QUOTED COMPANIES: MEMBERS’ APPROVAL OF DIRECTORS’ REMUNERATION REPORT

417 Quoted companies: members’ approval of directors’ remuneration report

(1) A quoted company must, prior to the accounts meeting, give to the membersof the company entitled to be sent notice of the meeting notice of the intentionto move at the meeting, as an ordinary resolution, a resolution approving thedirectors’ remuneration report for the financial year.

(2) The notice may be given in any manner permitted for the service on themember of notice of the meeting.

(3) The business that may be dealt with at the accounts meeting includes theresolution.This is so notwithstanding—

(a) any default in complying with subsection (1) or (2);(b) anything in the company’s articles.

(4) The existing directors must ensure that the resolution is put to the vote of themeeting.

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(5) No entitlement of a person to remuneration is made conditional on theresolution being passed by reason only of the provision made by this section.

(6) In this section—“the accounts meeting” means the general meeting of the company before

which the company’s annual accounts for the financial year are to belaid; and

“existing director” means a person who is a director of the companyimmediately before that meeting.

418 Quoted companies: offences in connection with procedure for approval

(1) In the event of default in complying with section 417(1) (notice to be given ofresolution for approval of directors’ remuneration report), an offence iscommitted by every officer of the company who is in default.

(2) If the resolution is not put to the vote of the accounts meeting, an offence iscommitted by each existing director.

(3) It is a defence for a person charged with an offence under subsection (2) toprove that he took all reasonable steps for securing that the resolution was putto the vote of the meeting.


(5) In this section—“the accounts meeting” means the general meeting of the company before

which the company’s annual accounts for the financial year are to belaid; and

“existing director” means a person who is a director of the companyimmediately before that meeting.

CHAPTER 11

FILING OF ACCOUNTS AND REPORTS

Duty to file accounts and reports

419 Duty to file accounts and reports with the registrar

(1) The directors of a company must deliver to the registrar for each financial yearthe accounts and reports required by—

section 422 (filing obligations of companies subject to small companiesregime),

section 423 (filing obligations of medium-sized companies),section 424 (filing obligations of unquoted companies), orsection 425 (filing obligations of quoted companies).

(2) This is subject to section 426 (unlimited companies exempt from filingobligations).

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420 Period allowed for filing accounts

(1) The period allowed for delivering accounts and reports to the registrar is—(a) for a private company, nine months after the end of the relevant

accounting reference period, and(b) for a public company, six months after the end of that period.

This is subject to the following provisions of this section.

(2) If the relevant accounting reference period is the company’s first and is aperiod of more than twelve months, the period allowed is—

(a) nine months or six months, as the case may be, from the firstanniversary of the incorporation of the company, or

(b) three months after the end of the accounting reference period,whichever last expires.

(3) If the relevant accounting period is treated as shortened by virtue of a noticegiven by the company under section 365 (alteration of accounting referencedate), the period allowed for delivering accounts and reports is—

(a) that applicable in accordance with the above provisions or(b) three months from the date of the notice under that section,

whichever last expires.

(4) If for any special reason the Secretary of State thinks fit he may, on anapplication made before the expiry of the period otherwise allowed, by noticein writing to a company extend that period by such further period as may bespecified in the notice.

(5) In this section “the relevant accounting reference period” means the accountingreference period by reference to which the financial year for the accounts inquestion was determined.

421 Calculation of period allowed

(1) This section applies for the purposes of calculating the period allowed for filingaccounts and reports (“the period allowed”), which is expressed as a specifiednumber of months from a specified date or after the end of a specified previousperiod.

(2) Subject to the following provisions, the period allowed ends with the date inthe appropriate month corresponding to the specified date or the last day of thespecified previous period.

(3) If the specified date, or the last day of the specified previous period, is the lastday of a month, the period allowed ends with the last day of the appropriatemonth (whether or not that is the corresponding date).

(4) If—(a) the specified date, or the last day of the specified previous period, is not

the last day of a month but is the 29th or 30th, and(b) the appropriate month is February,

the period allowed ends with the last day of February.

(5) “The appropriate month” means the month that is the specified number ofmonths after the month in which the specified date, or the end of the specifiedprevious period, falls.

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Filing obligations of different descriptions of company

422 Filing obligations of companies subject to small companies regime

(1) The directors of a company subject to the small companies regime—(a) must deliver to the registrar for each financial year a copy of a balance

sheet drawn up as at the last day of that year, and(b) may also deliver to the registrar—

(i) a copy of the company’s profit and loss account for that year,and

(ii) a copy of the directors’ report for that year.

(2) The directors must also deliver to the registrar a copy of the auditor’s report onthose accounts (and on the directors’ report).

(3) Subsection (2) does not apply if the company is exempt from audit and thedirectors have taken advantage of that exemption.If the company is exempt from audit by virtue of section 459 (small charities:accountant’s report in lieu of audit), a copy of the accountant’s report for thepurposes of that section must be delivered instead.

(4) The copies of accounts and reports delivered to the registrar must be copies ofthe company’s annual accounts and reports, except that where the companyprepares Companies Act accounts—

(a) the directors may deliver to the registrar a copy of a balance sheetdrawn up in accordance with regulations made by the Secretary ofState, and

(b) there may be omitted from the copy profit and loss account deliveredto the registrar such items as may be specified by the regulations.

These are referred to in this Part as “abbreviated accounts”.

(5) If abbreviated accounts are delivered to the register the obligation to deliver acopy of the auditor’s report on the accounts is to deliver a copy of the specialauditor’s report required by section 427.

(6) The copies of the balance sheet and directors’ report delivered to the registrarunder this section must state the name of the person who signed it on behalf ofthe board.

423 Filing obligations of medium-sized companies

(1) The directors of a company that qualifies as a medium-sized company inrelation to a financial year (see sections 443 to 445) must deliver to the registrara copy of—

(a) the company’s annual accounts, and(b) the directors’ report.

(2) They must also deliver to the registrar a copy of the auditor’s report on thoseaccounts (and on the directors’ report).This does not apply if the company is exempt from audit and the directors havetaken advantage of that exemption.

(3) Where the company prepares Companies Act accounts, the directors maydeliver to the registrar a copy of the company’s annual accounts for thefinancial year—

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(a) that includes a profit and loss account in which items are combined inaccordance with regulations made by the Secretary of State, and

(b) that does not contain items whose omission is authorised by theregulations.

These are referred to in this Part as “abbreviated accounts”.

(4) If abbreviated accounts are delivered to the register the obligation to deliver acopy of the auditor’s report on the accounts is to deliver a copy of the specialauditor’s report required by section 427.


424 Filing obligations of unquoted companies

(1) The directors of an unquoted company must deliver to the registrar for eachfinancial year of the company a copy of—

(a) the company’s annual accounts, and(b) the directors’ report.

(2) The directors must also deliver to the registrar a copy of the auditor’s report onthose accounts (and the directors’ report).This does not apply if the company is exempt from audit and the directors havetaken advantage of that exemption.


(4) This section does not apply to companies within—(a) section 422 (filing obligations of companies subject to the small

companies regime), or(b) section 423 (filing obligations of medium-sized companies).

425 Filing obligations of quoted companies

(1) The directors of a quoted company must deliver to the registrar for eachfinancial year of the company a copy of—

(a) the company’s annual accounts,(b) the directors’ remuneration report,(c) the directors’ report, and(d) the operating and financial review.

(2) They must also deliver a copy of the auditor’s report on those accounts (and onthe directors’ remuneration report, the directors’ report and the operating andfinancial review).

(3) The copies of the balance sheet, the directors’ remuneration report, thedirectors’ report and the operating and financial review delivered to theregistrar under this section must state the name of the person who signed it onbehalf of the board.

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426 Unlimited companies exempt from obligation to file accounts

(1) The directors of an unlimited company are not required to deliver accountsand reports to the registrar in respect of a financial year if the followingconditions are met.

(2) The conditions are that at no time during the relevant accounting referenceperiod—

(a) has the company been, to its knowledge, a subsidiary undertaking of anundertaking which was then limited, or

(b) have there been, to its knowledge, exercisable by or on behalf of two ormore undertakings which were then limited, rights which if exercisableby one of them would have made the company a subsidiaryundertaking of it, or

(c) has the company been a parent company of an undertaking which wasthen limited.

The references above to an undertaking being limited at a particular time areto an undertaking (under whatever law established) the liability of whosemembers is at that time limited.

(3) The exemption conferred by this section does not apply if—(a) the company is a banking or insurance company or the parent company

of a banking or insurance group, or(b) the company is a qualifying company within the meaning of the

Partnerships and Unlimited Companies (Accounts) Regulations 1993(S.I. 1993/1820).

(4) Where a company is exempt by virtue of this section from the obligation todeliver accounts—

(a) section 412(3) (requirements in connection with publication of statutoryaccounts: meaning of “statutory accounts”) has effect with thesubstitution for the words “as required to be delivered to the registrarunder section 419” of the words “as prepared in accordance with thisPart and approved by the board of directors”; and

(b) section 413(1)(b) (requirements in connection with publication of non-statutory accounts: statement whether statutory accounts delivered)has effect with the substitution for the words from “whether statutoryaccounts” to “have been delivered to the registrar” of the words “thatthe company is exempt from the requirement to deliver statutoryaccounts”.

Requirements where abbreviated accounts delivered

427 Special auditor’s report where abbreviated accounts delivered

(1) This section applies where the directors of a company deliver to the registrarcopies of accounts (“abbreviated accounts”) prepared in accordance withregulations under—

section 422 (filing obligations of companies subject to small companiesregime), or

section 423 (filing obligations of medium-sized companies),and the company is not exempt from audit (or the directors have not takenadvantage of any such exemption).

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(2) The directors must also deliver to the registrar a copy of a special report of thecompany’s auditor stating that in his opinion—

(a) the company is entitled to deliver abbreviated accounts in accordancewith the section in question, and

(b) the abbreviated accounts to be delivered are properly prepared inaccordance with regulations under that section.

(3) The auditor’s report on the company’s annual accounts need not be delivered,but—

(a) if that report was qualified, the special report must set out that reportin full together with any further material necessary to understand thequalification, and

(b) if that report contained a statement under—(i) section 486(2)(a) or (b) (accounts, records or returns inadequate

or accounts not agreeing with records and returns), or(ii) section 486(3) (failure to obtain necessary information and

explanations),the special report must set out that statement in full.

(4) The provisions of—sections 491 to 493 (signature of auditor’s report), andsections 494 to 496 (offences in connection with auditor’s report)

apply to a special report under this section as they apply to an auditor’s reporton the company’s annual accounts prepared under Chapter 4 or 5.

(5) If abbreviated accounts are delivered to the registrar, the references in section412 or 413 (requirements in connection with publication of accounts) to theauditors’ report on the company’s annual accounts shall be read as referencesto the special auditors’ report required by this section.

428 Approval and signing of abbreviated accounts

(1) Abbreviated accounts prepared in accordance with regulations under—(a) section 422 (filing obligations of companies subject to the small

companies regime), or(b) section 423 (filing obligations of medium-sized companies),

must be approved by the board of directors and signed on behalf of the boardby a director of the company.

(2) The signature must be on the balance sheet.

(3) The balance sheet must contain in a prominent position above the signature astatement to the effect that it is prepared in accordance with the specialprovisions of this Act relating (as the case may be) to companies subject to thesmall companies regime or to medium-sized companies.

(4) If abbreviated accounts are approved that do not comply with therequirements of regulations under the relevant section, every director of thecompany who—

(a) knew that they did not comply, or was reckless as to whether theycomplied, and

(b) failed to take reasonable steps to prevent them from being approved,commits an offence.

(5) A person guilty of an offence under subsection (4) is liable—

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(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum.

Failure to file accounts and reports

429 Default in filing accounts and reports: offences

(1) If the requirements of section 419 (duty to file accounts and reports) are notcomplied with before the end of the period allowed for filing accounts andreports, every person who immediately before the end of that period was adirector of the company commits an offence.

(2) It is a defence for a person charged with such an offence to prove that he tookall reasonable steps for securing that those requirements would be compliedwith before the end of that period.

(3) It is not a defence to prove that the documents in question were not in factprepared as required by this Part.


430 Default in filing accounts and reports: court order

(1) If—(a) the requirements of section 419 (duty to file accounts and reports) are

not complied with before the end of the period allowed for filingaccounts and reports, and

(b) the directors of the company fail to make good the default within 14days after the service of a notice on them requiring compliance,

the court may, on the application of any member or creditor of the company orof the registrar, make an order directing the directors (or any of them) to makegood the default within such time as may be specified in the order.

(2) The court’s order may provide that all costs (in Scotland, expenses) of andincidental to the application are to be borne by the directors.

431 Civil penalty for failure to file accounts and reports

(1) Where the requirements of section 419 are not complied with before the end ofthe period allowed for filing accounts and reports, the company is liable to acivil penalty.This is in addition to any liability of the directors under section 429.

(2) The amount of the penalty shall be determined in accordance with regulationsmade by the Secretary of State by reference to—

(a) the length of the period between the end of the period allowed for filingaccounts and reports and the day on which the requirements arecomplied with, and

(b) whether the company is a private or public company.

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(3) The penalty may be recovered by the registrar and is to be paid into theConsolidated Fund.

(4) It is not a defence in proceedings under this section to prove that thedocuments in question were not in fact prepared as required by this Part.

(5) Regulations under this section having the effect of increasing the penaltypayable in any case are subject to affirmative resolution procedure.Otherwise, the regulations are subject to negative resolution procedure.

CHAPTER 12

REVISION OF DEFECTIVE ACCOUNTS AND REPORTS

Voluntary revision

432 Voluntary revision of accounts etc

(1) If it appears to the directors of a company that—(a) the company’s annual accounts,(b) the directors’ remuneration report, the directors’ report or the

operating and financial review, or(c) a summary financial statement of the company,

did not comply with the requirements of this Act (or, where applicable, ofArticle 4 of the IAS Regulation), they may prepare revised accounts or a revisedreport, review or statement.

(2) Where copies of the previous accounts, report or review have been sent out tomembers, delivered to the registrar or (in the case of a public company) laidbefore the company in general meeting, the revisions must be confined to—

(a) the correction of those respects in which the previous accounts, reportor review did not comply with the requirements of this Act (or, whereapplicable, of Article 4 of the IAS Regulation), and

(b) the making of any necessary consequential alterations.

(3) The Secretary of State may make provision by regulations as to the applicationof the provisions of this Act in relation to—

(a) revised annual accounts,(b) a revised directors’ remuneration report, directors’ report or operating

and financial review, or(c) a revised summary financial statement.

(4) The regulations may, in particular—(a) make different provision according to whether the previous accounts,

report, review or statement are replaced or are supplemented by adocument indicating the corrections to be made;

(b) make provision with respect to the functions of the company’s auditoror reporting accountant in relation to the revised accounts, report,review or statement;

(c) require the directors to take such steps as may be specified in theregulations where the previous accounts, report or review have been—

(i) sent out to members and others under section 399,(ii) laid before the company in general meeting, or

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(iii) delivered to the registrar,or where a summary financial statement containing informationderived from the previous accounts, report or review has been sent tomembers under section 402;

(d) apply the provisions of this Act (including those creating criminaloffences) subject to such additions, exceptions and modifications as arespecified in the regulations.


Secretary of State’s notice

433 Secretary of State’s notice in respect of accounts or reports

(1) This section applies where—(a) copies of a company’s annual accounts, directors’ report or operating

and financial review have been sent out under section 399, or(b) a copy of a company’s annual accounts, directors’ report or operating

and financial review has been delivered to the registrar or (in the caseof a public company) laid before the company in general meeting,

and it appears to the Secretary of State that there is, or may be, a questionwhether the accounts, report or review comply with the requirements of thisAct (or, where applicable, of Article 4 of the IAS Regulation).

(2) The Secretary of State may give notice to the directors of the companyindicating the respects in which it appears that such a question arises or mayarise.

(3) The notice must specify a period of not less than one month for the directors togive an explanation of the accounts, report or review or prepare revisedaccounts or a revised report or review.

(4) If at the end of the specified period, or such longer period as the Secretary ofState may allow, it appears to the Secretary of State that the directors havenot—

(a) given a satisfactory explanation of the accounts, report or review, or(b) revised the accounts, report or review so as to comply with the

requirements of this Act (or, where applicable, of Article 4 of the IASRegulation),

the Secretary of State may apply to the court.

(5) The provisions of this section apply equally to revised annual accounts, reviseddirectors’ reports and revised operating and financial reviews, in which casethey have effect as if the references to revised accounts, reports or reviews werereferences to further revised accounts, reports or reviews.

Application to court

434 Application to court in respect of defective accounts or reports

(1) An application may be made to the court—(a) by the Secretary of State, after having complied with section 433, or(b) by a person authorised by the Secretary of State for the purposes of this

section,

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for a declaration (in Scotland, a declarator) that the annual accounts of acompany do not comply, or a directors’ report or operating and financialreview does not comply, with the requirements of this Act (or, whereapplicable, of Article 4 of the IAS Regulation) and for an order requiring thedirectors of the company to prepare revised accounts or a revised report orreview.

(2) Notice of the application, together with a general statement of the matters atissue in the proceedings, shall be given by the applicant to the registrar forregistration.

(3) If the court orders the preparation of revised accounts, it may give directionsas to—

(a) the auditing of the accounts,(b) the revision of any directors’ remuneration report, directors’ report or

summary financial statement, and(c) the taking of steps by the directors to bring the making of the order to

the notice of persons likely to rely on the previous accounts,and such other matters as the court thinks fit.

(4) If the court orders the preparation of a revised directors’ report or a revisedoperating and financial review it may give directions as to—

(a) the review of the directors’ report or operating and financial review bythe auditors,

(b) the revision of any directors’ report, directors’ remuneration report,operating and financial review or summary financial statement,

(c) the taking of steps by the directors to bring the making of the order tothe notice of persons likely to rely on the previous report or review, and

(d) such other matters as the court thinks fit.

(5) If the court finds that the accounts, report or review did not comply with therequirements of this Act (or, where applicable, of Article 4 of the IASRegulation) it may order that all or part of—

(a) the costs (in Scotland, expenses) of and incidental to the application,and

(b) any reasonable expenses incurred by the company in connection withor in consequence of the preparation of revised accounts or a revisedreport or review,

are to be borne by such of the directors as were party to the approval of thedefective accounts, report or review.For this purpose every director of the company at the time of the approval ofthe accounts, report or review shall be taken to have been a party to theapproval unless he shows that he took all reasonable steps to prevent thatapproval.

(6) Where the court makes an order under subsection (5) it shall have regard towhether the directors party to the approval of the defective accounts, report orreview knew or ought to have known that the accounts, report or review didnot comply with the requirements of this Act (or, where applicable, of Article4 of the IAS Regulation), and it may exclude one or more directors from theorder or order the payment of different amounts by different directors.

(7) On the conclusion of proceedings on an application under this section, theapplicant must send to the registrar for registration a copy of the court order

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or, as the case may be, give notice to the registrar that the application has failedor been withdrawn.

(8) The provisions of this section apply equally to revised annual accounts, reviseddirectors’ reports and revised operating and financial reviews, in which casethey have effect as if the references to revised accounts, reports or reviews werereferences to further revised accounts, reports or reviews.

435 Other persons authorised to apply to the court

(1) The Secretary of State may by order (an “authorisation order”) authorise for thepurposes of section 434 any person appearing to him—

(a) to have an interest in, and to have satisfactory procedures directed tosecuring, compliance by companies with the requirements of this Act(or, where applicable, of Article 4 of the IAS Regulation) relating toaccounts, directors’ reports and operating and financial reviews,

(b) to have satisfactory procedures for receiving and investigatingcomplaints about companies’ annual accounts, directors’ reports andoperating and financial reviews, and

(c) otherwise to be a fit and proper person to be authorised.

(2) A person may be authorised generally or in respect of particular classes of case,and different persons may be authorised in respect of different classes of case.

(3) The Secretary of State may refuse to authorise a person if he considers that hisauthorisation is unnecessary having regard to the fact that there are one ormore other persons who have been or are likely to be authorised.

(4) If the authorised person is an unincorporated association, proceedings broughtin, or in connection with, the exercise of any function by the association as anauthorised person may be brought by or against the association in the name ofa body corporate whose constitution provides for the establishment of theassociation.

(5) An authorisation order may contain such requirements or other provisionsrelating to the exercise of functions by the authorised person as appear to theSecretary of State to be appropriate.No such order is to be made unless it appears to the Secretary of State that theperson would, if authorised, exercise his functions as an authorised person inaccordance with the provisions proposed.

(6) Where authorisation is revoked, the revoking order may make such provisionas the Secretary of State thinks fit with respect to pending proceedings.

(7) An order under this section is subject to negative resolution procedure.

436 Disclosure of information by tax authorities

(1) The Commissioners for Her Majesty’s Revenue and Customs may discloseinformation to a person authorised under section 435 for the purpose offacilitating—

(a) the taking of steps by that person to discover whether there are groundsfor an application to the court under section 434 (application in respectof defective accounts etc), or

(b) a decision by the authorised person whether to make such anapplication.

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(2) This section applies despite any statutory or other restriction on the disclosureof information.Provided that, in the case of personal data within the meaning of the DataProtection Act 1998 (c. 29), information is not to be disclosed in contraventionof that Act.

(3) Information disclosed to an authorised person under this section—(a) may not be used except in or in connection with—

(i) taking steps to discover whether there are grounds for anapplication to the court under section 434, or

(ii) deciding whether or not to make such an application,or in, or in connection with, proceedings on such an application; and

(b) must not be further disclosed except—(i) to the person to whom the information relates, or

(ii) in, or in connection with, proceedings on any such applicationto the court.

(4) A person who contravenes subsection (3) commits an offence unless—(a) he did not know, and had no reason to suspect, that the information

had been disclosed under this section, or(b) he took all reasonable steps and exercised all due diligence to avoid the

commission of the offence.




(ii) in Scotland or Northern Ireland, to imprisonment for a term notexceeding three months, or to a fine not exceeding the statutorymaximum (or both).

Power of authorised person to require documents etc

437 Power of authorised person to require documents, information and explanations

(1) This section applies where it appears to a person who is authorised undersection 435 that there is, or may be, a question whether a company’s annualaccounts, directors’ report or operating and financial review comply with therequirements of this Act (or, where applicable, of Article 4 of the IASRegulation).

(2) The authorised person may require any of the persons mentioned in subsection(3) to produce any document, or to provide him with any information orexplanations, that he may reasonably require for the purpose of—

(a) discovering whether there are grounds for an application to the courtunder section 434, or

(b) deciding whether to make such an application.

(3) Those persons are—

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(a) the company;(b) any officer, employee, or auditor of the company;(c) any persons who fell within paragraph (b) at a time to which the

document or information required by the authorised person relates.

(4) If a person fails to comply with such a requirement, the authorised person mayapply to the court.

(5) If it appears to the court that the person has failed to comply with arequirement under subsection (2), it may order the person to take such steps asit directs for securing that the documents are produced or the information orexplanations are provided.

(6) A statement made by a person in response to a requirement under subsection(2) or an order under subsection (5) may not be used in evidence against himin any criminal proceedings.

(7) Nothing in this section compels any person to disclose documents orinformation in respect of which a claim to legal professional privilege (inScotland, to confidentiality of communications) could be maintained in legalproceedings.

(8) In this section “document” includes information recorded in any form.

438 Restrictions on disclosure of information obtained under compulsory powers

(1) This section applies to information (in whatever form) obtained in pursuanceof a requirement or order under section 437 (power of authorised person torequire documents etc) that relates to the private affairs of an individual or toany particular business.

(2) No such information may, during the lifetime of that individual or so long asthat business continues to be carried on, be disclosed without the consent ofthat individual or the person for the time being carrying on that business.

(3) This does not apply—(a) to disclosure permitted by section 439 (permitted disclosure of

information obtained under compulsory powers), or(b) to the disclosure of information that is or has been available to the

public from another source.

(4) A person who discloses information in contravention of this section commitsan offence, unless—

(a) he did not know, and had no reason to suspect, that the informationhad been disclosed under section 437, or

(b) he took all reasonable steps and exercised all due diligence to avoid thecommission of the offence.




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439 Permitted disclosure of information obtained under compulsory powers

(1) The prohibition in section 438 of the disclosure of information obtained inpursuance of a requirement or order under section 437 (power of authorisedperson to require documents etc) that relates to the private affairs of anindividual or to any particular business has effect subject to the followingexceptions.

(2) It does not apply to the disclosure of information for the purpose of facilitatingthe carrying out by the authorised person of his functions under section 434.

(3) It does not apply to disclosure to—(a) the Secretary of State,(b) the Department of Enterprise, Trade and Investment for Northern

Ireland,(c) the Treasury,(d) the Bank of England,(e) the Financial Services Authority, or(f) the Commissioners of Revenue and Customs.

(4) It does not apply to disclosure—(a) for the purpose of assisting a body designated by an order under

section 46 of the Companies Act 1989 (c. 40) (delegation of functions ofthe Secretary of State) to exercise its functions under Part 2 of that Act;

(b) with a view to the institution of, or otherwise for the purposes of,disciplinary proceedings relating to the performance by an accountantor auditor of his professional duties;

(c) for the purpose of enabling or assisting the Secretary of State or theTreasury to exercise any of their functions under any of the following—

(i) the Companies Acts,(ii) the insider dealing legislation,

(iii) the Insolvency Act 1986 (c. 45) or the Insolvency (NorthernIreland) Order 1989,

(iv) the Company Directors Disqualification Act 1986 (c. 46) or theCompany Directors Disqualification (Northern Ireland) Order2002,

(v) the Financial Services and Markets Act 2000 (c. 8);(d) for the purpose of enabling or assisting the Department of Enterprise,

Trade and Investment for Northern Ireland to exercise any powersconferred on it by the enactments relating to companies, directors’disqualification or insolvency;

(e) for the purpose of enabling or assisting the Bank of England to exerciseits functions;

(f) for the purpose of enabling or assisting the Commissioners of Revenueand Customs to exercise their functions;

(g) for the purpose of enabling or assisting the Financial Services Authorityto exercise its functions under any of the following—

(i) the legislation relating to friendly societies or to industrial andprovident societies,

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(ii) the Building Societies Act 1986 (c. 53),(iii) Part 7 of the Companies Act 1989 (c. 40),(iv) the Financial Services and Markets Act 2000 (c. 8); or

(h) in pursuance of any Community obligation.

(5) It does not apply to disclosure to a body exercising functions of a public natureunder legislation in any country or territory outside the United Kingdom thatappear to the authorised person to be similar to his functions under section 434for the purpose of enabling or assisting that body to exercise those functions.

(6) In determining whether to disclose information to a body in accordance withsubsection (5), the authorised person must have regard to the followingconsiderations—

(a) whether the use which the body is likely to make of the information issufficiently important to justify making the disclosure;

(b) whether the body has adequate arrangements to prevent theinformation from being used or further disclosed other than—

(i) for the purposes of carrying out the functions mentioned in thatsubsection, or

(ii) for other purposes substantially similar to those for whichinformation disclosed to the authorised person could be used orfurther disclosed.

440 Power to amend categories of permitted disclosure

(1) The Secretary of State may by order amend section 439(3), (4) and (5).

(2) An order under this section must not—(a) amend subsection (3) of that section (UK public authorities) by

specifying a person unless the person exercises functions of a publicnature (whether or not he exercises any other function);

(b) amend subsection (4) of that section (purposes for which disclosurepermitted) by adding or modifying a description of disclosure unlessthe purpose for which the disclosure is permitted is likely to facilitatethe exercise of a function of a public nature;

(c) amend subsection (5) of that section (overseas regulatory authorities)so as to have the effect of permitting disclosures to be made to a bodyother than one that exercises functions of a public nature in a countryor territory outside the United Kingdom.


CHAPTER 13


Accounting and reporting standards

441 Accounting standards

(1) In this Part “accounting standards” means statements of standard accountingpractice issued by such body or bodies as may be prescribed by regulations.

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(2) References in this Part to accounting standards applicable to a company’sannual accounts are to such standards as are, in accordance with their terms,relevant to the company’s circumstances and to the accounts.

(3) Regulations under this section may contain such transitional and othersupplementary and incidental provisions as appear to the Secretary of State tobe appropriate.

442 Reporting standards

(1) In this Part, “reporting standards” means statements of standard reportingpractice that—

(a) relate to operating and financial reviews, and(b) are issued by a body or bodies specified by order of the Secretary of

State.

(2) References in this Part to relevant reporting standards, in relation to acompany’s operating and financial review, are to such standards as are, inaccordance with their terms, applicable to the company’s circumstances and tothe review.

(3) Where or to the extent that the directors of a company have complied with areporting standard, they are presumed (unless the contrary is proved) to havecomplied with the corresponding requirements of this Part relating to thecontents of an operating and financial review.


(5) The Secretary of State may make provision by regulations—(a) for the issuing by a body or bodies specified by order of the Secretary

of State of standards in relation to matters to be contained in reportswhich are required by this Part to be prepared by the directors of acompany;

(b) for directors of a company who have complied with any such standard,or any of its provisions, in relation to any such report, to be presumed(unless the contrary is proved) to have complied with any requirementsof this Part relating to the contents of the report to which the standardor provision relates.

(6) Any such regulations are subject to negative resolution procedure.

Companies qualifying as medium-sized

443 Companies qualifying as medium-sized: general

(1) A company qualifies as medium-sized in relation to a financial year if thequalifying conditions are met—

(a) in the case of the company’s first financial year, in that year, and(b) in the case of any subsequent financial year, in that year and the

preceding year.

(2) A company is treated as qualifying as medium-sized in relation to a financialyear (other than its first financial year)—

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(3) The qualifying conditions are met by a company in a year in which it satisfiestwo or more of the following requirements—

(4) For a period that is a company’s financial year but not in fact a year themaximum figures for turnover must be proportionately adjusted.

(5) The balance sheet total means the aggregate of the amounts shown as assets inthe company’s balance sheet.

(6) The number of employees means the average number of persons employed bythe company in the year, determined as follows—

(a) find for each month in the financial year the number of personsemployed under contracts of service by the company in that month(whether throughout the month or not),

(b) add together the monthly totals, and(c) divide by the number of months in the financial year.

(7) This section is subject to section 444 (companies qualifying as medium-sized:parent companies).

444 Companies qualifying as medium-sized: parent companies

(1) A parent company qualifies as a medium-sized company in relation to afinancial year only if the group headed by it qualifies as a medium-sized group.

(2) A group qualifies as medium-sized in relation to a financial year if thequalifying conditions are met—

(a) in the case of the parent company’s first financial year, in that year, and (b) in the case of any subsequent financial year, in that year and the

preceding year.

(3) A group is treated as qualifying as medium-sized in relation to a financial year(other than the parent company’s first financial year)—


1. Turnover Not more than £22.8 million

2. Balance sheet total Not more than £11.4 million

3. Number of employees Not more than 250

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(4) The qualifying conditions are met by a group in a year in which it satisfies twoor more of the following requirements—

(5) The aggregate figures are ascertained by aggregating the relevant figuresdetermined in accordance with section 355 for each member of the group.

(6) In relation to the aggregate figures for turnover and balance sheet total—“net” means after any set-offs and other adjustments made to eliminate

group transactions—(a) in the case of Companies Act accounts, in accordance with

regulations under section 377,(b) in the case of IAS accounts, in accordance with international

accounting standards; and“gross” means without those set-offs and other adjustments.

A company may satisfy the relevant requirements on the basis of either the netor the gross figure.

(7) The figures for each subsidiary undertaking shall be those included in itsindividual accounts for the relevant financial year, that is—

(a) if its financial year ends with that of the parent company, that financialyear, and

(b) if not, its financial year ending last before the end of the financial yearof the parent company.

If those figures cannot be obtained without disproportionate expense or unduedelay, the latest available figures shall be taken.

445 Companies excluded from being treated as medium-sized

(1) A company is not entitled to take advantage of any of the provisions of this Partrelating to companies qualifying as medium-sized if it was at any time withinthe financial year in question—

(a) a public company,(b) a company that—

(i) has permission under Part 4 of the Financial Services andMarkets Act 2000 (c. 8) to carry on a regulated activity, or

(ii) carries on insurance market activity, or(c) a member of an ineligible group.

1. Aggregate turnover Not more than £22.8 million net (or£27.36 million gross)

2. Aggregate balance sheet total Not more than £11.4 million net (or£13.68 million gross)

3. Aggregate number of employees Not more than 250

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trading on a regulated market, or(c) a person who—

(i) has permission under Part 4 of the Financial Services andMarkets Act 2000 (c. 8) to carry on a regulated activity, or


Other supplementary provisions

446 Preparation and filing of accounts in euros

(1) The amounts set out in the annual accounts of a company may also be shownin the same accounts translated into euros.

(2) When complying with section 419 (duty to file accounts and reports), thedirectors of a company may deliver to the registrar an additional copy of thecompany’s annual accounts in which the amounts have been translated intoeuros.

(3) In both cases—(a) the amounts must have been translated at the exchange rate prevailing

on the date to which the balance sheet is made up, and(b) that rate must be disclosed in the notes to the accounts.

(4) For the purposes of sections 412 and 413 (requirements in connection withpublished accounts) any additional copy of the company’s annual accountsdelivered to the registrar under subsection (2) above shall be treated asstatutory accounts of the company.In the case of such a copy, references in those sections to the auditor’s reporton the company’s annual accounts shall be read as references to the auditor’sreport on the annual accounts of which it is a copy.

447 Power to apply provisions to banking partnerships

(1) The Secretary of State may by regulations apply to banking partnerships,subject to such exceptions, adaptations and modifications as he considersappropriate, the provisions of this Part (and of regulations made under thisPart) applying to banking companies.

(2) A “banking partnership” means a partnership which has permission underPart 4 of the Financial Services and Markets Act 2000.But a partnership is not a banking partnership if it has permission to acceptdeposits only for the purpose of carrying on another regulated activity inaccordance with that permission.

(3) Expressions used in this section that are also used in the provisions regulatingactivities under the Financial Services and Markets Act 2000 have the samemeaning here as they do in those provisions.See section 22 of that Act, orders made under that section and Schedule 2 tothat Act.


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448 Meaning of “annual accounts” and related expressions

(1) In this Part a company’s “annual accounts”, in relation to a financial year,means—

(a) the company’s individual accounts for that year (see section 367), and(b) any group accounts prepared by the company for that year (see sections

371 and 372).This is subject to section 381 (option to omit individual profit and loss accountfrom annual accounts where information given in group accounts).

(2) In the case of an unquoted company, its “annual accounts and reports” for afinancial year are—

(a) its annual accounts,(b) the directors’ report, and(c) the auditor’s report on those accounts and the directors’ report (unless

the company is exempt from audit).

(3) In the case of a quoted company, its “annual accounts and reports” for afinancial year are—

(a) its annual accounts,(b) the directors’ remuneration report,(c) the directors’ report,(d) the operating and financial review, and(e) the auditor’s report on those accounts, on the auditable part of the

directors’ remuneration report and on the directors’ report.

(4) Where the directors of a company take advantage of the exemption conferredby section 459 (small charities: accountant’s report in lieu of audit), thereferences in this section to the auditor’s report shall be read as references tothe report made for the purposes of section 459.

449 Notes to the accounts

(1) Information required by this Part to be given in notes to a company’s annualaccounts may be contained in the accounts or in a separate document annexedto the accounts.

(2) References in this Part to a company’s annual accounts, or to a balance sheet orprofit and loss account, include notes to the accounts giving information whichis required by any provision of this Act or international accounting standards,and required or allowed by any such provision to be given in a note tocompany accounts.

450 Parliamentary procedure for certain regulations under this Part

(1) This section applies to regulations under the following provisions of thisPart—

section 369 (Companies Act individual accounts),section 377 (Companies Act group accounts),section 382 (information about related undertakings),section 385 (information about directors’ benefits: remuneration,

pensions and compensation for loss of office),section 389 (contents of directors’ report: general),section 394 (contents of operating and financial review),

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section 397 (contents of directors’ remuneration report),section 422 (filing obligations of companies subject to small companies

regime),section 423 (filing obligations of medium-sized companies)

(2) Any such regulations may make consequential amendments or repeals in otherprovisions of this Act, or in other enactments.

(3) Regulations that—(a) restrict the classes of company which have the benefit of any

exemption, exception or special provision,(b) require additional matter to be included in a document of any class, or(c) otherwise render the requirements of this Part more onerous,

are subject to affirmative resolution procedure.

(4) Otherwise, the regulations are subject to negative resolution procedure.


(1) In this Part—“group” means a parent undertaking and its subsidiary undertakings;“IAS Regulation” means EC Regulation No. 1606/2002 of the European

Parliament and of the Council of 19 July 2002 on the application ofinternational accounting standards;

“included in the consolidation”, in relation to group accounts, or“included in consolidated group accounts”, means that the undertakingis included in the accounts by the method of full (and not proportional)consolidation, and references to an undertaking excluded fromconsolidation shall be construed accordingly;

“insurance market activity” has the meaning given in section 316(3) of theFinancial Services and Markets Act 2000 (c. 8);

“international accounting standards” means the international accountingstandards, within the meaning of the IAS Regulation, adopted fromtime to time by the European Commission in accordance with thatRegulation;

“listing rules” has the same meaning as in Part 6 of the Financial Servicesand Markets Act 2000 (see section 73A of that Act);

“profit and loss account”, in relation to a company that prepares IASaccounts, includes an income statement or other equivalent financialstatement required to be prepared by international accountingstandards;

“regulated activity” has the meaning given in section 22 of the FinancialServices and Markets Act 2000, except that it does not include activitiesof the kind specified in any of the following provisions of the FinancialServices and Markets Act 2000 (Regulated Activities) Order 2001—

(a) article 25A (arranging regulated mortgage contracts),(b) article 39A (assisting administration and performance of a

contract of insurance),(c) article 53A (advising on regulated mortgage contracts), or(d) article 21 (dealing as agent), article 25 (arranging deals in

investments) or article 53 (advising on investments) where theactivity concerns relevant investments that are not contractually

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based investments (within the meaning of article 3 of thatOrder);

“regulated market” has the same meaning as in Directive 2004/39 of theEuropean Parliament and the Council of 21 April 2004 on markets infinancial instruments;

“turnover”, in relation to a company, means the amounts derived from theprovision of goods and services falling within the company’s ordinaryactivities, after deduction of—

(a) trade discounts,(b) value added tax, and(c) any other taxes based on the amounts so derived.

(2) In the case of an undertaking not trading for profit, any reference in this Partto a profit and loss account is to an income and expenditure account.References to profit and loss and, in relation to group accounts, to aconsolidated profit and loss account shall be construed accordingly.

PART 16

AUDIT

CHAPTER 1

REQUIREMENT FOR AUDITED ACCOUNTS

Requirement for audited accounts

452 Requirement for audited accounts

(1) A company’s annual accounts for a financial year must be audited inaccordance with this Part unless the company—

(a) is exempt from audit under—section 454 (small companies),section 457 (dormant companies), orsection 459 (charities: accountant’s report in lieu of audit);

or(b) is exempt from the requirements of this Part under section 468 (non-

profit-making companies subject to public sector audit).

(2) A company is not entitled to any such exemption unless its balance sheetcontains a statement by the directors to that effect.

(3) A company is not entitled to exemption under any of the provisions mentionedin subsection (1)(a) unless its balance sheet contains a statement by thedirectors to the effect that—

(a) the members have not required the company to obtain an audit of itsaccounts for the year in question in accordance with section 453, and

(b) the directors acknowledge their responsibilities for complying with therequirements of this Act with respect to accounting records and thepreparation of accounts.

(4) The statement required by subsection (2) or (3) must appear on the balancesheet above the signature required by section 387.

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453 Right of members to require audit

(1) The members of a company that would otherwise be entitled to exemptionfrom audit under any of the provisions mentioned in section 452(1)(a) may bynotice under this section require it to obtain an audit of its accounts for afinancial year.

(2) The notice must be given by—(a) members holding not less in total than 10% in nominal value of the

company’s issued share capital, or any class of it, or(b) if the company does not have a share capital, not less than 10% in

number of the members of the company.

(3) The notice may not be given before the financial year to which it relates andmust be given not later than one month before the end of that year.

Exemption from audit: small companies

454 Small companies: conditions for exemption from audit

(1) A company that meets the following conditions in respect of a financial year isexempt from the requirements of this Act relating to the audit of accounts forthat year.

(2) The conditions are—(a) that the company qualifies as a small company in relation to that year,(b) that its turnover in that year is not more than £5.6 million, and(c) that its balance sheet total for that year is not more than £2.8 million.

(3) In relation to a company that is a charity, for the condition in subsection (2)(b)substitute the condition that its gross income for the year is not more than£90,000.

(4) For a period which is a company’s financial year but not in fact a year themaximum figures for turnover or gross income shall be proportionatelyadjusted.

(5) For the purposes of this section—(a) whether a company qualifies as a small company shall be determined

in accordance with section 355(1) to (6),(b) “balance sheet total” has the same meaning as in that section, and(c) “gross income” means the company’s income from all sources, as

shown in the company’s income and expenditure account.

(6) This section has effect subject to—section 452((2) (balance sheet to contain statement that company entitled

to exemption under this section),section 453 (right of members to require audit),section 455 (companies excluded from small companies exemption), andsection 456 (availability of small companies exemption in case of group

company).

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455 Companies excluded from small companies exemption

(1) A company is not entitled to the exemption conferred by section 454 (smallcompanies) if it was at any time within the financial year in question—


(i) has permission under Part 4 of the Financial Services andMarkets Act 2000 (c. 8) to carry on a regulated activity,

(ii) carries on insurance market activity, or(iii) is an appointed representative within the meaning of section 39

of that Act (other than an appointed representative whose scopeof appointment is limited to activities that are not regulatedactivities for the purposes of this Part),

(c) a special register body as defined in section 117(1) of the Trade Unionand Labour Relations (Consolidation) Act 1992 (c. 52) or an employers’association as defined in section 122 of that Act or Article 4 of theIndustrial Relations (Northern Ireland) Order 1992, or

(d) a member of an ineligible group.





456 Availability of small companies exemption in case of group company

(1) A company is not entitled to the exemption conferred by section 454 (smallcompanies) in respect of a financial year during any part of which it was agroup company unless—

(a) the conditions specified in subsection (2) below are met, or(b) subsection (3) applies.

(2) The conditions are—(a) that the group—

(i) qualifies as a small group in relation to that financial year, and(ii) was not at any time in that year an ineligible group,

(b) that the group’s aggregate turnover in that year is—(i) in the case of a company registered in England and Wales or

Northern Ireland that is a charity, not more than £700,000 net (or£840,000 gross), and

(ii) in the case of a company registered in Scotland that is a charity,of such amount as may be specified by regulations under theCharities and Trustee Investment (Scotland) Act 2005 (asp 10);

(iii) in any other case, not more than £5.6 million net (or £6.72million gross), and

(c) that the group’s aggregate balance sheet total for that year is not morethan £2.8 million net (or £3.36 million gross).

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(3) A company is not excluded by subsection (1) if, throughout the whole of theperiod or periods during the financial year when it was a group company, itwas both a subsidiary undertaking and dormant.

(4) In this section—(a) “group company” means a company that is a parent company or a

subsidiary undertaking, and(b) “the group”, in relation to a group company, means that company

together with all its associated undertakings.For this purpose undertakings are associated if one is a subsidiary undertakingof the other or both are subsidiary undertakings of a third undertaking.

(5) For the purposes of this section—(a) whether a group qualifies as small shall be determined in accordance

with section 356 (qualifying conditions for small companies accountsregime),

(b) “ineligible group” has the meaning given by section 357(2);(c) a group’s aggregate turnover and aggregate balance sheet total shall be

determined as for the purposes of section 356;(d) “net” and “gross” have the same meaning as in that section.

(6) The provisions mentioned in subsection (5) apply for the purposes of thissection as if all the bodies corporate in the group were companies.

Exemption from audit: dormant companies

457 Dormant companies: conditions for exemption from audit

(1) A company is exempt from the requirements of this Act relating to the audit ofaccounts in respect of a financial year if—

(a) it has been dormant since its formation, or(b) it has been dormant since the end of the previous financial year and the

following conditions are met.

(2) The conditions are that the company—(a) as regards its individual accounts for the financial year in question—

(i) is entitled to prepare accounts in accordance with the smallcompanies regime (see sections 354 to 357), or

(ii) would be so entitled but for having been a public company or amember of an ineligible group, and

(b) is not required to prepare group accounts for that year.

(3) This section has effect subject to—section 452(2) (balance sheet to contain statement that company entitled

to exemption under this section),section 453 (right of members to require audit), andsection 458 (companies excluded from dormant companies exemption.

458 Companies excluded from dormant companies exemption

A company is not entitled to the exemption conferred by section 457 (dormantcompanies) if it was at any time within the financial year in question acompany that—

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(a) has permission under Part 4 of the Financial Services and Markets Act2000 (c. 8) to carry on a regulated activity, or

(b) carries on insurance market activity.

Exemption from audit: certain charities

459 Small charities: accountant’s report in lieu of audit

(1) A company that is a charity is exempt from the requirements of this Actrelating to the audit of accounts in respect of a financial year if—

(a) it meets the conditions set out in subsection (2) below, and(b) the directors cause a report in respect of the company’s individual

accounts for that year to be prepared in accordance with section 462and made to the company’s members.

(2) The conditions referred to above are that—(a) the company qualifies as a small company in relation to that year;(b) its balance sheet total for that year is—

(i) in the case of a company registered in England and Wales orNorthern Ireland, not more than £1.4 million, and

(ii) in the case of a company registered in Scotland, of such amountas may be specified by regulations under the Charities andTrustee Investment (Scotland) Act 2005 (asp 10);

(c) its gross income in that year is—(i) in the case of a company registered in England and Wales or

Northern Ireland, more than £90,000 but not more than£250,000, and

(ii) in the case of a company registered in Scotland, of such amountas may be specified by regulations under the Charities andTrustee Investment (Scotland) Act 2005.

(3) For a period which is a company’s financial year but not in fact a year themaximum figure for gross income shall be proportionately adjusted.

(4) For the purposes of this section—(a) whether a company qualifies as a small company shall be determined

in accordance with section 355(1) to (6);(b) “balance sheet total” has the same meaning as in that section, and(c) “gross income” means the company’s income from all sources, as

shown in the company’s income and expenditure account.

(5) This section has effect subject to—section 452((2) (balance sheet to contain statement that company entitled

to exemption under this section),section 453 (right of members to require audit),section 460 (companies excluded from report exemption), andsection 461 (availability of report exemption in case of group company).

460 Companies excluded from report exemption

(1) A company is not entitled to the exemption conferred by section 459 (charities:accountant’s report in lieu of audit) if it was at any time within the financialyear in question—

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(i) has permission under Part 4 of the Financial Services andMarkets Act 2000 (c. 8) to carry on a regulated activity,

(ii) carries on insurance market activity, or(iii) is an appointed representative within the meaning of section 39

of that Act (other than an appointed representative whose scopeof appointment is limited to activities that are not regulatedactivities for the purposes of this Part),

(c) a special register body as defined in section 117(1) of the Trade Unionand Labour Relations (Consolidation) Act 1992 (c. 52) or an employers’association as defined in section 122 of that Act or Article 4 of theIndustrial Relations (Northern Ireland) Order 1992, or

(d) a member of an ineligible group.





461 Availability of report exemption in case of group company

(1) A company is not entitled to the exemption conferred by section 459 (charities:accountant’s report in lieu of audit) in respect of a financial year during anypart of which it was a group company unless—

(a) the conditions specified in subsection (2) below are met, or(b) subsection (3) applies.

(2) The conditions are—(a) that the group—

(i) qualifies as a small group in relation to that financial year, and(ii) was not at any time in that year an ineligible group,

(b) that the group’s aggregate turnover in that year is—(i) in the case of a company registered in England and Wales or

Northern Ireland, not more than £700,000 net (or £840,000gross), and

(ii) in the case of a company registered in Scotland, of such amountas may be specified by regulations under the Charities andTrustee Investment (Scotland) Act 2005 (asp 10);

(c) that the group’s aggregate balance sheet total for that year is—(i) in the case of a company registered in England and Wales or

Northern Ireland, not more than £2.8 million net (or £3.36million gross), and

(ii) in the case of a company registered in Scotland, of such amountas may be specified by regulations under the Charities andTrustee Investment (Scotland) Act 2005.

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(3) A company is not excluded by subsection (1) if, throughout the whole of theperiod or periods during the financial year when it was a group company, itwas both a subsidiary undertaking and dormant.

(4) In this section—(a) “group company” means a company that is a parent company or a

subsidiary undertaking, and(b) “the group”, in relation to a group company, means that company

together with all its associated undertakings.For this purpose undertakings are associated if one is a subsidiary undertakingof the other or both are subsidiary undertakings of a third undertaking.

(5) For the purposes of this section—(a) whether a group qualifies as a small group shall be determined in

accordance with section 356(2) (conditions for small companiesaccounts regime),

(b) “ineligible group” has the meaning given by section 357;(c) a group’s aggregate turnover and aggregate balance sheet total shall be

determined as for the purposes of section 356, and(d) “net” and “gross” have the same meaning as in that section.

(6) The provisions mentioned in subsection (5) apply for the purposes of thissection as if all the bodies corporate in the group were companies.

462 The accountant’s report

(1) The report required for the purposes of section 459 (charities: accountant’sreport in lieu of audit) is a report that—

(a) is prepared by a person (the “reporting accountant”) who meets therequirements of section 463, and

(b) complies with the following provisions.

(2) The report must state whether in the opinion of the reporting accountant—(a) the accounts of the company for the financial year in question are in

agreement with the accounting records kept by the company, and(b) having regard only to, and on the basis of, the information contained in

those accounting records, those accounts have been drawn up in amanner consistent with the relevant provisions of this Act.

(3) The relevant provisions of this Act means the provisions specified for thepurposes of this section by regulations made by the Secretary of State, so far asare applicable to the company.

(4) The report must also state that in the opinion of the reporting accountant,having regard only to, and on the basis of, the information contained in theaccounting records kept by the company, the company is entitled to exemptionfrom audit under section 459.

(5) The report must state the name of the reporting accountant and be signed anddated—

(a) where the reporting accountant is an individual, by him;(b) where the reporting accountant is a firm, by a person authorised to sign

on its behalf.


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463 The reporting accountant

(1) The reporting accountant must be—(a) a member of a qualifying body who, under the rules of the body—

(i) is entitled to engage in public practice, and(ii) is not ineligible for appointment as a reporting accountant, or

(b) a person who—(i) is subject to the rules of a qualifying body in seeking

appointment or acting as company auditor, and(ii) under those rules, is eligible for such appointment.

(2) An individual or a firm may be appointed as reporting accountant.

(3) The references in subsection (1) to the rules of a qualifying body are to the rules(whether or not laid down by the body itself) which the body has power toenforce and which are relevant for the purposes of Part 33 (statutory auditors)or this section.They include rules relating to the admission and expulsion of members of thebody, so far as relevant for the purposes of that Part or this section.

(4) In this section “qualifying body” means—(a) the Institute of Chartered Accountants in England and Wales,(b) the Institute of Chartered Accountants of Scotland,(c) the Institute of Chartered Accountants in Ireland,(d) the Association of Chartered Certified Accountants,(e) the Association of Authorised Public Accountants.(f) the Association of Accounting Technicians,(g) the Association of International Accountants,(h) the Chartered Institute of Management Accountants, or(i) the Institute of Chartered Secretaries and Administrators.

(5) A person must not be appointed as reporting accountant unless he meets theindependence requirement in section 465.


(1) This section applies where a partnership that is not a legal person under thelaw by which it is governed is appointed as reporting accountant.

(2) Unless a contrary intention appears, the appointment is of the partnership assuch and not of the partners.


(a) any partnership that succeeds to the practice of that partnership, or(b) any other person who succeeds to that practice having previously

carried it on in partnership.

(4) For the purposes of subsection (3)—(a) a partnership is regarded as succeeding to the practice of another

partnership only if the members of the successor partnership aresubstantially the same as those of the former partnership, and

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(b) a partnership or other person is regarded as succeeding to the practiceof a partnership only if it or he succeeds to the whole or substantiallythe whole of the business of the former partnership.

(5) Where the partnership ceases and the appointment is not treated undersubsection (3) as extending to any partnership or other person, theappointment may with the consent of the company be treated as extending toa partnership, or other person, who succeeds to—

(a) the business of the former partnership, or(b) such part of it as is agreed by the company is to be treated as comprising

the appointment.


(1) A person may not be appointed as reporting accountant—(a) if he is—

(i) an officer or employee of the company, or(ii) a partner or employee of such a person, or a partnership of

which such a person is a partner;(b) if he is—

(i) an officer or employee of an associated undertaking of thecompany, or

(ii) a partner or employee of such a person, or a partnership ofwhich such a person is a partner;

(c) if there exists between—(i) the person or an associate of his, and

(ii) the company or an associated undertaking of the company,a connection of any such description as may be specified by regulationsmade by the Secretary of State.

(2) An auditor of the company is not regarded as an officer or employee of thecompany for this purpose.

(3) In this section— “associated undertaking” means—

(a) a parent undertaking or subsidiary undertaking of the companyperson, or

(b) a subsidiary undertaking of a parent undertaking of thecompany; and

“associate” has the meaning given by section 466.



(1) This section defines “associate” for the purposes of section 465 (independencerequirement).

(2) In relation to an individual, “associate” means—(a) that individual’s spouse or civil partner or minor child or step-child,(b) any body corporate of which that individual is a director, and(c) any employee or partner of that individual.

(3) In relation to a body corporate, “associate” means—

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(a) any body corporate of which that body is a director,(b) any body corporate in the same group as that body, and(c) any employee or partner of that body or of any body corporate in the

same group.

(4) In relation to a partnership that is a legal person under the law by which it isgoverned, “associate” means—


(5) In relation to a partnership that is not a legal person under the law by which itis governed “associate” means any person who is an associate of any of thepartners.

(6) In this section, in relation to a limited liability partnership, for “director” read“member”.

467 Rights of reporting accountant

Where the directors of a company take advantage of the exemption conferredby section 459 (small charities: accountant’s report in lieu of audit), sections 487to 489 (auditor’s rights to information) have effect in relation to the reportingaccountant as they would in relation to an auditor.

Companies subject to public sector audit

468 Non-profit-making companies subject to public sector audit

(1) The requirements of this Part as to audit of accounts do not apply to a companyfor a financial year if it is non-profit-making and its accounts—

(a) are subject to audit—(i) by the Comptroller and Auditor General by virtue of an order

under section 25(6) of the Government Resources and AccountsAct 2000 (c. 20), or

(ii) by the Auditor General for Wales by virtue of section 96 of theGovernment of Wales Act 1998 (c. 38);

(b) are accounts—(i) in relation to which section 21 of the Public Finance and

Accountability (Scotland) Act 2000 (asp 1) (audit of accounts:Auditor General for Scotland) applies, or

(ii) that are subject to audit by the Auditor General for Scotland byvirtue of an order under section 469 (Scottish public sectorcompanies: audit by Auditor General for Scotland); or

(c) are subject to audit by the Comptroller and Auditor General forNorthern Ireland by virtue of an order under Article 5(3) of the Auditand Accountability (Northern Ireland) Order 2003 (S.I. 2003/418(N.I. 5)).

(2) In the case of a company that is a parent company or a subsidiary undertaking,subsection (1) applies only if every group undertaking is non-profit-making.

(3) In this section “non-profit-making” has the same meaning as in Article 48 of theTreaty establishing the European Community.

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(4) This section has effect subject to section 452(2) (balance sheet to containstatement that company entitled to exemption under this section).

469 Scottish public sector companies: audit by Auditor General for Scotland

(1) The Scottish Ministers may by order provide for the accounts of a companyhaving its registered office in Scotland to be audited by the Auditor General forScotland.

(2) An order under subsection (1) may be made in relation to a company only if itappears to the Scottish Ministers that the company—

(a) exercises in or as regards Scotland functions of a public nature none ofwhich relate to reserved matters (within the meaning of the ScotlandAct 1998 (c. 46)), or

(b) is entirely or substantially funded from a body having accounts fallingwithin paragraph (a) or (b) of subsection (3).

(3) Those accounts are—(a) accounts in relation to which section 21 of the Public Finance and

Accountability (Scotland) Act 2000 (asp 1) (audit of accounts: AuditorGeneral for Scotland) applies,

(b) accounts which are subject to audit by the Auditor General for Scotlandby virtue of an order under this section.

(4) An order under subsection (1) may make such supplementary or consequentialprovision (including provision amending an enactment) as the ScottishMinisters think expedient.

(5) An order under subsection (1) shall not be made unless a draft of the statutoryinstrument containing it has been laid before, and approved by resolution of,the Scottish Parliament.

CHAPTER 2

APPOINTMENT OF AUDITORS

Private companies

470 Appointment of auditors of private company: general

(1) An auditor or auditors of a private company must be appointed before the endof each period for appointing auditors unless the directors reasonably resolveotherwise on the ground that audited accounts are unlikely to be required forthe financial year in question.

(2) The members of a private company may appoint an auditor or auditors byordinary resolution—

(a) during the period for appointing auditors,(b) if the company should have appointed an auditor or auditors during

the period for appointing auditors but failed to do so, or(c) where the directors have power to appoint under subsection (3) but

have failed to do so.

(3) The directors of a private company may appoint an auditor or auditors of thecompany—

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(a) at any time before the company’s first period for appointing auditors,(b) following a period during which the company (being exempt from

audit) did not have any auditor, at any time before the company’s nextperiod for appointing auditors, or

(c) to fill a casual vacancy in the office of auditor.

(4) An auditor or auditors of a private company may only be appointed—(a) in accordance with this section, or(b) in accordance with section 471 (default power of Secretary of State).

471 Appointment of auditors of private company: default power of Secretary of State

(1) If a private company fails to appoint an auditor or auditors in accordance withsection 470(1), the Secretary of State may appoint one or more persons to fill thevacancy.

(2) In such a case the company must within one week of the end of the period forappointing auditors give notice to the Secretary of State of his power havingbecome exercisable.

(3) If a company fails to give the notice required by this section, an offence iscommitted by—



472 Period for appointing auditors

The “period for appointing auditors”, in relation to a private company, is theperiod of 28 days beginning with—

(a) the end of the period allowed for sending out copies of the company’saccounts and reports (see section 400), or

(b) if earlier the day on which copies of the company’s accounts andreports are sent out under section 399.

473 Term of office of auditors of private company

(1) An auditor or auditors of a private company hold office in accordance with theterms of their appointment, subject to the requirements that—

(a) they do not take office until any previous auditor or auditors cease tohold office, and

(b) they cease to hold office at the end of the next period for appointingauditors unless re-appointed.

(2) An auditor of a private company is deemed to be re-appointed at the end of thenext period for appointing auditors, unless—

(a) he was appointed by the directors, or(b) the company’s articles require actual re-appointment, or

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(c) notice has been given in accordance with section 474 (notice bymembers excluding deemed re-appointment), or

(d) the directors have resolved that no auditor or auditors should beappointed for the financial year in question.

(3) This is without prejudice to the provisions of this Part as to removal andresignation of auditors.

(4) No account shall be taken of any loss of the opportunity of deemed re-appointment under this section in ascertaining the amount of anycompensation or damages payable to an auditor on his ceasing to hold officefor any reason.

474 Notice by members excluding deemed re-appointment

(1) The members of a company may give notice to the company that the auditor orauditors of the company should not be deemed to be re-appointed inaccordance with section 473(2).

(2) The notice must be given by members representing not less than the requisitepercentage of the total voting rights of all members who would be entitled tovote on a resolution to that effect at the time the notice is given.

(3) The “requisite percentage” is 5% or such lower percentage as is specified forthis purpose in the company’s articles.

(4) The notice must be given before the end of the accounting reference periodimmediately preceding the time when the deemed re-appointment wouldhave effect.

(5) The notice—(a) may be sent to the company in hard copy form or in electronic form,

and(b) must be authenticated by the members giving it.

(6) Where the notice consists of more than one copy of the notice —(a) the notice is authenticated if each copy is authenticated by the members

sending the copy,(b) the notice is validly given if each copy is to the same effect and

subsection (2) is satisfied by the copies of the notice taken together, and(c) the notice is given at the time at which the company receives the last

copy.

Public companies

475 Appointment of auditors of public company: general

(1) An auditor or auditors of a public company must be appointed before the endof each accounts meeting of the company unless the directors reasonablyresolve otherwise on the ground that audited accounts are unlikely to berequired for the financial year in question.

(2) The members of a public company may appoint an auditor or auditors byordinary resolution—

(a) at an accounts meeting,

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(b) if the company should have appointed an auditor or auditors at the lastaccounts meeting but failed to do so, or

(c) where the directors have power to appoint under subsection (3) buthave failed to do so.

(3) The directors of a public company may appoint an auditor or auditors of thecompany—

(a) at any time before the company’s first accounts meeting,(b) following a period during which the company (being exempt from

audit) did not have any auditor, at any time before the company’s nextaccounts meeting, or

(c) to fill a casual vacancy in the office of auditor.

(4) An auditor or auditors of a public company may only be appointed—(a) in accordance with this section, or(b) in accordance with section 476 (default power of Secretary of State).

476 Appointment of auditors of public company: default power of Secretary of State

(1) If a public company fails to appoint an auditor or auditors in accordance withsection 475(1), the Secretary of State may appoint one or more persons to fill thevacancy.

(2) In such a case the company must within one week of the end of the accountsmeeting give notice to the Secretary of State of his power having becomeexercisable.




477 Meaning of “accounts meeting”

“Accounts meeting”, in relation to a public company, means a meeting of thecompany at which the company’s annual accounts are, or are to be, laid inaccordance with Chapter 9 of Part 15.

478 Term of office of auditors of public company

(1) The auditor or auditors of a public company hold office in accordance with theterms of their appointment, subject to the requirements that—

(a) they do not take office until the previous auditor or auditors haveceased to hold office, and

(b) they cease to hold office at the conclusion of the accounts meeting nextfollowing their appointment, unless re-appointed.

(2) This is without prejudice to the provisions of this Part as to removal andresignation of auditors.

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General provisions

479 Fixing of auditor’s remuneration

(1) The remuneration of an auditor appointed by the members of a company mustbe fixed by the members by ordinary resolution or in such manner as themembers may by ordinary resolution determine.

(2) The remuneration of an auditor appointed by the directors of a company mustbe fixed by the directors.

(3) The remuneration of an auditor appointed by the Secretary of State must befixed by the Secretary of State.

(4) For the purposes of this section “remuneration” includes sums paid in respectof expenses.

(5) This section applies in relation to benefits in kind as to payments of money.

480 Disclosure of terms of audit appointment

(1) The Secretary of State may make provision by regulations for securing thedisclosure of the terms on which a company’s auditor is appointed,remunerated or performs his duties.Nothing in the following provisions of this section affects the generality of thispower.

(2) The regulations may—(a) require disclosure of—

(i) a copy of any terms that are in writing and (ii) a written memorandum setting out any terms that are not in

writing;(b) require disclosure to be at such times, in such places and by such means

as are specified in the regulations;(c) require the place and means of disclosure to be stated—

(i) in a note to the company’s annual accounts (in the case of itsindividual accounts) or in such manner as is specified in theregulations (in the case of group accounts),

(ii) in the directors’ report, or(iii) in the auditor’s report on the company’s annual accounts.

(3) The provisions of this section apply to a variation of the terms mentioned insubsection (1) as they apply to the original terms.


481 Disclosure of services provided by auditor or associates and related remuneration

(1) The Secretary of State may make provision by regulations for securing thedisclosure of—

(a) the nature of any services provided for a company by the company’sauditor (whether in his capacity as auditor or otherwise) or by hisassociates;

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(b) the amount of any remuneration received or receivable by a company’sauditor, or his associates, in respect of any such services.

Nothing in the following provisions of this section affects the generality of thispower.

(2) The regulations may provide—(a) for disclosure of the nature of any services provided to be made by

reference to any class or description of services specified in theregulations (or any combination of services, however described);

(b) for the disclosure of amounts of remuneration received or receivable inrespect of services of any class or description specified in theregulations (or any combination of services, however described);

(c) for the disclosure of separate amounts so received or receivable by thecompany’s auditor or any of his associates, or of aggregate amounts soreceived or receivable by all or any of those persons.

(3) The regulations may—(a) provide that “remuneration” includes sums paid in respect of expenses;(b) apply to benefits in kind as well as to payments of money, and require

the disclosure of the nature of any such benefits and their estimatedmoney value;

(c) apply to services provided for associates of a company as well as tothose provided for a company;

(d) define “associate” in relation to an auditor and a company respectively.

(4) The regulations may provide that any disclosure required by the regulations isto be made—

(a) in a note to the company’s annual accounts (in the case of its individualaccounts) or in such manner as is specified in the regulations (in thecase of group accounts),

(b) in the directors’ report, or(c) in the auditor’s report on the company’s annual accounts.

(5) If the regulations provide that any such disclosure is to be made as mentionedin subsection (4)(a) or (b), the regulations may—

(a) require the auditor to supply the directors of the company with anyinformation necessary to enable the disclosure to be made;

(b) provide for—sections 387(4) and (5) and section 392(3) and (4) (offences in

connection with approval of accounts or report), andany provision of Chapter 12 of Part 15 (revision of defective

accounts and reports),to apply in relation to a failure to make the disclosure as it applies inrelation to a failure to comply with a requirement of that Part.


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CHAPTER 3

FUNCTIONS OF AUDITOR

Auditors’ report

482 Auditor’s report on company’s annual accounts

(1) A company’s auditor must make a report to the company’s members on allannual accounts of the company of which copies are, during his tenure ofoffice—

(a) in the case of a private company, to be sent out to members undersection 399;

(b) in the case of a public company, to be laid before the company ingeneral meeting under section 415.

(2) The auditor’s report must include—(a) an introduction identifying the annual accounts that are the subject of

the audit and the financial reporting framework that has been appliedin their preparation, and

(b) a description of the scope of the audit identifying the auditingstandards in accordance with which the audit was conducted.

(3) The report must state clearly whether, in the auditor’s opinion, the annualaccounts—

(a) give a true and fair view—(i) in the case of an individual balance sheet, of the state of affairs

of the company as at the end of the financial year,(ii) in the case of an individual profit and loss account, of the profit

or loss of the company for the financial year,(iii) in the case of group accounts, of the state of affairs as at the end

of the financial year and of the profit or loss for the financialyear, of the undertakings included in the consolidation as awhole, so far as concerns members of the company;

(b) have been properly prepared in accordance with the relevant financialreporting framework; and

(c) have been prepared in accordance with the requirements of this Act(and, where applicable, Article 4 of the IAS Regulation).

(4) The auditor’s report—(a) must be either unqualified or qualified, and(b) must include a reference to any matters to which the auditor wishes to

draw attention by way of emphasis without qualifying the report.

483 Auditor’s report on directors’ report

The auditor must state in his report on the company’s annual accounts whetherin his opinion the information given in the directors’ report for the financialyear for which the accounts are prepared is consistent with those accounts.

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484 Auditor’s report on operating and financial review

If the company is a quoted company, the auditor must state in his report on thecompany’s annual accounts—

(a) whether in his opinion the information given in the operating andfinancial review for the financial year for which the accounts areprepared is consistent with those accounts, and

(b) whether any matters have come to his attention, in the performance ofhis functions as auditor of the company, which in his opinion areinconsistent with the information given in the operating and financialreview.

485 Auditor’s report on auditable part of directors’ remuneration report

(1) If the company is a quoted company, the auditor, in his report on thecompany’s annual accounts for the financial year, must—

(a) report to the company’s members on the auditable part of the directors’remuneration report, and

(b) state whether in his opinion that part of the directors’ remunerationreport has been properly prepared in accordance with this Act.

(2) For the purposes of this Part, “the auditable part” of a directors’ remunerationreport is the part identified as such by regulations under section 397.

Duties and rights of auditors

486 Duties of auditor

(1) A company’s auditor, in preparing his report, must carry out suchinvestigations as will enable him to form an opinion as to—

(a) whether proper accounting records have been kept by the companyand proper returns adequate for their audit have been received frombranches not visited by him, and

(b) whether the company’s individual accounts are in agreement with theaccounting records and returns, and

(c) in the case of a quoted company, whether the auditable part of thecompany’s directors’ remuneration report is in agreement with theaccounting records and returns.

(2) If the auditor is of opinion—(a) that proper accounting records have not been kept, or that proper

returns adequate for their audit have not been received from branchesnot visited by him, or

(b) that the company’s individual accounts are not in agreement with theaccounting records and returns, or

(c) in the case of a quoted company, that the auditable part of its directors’remuneration report is not in agreement with the accounting recordsand returns,

the auditor shall state that fact in his report.

(3) If the auditor fails to obtain all the information and explanations which, to thebest of his knowledge and belief, are necessary for the purposes of his audit, heshall state that fact in his report.

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(4) If—(a) the requirements of regulations under section 385 (disclosure of

directors’ benefits: remuneration, pensions and compensation for lossof office) are not complied with in the annual accounts, or

(b) in the case of a quoted company, the requirements of regulations undersection 397 as to information forming the auditable part of directors’remuneration report are not complied with in that report,

the auditor must include in his report, so far as he is reasonably able to do so,a statement giving the required particulars.

(5) If the directors of the company have prepared accounts and reports inaccordance with the small companies regime and in the auditor’s opinion theywere not entitled so to do, the auditor shall state that fact in his report.

487 Auditor’s general right to information

(1) An auditor of a company—(a) has a right of access at all times to the company’s books, accounts and

vouchers (in whatever form they are held), and(b) may require any of the following persons to provide him with such

information or explanations as he thinks necessary for the performanceof his duties as auditor.

(2) Those persons are—(a) any officer or employee of the company;(b) any person holding or accountable for any of the company’s books,

accounts or vouchers;(c) any subsidiary undertaking of the company which is a body corporate

incorporated in the United Kingdom;(d) any officer, employee or auditor of any such subsidiary undertaking or

any person holding or accountable for any books, accounts or vouchersof any such subsidiary undertaking;

(e) any person who fell within any of paragraphs (a) to (d) at a time towhich the information or explanations required by the auditor relatesor relate.

(3) A statement made by a person in response to a requirement under this sectionmay not be used in evidence against him in criminal proceedings exceptproceedings for an offence under section 489.

(4) Nothing in this section compels a person to disclose information in respect ofwhich a claim to legal professional privilege (in Scotland, to confidentiality ofcommunications) could be maintained in legal proceedings.

488 Auditor’s right to information from overseas subsidiaries

(1) Where a parent company has a subsidiary undertaking that is not a bodycorporate incorporated in the United Kingdom, the auditor of the parentcompany may require it to obtain from any of the following persons suchinformation or explanations as he may reasonably require for the purposes ofhis duties as auditor.

(2) Those persons are—(a) the undertaking;

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(b) any officer, employee or auditor of the undertaking;(c) any person holding or accountable for any of the undertaking’s books,

accounts or vouchers;(d) any person who fell within paragraph (b) or (c) at a time to which the

information or explanations relates or relate.

(3) If so required, the parent company must take all such steps as are reasonablyopen to it to obtain the information or explanations from the person concerned.

(4) A statement made by a person in response to a requirement under this sectionmay not be used in evidence against him in criminal proceedings exceptproceedings for an offence under section 489.

(5) Nothing in this section compels a person to disclose information in respect ofwhich a claim to legal professional privilege (in Scotland, to confidentiality ofcommunications) could be maintained in legal proceedings.

489 Auditor’s rights to information: offences

(1) A person commits an offence who knowingly or recklessly makes to an auditorof a company a statement (oral or written) that—

(a) conveys or purports to convey any information or explanations whichthe auditor requires, or is entitled to require, under section 487, and

(b) is misleading, false or deceptive in a material particular.




(ii) in Scotland or Northern Ireland, to imprisonment for a term notexceeding six months or to a fine not exceeding the statutorymaximum (or both).

(3) A person who fails to comply with a requirement under section 487 withoutdelay commits an offence unless it was not reasonably practicable for him toprovide the required information or explanations.

(4) If a parent company fails to comply with section 488, an offence is committedby—


(5) A person guilty of an offence under subsection (3) or (4) is liable on summaryconviction to a fine not exceeding level 3 on the standard scale.

(6) Nothing in this section affects any right of an auditor to apply for an injunctionto enforce any of his rights under section 487 or 488.

490 Auditor’s rights in relation to resolutions and meetings

(1) In relation to a written resolution proposed to be agreed to by a privatecompany, the company’s auditor is entitled to receive all such communications

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relating to the resolution as, by virtue of any provision of Chapter 2 of Part 13of this Act are required to be supplied to a member of the company.

(2) A company’s auditor is entitled—(a) to receive all notices of, and other communications relating to, any

general meeting which a member of the company is entitled to receive,(b) to attend any general meeting of the company, and(c) to be heard at any general meeting which he attends on any part of the

business of the meeting which concerns him as auditor.

(3) Where the auditor is a firm, the right to attend or be heard at a meeting isexercisable by an individual authorised by the firm in writing to act as itsrepresentative at the meeting.

Signature of auditor’s report

491 Signature of auditor’s report

The auditor’s report must state the name of the auditor and be signed anddated—

(a) where the auditor is an individual, by him;(b) where the auditor is a firm, by the senior statutory auditor.

492 Senior statutory auditor

(1) The senior statutory auditor means the individual identified by the firm assenior statutory auditor in relation to the audit in accordance with—

(a) standards issued by the European Commission, or(b) if there is no applicable standard so issued, any relevant guidance

issued by—(i) the Secretary of State, or

(ii) a body appointed by order of the Secretary of State.

(2) The person identified as senior statutory auditor must be qualified to beappointed as auditor of the company in question.

(3) The senior statutory auditor is not, by reason of his having signed the auditor’sreport, subject to any civil liability to which he would not otherwise be subject.

(4) An order appointing a body for the purpose of subsection (1)(b)(ii) is subject tonegative resolution procedure.

493 Name of auditor etc to be stated in published copies of auditor’s report.

(1) Every copy of the auditor’s report that is published by or on behalf of thecompany must state—

(a) the name of the auditor, and(b) if the auditor is a firm, the name of the senior statutory auditor,

subject to the following provisions of this section.

(2) For the purposes of this section a company is regarded as publishing the reportif it publishes, issues or circulates it or otherwise makes it available for publicinspection in a manner calculated to invite members of the public generally, orany class of members of the public, to read it.

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(3) The auditor’s name or the name of the senior statutory auditor need not bestated if the company—

(a) considering on reasonable grounds that the statement of the name inpublished copies of the report would create or be likely to create aserious risk that the auditor, the senior statutory auditor or any otherperson would be subject to violence or intimidation, has resolved thatthe name of the auditor or senior statutory auditor should not be sostated, and

(b) has given notice of the resolution given to the Secretary of State.

(4) The notice of the resolution must contain—(a) the name and registered number of the company to which the report

relates,(b) the financial year of the company to which the report relates,(c) the name of the audit firm, and(d) the name of the senior statutory auditor.

(5) Where the company has so resolved, and given notice to the Secretary of State,every copy of the auditor’s report that is published by or on behalf of thecompany must state that the company has resolved that the name of theauditor or senior statutory auditor should not be stated.

(6) If a copy of the auditor’s report is published without the required statement ofthe auditor’s or senior auditor’s name, or the statement required by subsection(5), an offence is committed by—



Offences in connection with auditor’s report

494 Offences in connection with auditor’s report

(1) A person to whom this section applies commits an offence if he knowingly orrecklessly causes a report under section 482 (auditor’s report on company’sannual accounts) to include any matter that is misleading, false or deceptive ina material particular.

(2) A person to whom this section applies commits an offence if he knowingly orrecklessly causes such a report to omit a statement required by—

(a) section 486(2) (statements that proper accounting records or returns notkept or received or not properly reflected in accounts etc.),

(b) section 486(3) (statement that necessary information and explanationsnot obtained),

(c) section 486(4) (statement of particulars in relation to directors’remuneration omitted from accounts etc.), or

(d) section 486(5) (statement that directors wrongly took advantage ofexemption from obligation to prepare group accounts).

(3) This section applies to—

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(a) where the auditor is an individual, that individual and any employeeor agent of his who is eligible for appointment as auditor of thecompany;

(b) where the auditor is a firm, any director, member, employee or agent ofthe firm who is eligible for appointment as auditor of the company.


maximum.

495 Guidance for regulatory and prosecuting authorities: England, Wales and Northern Ireland

(1) The Secretary of State may issue guidance for the purpose of helping relevantregulatory and prosecuting authorities to determine how they should carry outtheir functions in cases where behaviour occurs that—

(a) appears to involve the commission of an offence under section 494(offences in connection with auditors’ report), and

(b) has been, is being or may be investigated pursuant to arrangements—(i) under paragraph 15 of Schedule 10 (investigation of complaints

against auditors and supervisory bodies), or(ii) of a kind mentioned in paragraph 24 of that Schedule

(independent investigation for disciplinary purposes of publicinterest cases).

(2) The Secretary of State must obtain the consent of the Attorney General beforeissuing any such guidance.

(3) In this section “relevant regulatory and prosecuting authorities” means—(a) supervisory bodies within the meaning of Part 33 of this Act,(b) bodies to which the Secretary of State may make grants under section

16(1) of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004 (c. 27) (bodies concerned with accountingstandards etc),

(c) the Director of the Serious Fraud Office,(d) the Director of Public Prosecutions or the Director of Public

Prosecutions for Northern Ireland, and(e) the Secretary of State.

(4) This section does not apply to Scotland.

496 Guidance for regulatory authorities: Scotland

(1) The Lord Advocate may issue guidance for the purpose of helping relevantregulatory authorities to determine how they should carry out their functionsin cases where behaviour occurs that—

(a) appears to involve the commission of an offence under section 494(offences in connection with auditors’ report), and

(b) has been, is being or may be investigated pursuant to arrangements—(i) under paragraph 15 of Schedule 10 (investigation of complaints

against auditors and supervisory bodies), or

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(ii) of a kind mentioned in paragraph 24 of that Schedule(independent investigation for disciplinary purposes of publicinterest cases).

(2) The Lord Advocate must consult the Secretary of State before issuing any suchguidance.

(3) In this section “relevant regulatory authorities” means—(a) supervisory bodies within the meaning of Part 33 of this Act,(b) bodies to which the Secretary of State may make grants under section

16(1) of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004 (c. 27) (bodies concerned with accountingstandards etc), and

(c) the Secretary of State.

(4) This section applies only to Scotland.

CHAPTER 4

REMOVAL, RESIGNATION, ETC OF AUDITORS

Removal of auditor

497 Resolution removing auditor from office

(1) The members of a company may by ordinary resolution at any time remove anauditor from office.

(2) This power is exercisable only in accordance with section 498 (special notice ofresolution to remove auditor).

(3) Nothing in this section is to be taken as depriving the person removed ofcompensation or damages payable to him in respect of the termination—

(a) of his appointment as auditor or(b) of any appointment terminating with that as auditor.

(4) An auditor may not be removed from office before the expiration of his term ofoffice except by resolution under this section.

498 Special notice required for resolution removing auditor from office

(1) Special notice is required for a resolution at a general meeting of a companyremoving an auditor from office.

(2) On receipt of notice of such an intended resolution the company mustimmediately send a copy of it to the person proposed to be removed.

(3) The auditor proposed to be removed may make with respect to the intendedresolution representations in writing to the company (not exceeding areasonable length) and request their notification to members of the company.

(4) The company must (unless the representations are received by it too late for itto do so)—

(a) in any notice of the resolution given to members of the company, statethe fact of the representations having been made, and

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(b) send a copy of the representations to every member of the company towhom notice of the meeting is or has been sent.

(5) If a copy of any such representations is not sent out as required becausereceived too late or because of the company’s default, the auditor may (withoutprejudice to his right to be heard orally) require that the representations beread out at the meeting.

(6) Copies of the representations need not be sent out and the representations neednot be read at the meeting if, on the application either of the company or of anyother person claiming to be aggrieved, the court is satisfied that the rightsconferred by this section are being abused.The court may order the company’s costs (in Scotland, expenses) on theapplication to be paid in whole or in part by the auditor, notwithstanding thathe is not a party to the application.

499 Notice to registrar of resolution removing auditor from office

(1) Where a resolution is passed under section 497 (resolution removing auditorfrom office), the company must give notice of that fact to the registrar within14 days.


(a) the company, and(b) every officer of it who is in default.


500 Rights of auditor who has been removed from office

(1) An auditor who has been removed by resolution under section 497 has,notwithstanding his removal, the rights conferred by section 490(2) in relationto any general meeting of the company—

(a) at which his term of office would otherwise have expired, or(b) at which it is proposed to fill the vacancy caused by his removal.

(2) In such a case the references in that section to matters concerning the auditoras auditor shall be construed as references to matters concerning him as aformer auditor.

Failure to re-appoint auditor

501 Failure to re-appoint auditor: special procedure required for written resolution

(1) This section applies where a resolution is proposed as a written resolution of aprivate company whose effect would be to appoint a person as auditor in placeof a person (the “outgoing auditor”) whose term of office has expired, or is toexpire, at the end of the period for appointing auditors.

(2) The following provisions apply if—

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(a) no period for appointing auditors has ended since the outgoing auditorceased to hold office, or

(b) such a period has ended and an auditor or auditors should have beenappointed but were not.

(3) The company must send a copy of the proposed resolution to the personproposed to be appointed and to the outgoing auditor.

(4) The outgoing auditor may, within 14 days after receiving the notice, make withrespect to the proposed resolution representations in writing to the company(not exceeding a reasonable length) and request their circulation to members ofthe company.

(5) The company must circulate the representations together with the copy orcopies of the resolution circulated in accordance with section 268 (resolutionproposed by directors) or section 270 (resolution proposed by members).

(6) Where subsection (5) applies—(a) the period allowed under section 270(3) for service of copies of the

proposed resolution is 28 days instead of 21 days, and(b) the provisions of section 270(6) and (7) (offences) apply in relation to a

failure to comply with that subsection as in relation to a default incomplying with that section.

(7) Copies of the representations need not be circulated if, on the application eitherof the company or of any other person claiming to be aggrieved, the court issatisfied that the rights conferred by this section are being abused.The court may order the company’s costs (in Scotland, expenses) on theapplication to be paid in whole or in part by the auditor, notwithstanding thathe is not a party to the application.

(8) If any requirement of this section is not complied with, the resolution isineffective.

502 Failure to re-appoint auditor: special notice required for resolution at general meeting

(1) This section applies to a resolution at a general meeting of a company whoseeffect would be to appoint a person as auditor in place of a person (the“outgoing auditor”) whose term of office has ended, or is to end—

(a) in the case of a private company, at the end of the period for appointingauditors;

(b) in the case of a public company, at the end of the next accounts meeting.

(2) Special notice is required of such a resolution if—(a) in the case of a private company—

(i) no period for appointing auditors has ended since the outgoingauditor ceased to hold office, or

(ii) such a period has ended and an auditor or auditors should havebeen appointed but were not;

(b) in the case of a public company—(i) there has been no accounts meeting of the company since the

outgoing auditor ceased to hold office, or(ii) there has been an accounts meeting at which an auditor or

auditors should have been appointed but were not.

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(3) On receipt of notice of such an intended resolution the company shallforthwith send a copy of it to the person proposed to be appointed and to theoutgoing auditor.

(4) The outgoing auditor may make with respect to the intended resolutionrepresentations in writing to the company (not exceeding a reasonable length)and request their notification to members of the company.

(5) The company must (unless the representations are received by it too late for itto do so)—

(a) in any notice of the resolution given to members of the company, statethe fact of the representations having been made, and

(b) send a copy of the representations to every member of the company towhom notice of the meeting is or has been sent.

(6) If a copy of any such representations is not sent out as required becausereceived too late or because of the company’s default, the outgoing auditormay (without prejudice to his right to be heard orally) require that therepresentations be read out at the meeting.

(7) Copies of the representations need not be sent out and the representations neednot be read at the meeting if, on the application either of the company or of anyother person claiming to be aggrieved, the court is satisfied that the rightsconferred by this section are being abused.The court may order the company’s costs (in Scotland, expenses) on theapplication to be paid in whole or in part by the outgoing auditor,notwithstanding that he is not a party to the application.

Resignation of auditor

503 Resignation of auditor

(1) An auditor of a company may resign his office by depositing a notice in writingto that effect at the company’s registered office.

(2) The notice is not effective unless it is accompanied by the statement requiredby section 506.

(3) An effective notice of resignation operates to bring the auditor’s term of officeto an end as of the date on which the notice is deposited or on such later dateas may be specified in it.

504 Notice to registrar of resignation of auditor

(1) Where an auditor resigns the company must within 14 days of the deposit of anotice of resignation send a copy of the notice to the registrar of companies.

(2) If default is made in complying with this section, an offence is committed by—(a) the company, and(b) every officer of the company who is in default.

(3) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to a fine and, for continued contravention,

a daily default fine not exceeding one-tenth of the statutory maximum;

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(b) on summary conviction, to a fine not exceeding the statutory maximumand, for continued contravention, a daily default fine not exceedingone-tenth of the statutory maximum.

505 Rights of resigning auditor

(1) This section applies where an auditor’s notice of resignation is accompanied bya statement of the circumstances connected with his resignation (see section506).

(2) He may deposit with the notice a signed requisition calling on the directors ofthe company forthwith duly to convene a general meeting of the company forthe purpose of receiving and considering such explanation of thecircumstances connected with his resignation as he may wish to place beforethe meeting.

(3) He may request the company to circulate to its members—(a) before the meeting convened on his requisition, or(b) before any general meeting at which his term of office would otherwise

have expired or at which it is proposed to fill the vacancy caused by hisresignation,

a statement in writing (not exceeding a reasonable length) of the circumstancesconnected with his resignation.

(4) The company must (unless the statement is received too late for it to comply)—(a) in any notice of the meeting given to members of the company, state the

fact of the statement having been made, and(b) send a copy of the statement to every member of the company to whom

notice of the meeting is or has been sent.

(5) The directors must within 21 days from the date of the deposit of a requisitionunder this section proceed duly to convene a meeting for a day not more than28 days after the date on which the notice convening the meeting is given.

(6) If default is made in complying with subsection (5), every director who failedto take all reasonable steps to secure that a meeting was convened commits anoffence.

(7) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction to a fine not exceeding the statutory maximum.

(8) If a copy of the statement mentioned above is not sent out as required becausereceived too late or because of the company’s default, the auditor may (withoutprejudice to his right to be heard orally) require that the statement be read outat the meeting.

(9) Copies of a statement need not be sent out and the statement need not be readout at the meeting if, on the application either of the company or of any otherperson who claims to be aggrieved, the court is satisfied that the rightsconferred by this section are being abused.The court may order the company’s costs (in Scotland, expenses) on such anapplication to be paid in whole or in part by the auditor, notwithstanding thathe is not a party to the application.

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(10) An auditor who has resigned has, notwithstanding his resignation, the rightsconferred by section 490(2) in relation to any such general meeting of thecompany as is mentioned in subsection (3)(a) or (b) above.In such a case the references in that section to matters concerning the auditoras auditor shall be construed as references to matters concerning him as aformer auditor.

Statement by auditor on ceasing to hold office

506 Statement by auditor to be deposited with company

(1) Where an auditor of a unquoted company ceases for any reason to hold office,he must deposit at the company’s registered office a statement of thecircumstances connected with his ceasing to hold office, unless he considersthat there are no circumstances in connection with his ceasing to hold officethat need to be brought to the attention of members or creditors of thecompany.

(2) If he considers that there are no circumstances in connection with his ceasingto hold office that need to be brought to the attention of members or creditorsof the company, he must deposit at the company’s registered office a statementto that effect.

(3) Where an auditor of a quoted company ceases for any reason to hold office, hemust deposit at the company’s registered office a statement of thecircumstances connected with his ceasing to hold office.

(4) The statement required by this section must be deposited—(a) in the case of resignation, along with the notice of resignation;(b) in the case of failure to seek re-appointment, not less than 14 days

before the end of the time allowed for next appointing an auditor;(c) in any other case, not later than the end of the period of 14 days

beginning with the date on which he ceases to hold office.

(5) A person ceasing to hold office as auditor who fails to comply with this sectioncommits an offence.

(6) In proceedings for such an offence it is a defence for the person charged toshow that he took all reasonable steps and exercised all due diligence to avoidthe commission of the offence.


maximum.

507 Company’s duties in relation to statement

(1) This section applies where the statement deposited under section 506 states thecircumstances connected with the auditor’s ceasing to hold office.

(2) The company must within 14 days of the deposit of the statement either—(a) send a copy of it to every person who under section 399 is entitled to be

sent copies of the accounts, or(b) apply to the court.

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(3) If it applies to the court, the company must notify the auditor of theapplication.

(4) If the court is satisfied that the auditor is abusing the rights conferred bysection 506—

(a) it shall direct that copies of the statement need not be sent out, and(b) it may further order the company’s costs (in Scotland, expenses) on the

application to be paid in whole or in part by the auditor, even if he isnot a party to the application.

The company must within 14 days of the court’s decision send to the personsmentioned in subsection (2)(a) a statement setting out the effect of the order.

(5) If no such direction is made the company must send copies of the statement tothe persons mentioned in subsection (2)(a) within 14 days of the court’sdecision or, as the case may be, of the discontinuance of the proceedings.

(6) In the event of default in complying with this section an offence is committedby every officer of the company who is in default.



maximum.

508 Copy of statement to be sent to registrar

(1) Unless within 21 days beginning with the day on which he deposited thestatement under section 506 the auditor receives notice of an application to thecourt under section 507, he must within a further seven days send a copy of thestatement to the registrar.

(2) If an application to the court is made under section 507 and the auditorsubsequently receives notice under subsection (5) of that section, he mustwithin seven days of receiving the notice send a copy of the statement to theregistrar.

(3) An auditor who fails to comply with subsection (1) or (2) commits an offence.



maximum.

509 Copy of statement to be sent to appropriate audit authority

(1) This section applies—(a) in the case of a major audit, where an auditor ceases for any reason to

hold office;

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(b) in the case of an audit that is not a major audit, where an auditor ceasesto hold office before the end of his term of office.

(2) Where this section applies the auditor and the company must—(a) inform the appropriate audit authority, and(b) send to that authority a copy of the statement deposited by him at the

company’s registered office in accordance with section 506.

(3) The appropriate audit authority is—(a) in the case of a major audit, the Secretary of State or the body to whom

the Secretary of State has delegated functions under section 848 or 849;(b) in the case of an audit that is not a major audit, the relevant supervisory

body.

(4) If the statement deposited by the auditor at the company’s registered office isto the effect that he considers that there are no circumstances in connectionwith his ceasing to hold office that need to be brought to the attention ofmembers or creditors of the company, the copy of that statement sent to theappropriate audit authority must be accompanied by a statement of thereasons for his ceasing to hold office.

(5) The auditor and the company must send the statements required by thissection to the appropriate audit authority—

(a) in the case of a major audit, at the same time he is required to deposit astatement at the company’s registered office in accordance with section506;

(b) in the case of an audit that is not a major audit, at such time (not beingearlier than the time mentioned in paragraph (a)) as the appropriateaudit authority may require.

(6) In this section a “major audit” means a statutory audit conducted in respectof—

(a) a company any of whose securities have been admitted to the officiallist (within the meaning of Part 6 of the Financial Services and MarketsAct 2000 (c. 8)), or

(b) any other person in whose financial condition there is a major publicinterest.

In determining whether an audit is a major audit within paragraph (b), regardshall be had to any guidance issued by any of the authorities mentioned insubsection (3).

(7) A person ceasing to hold office as auditor who fails to comply with this sectioncommits an offence.

(8) If a company fails to comply with subsection (2) or (5), an offence is committedby—




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510 Information to be given to accounting authorities

(1) The appropriate audit authority under section 509—(a) must inform the accounting authorities, and(b) may if it thinks fit send to each of those authorities a copy of the

statement deposited by the auditor at the company’s registered officein accordance with section 506.

(2) The accounting authorities are—(a) the Secretary of State, and(b) any person authorised by the Secretary of State for the purposes of

section 434 (revision of defective accounts: persons authorised to applyto court).

(3) If either of the accounting authorities is also the appropriate audit authorityunder section 509 it is only necessary to comply with this section as regards anyother accounting authority.

(4) If the court has made an order under section 507(4) directing that copies of thestatement need not be sent out by the company, sections 438 and 439(restriction on further disclosure) apply in relation to the copies sent to theaccounting authorities as they apply to information obtained under section437(power to require documents etc).

Supplementary

511 Effect of casual vacancies

During a casual vacancy in the office of auditor, any surviving or continuingauditor or auditors may continue to act.

CHAPTER 5

QUOTED COMPANIES: RIGHT OF MEMBERS TO RAISE AUDIT CONCERNS AT ACCOUNTS MEETING

512 Members’ power to require website publication of audit concerns

(1) The members of a quoted company may require the company to publish on awebsite a statement setting out any matter relating to—

(a) the audit of the company’s accounts (including the auditor’s report andthe conduct of the audit) that are to be laid before the next accountsmeeting, or

(b) any circumstances connected with an auditor of the company ceasingto hold office since the previous accounts meeting,

that the members propose to raise at the next accounts meeting of thecompany.

(2) A company is required to do so once it has received requests from—

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(a) members representing at least 5% of the total voting rights of all themembers who have a relevant right to vote (excluding any voting rightsattached to any shares in the company held as treasury shares), or

(b) at least 100 members who have a relevant right to vote and hold sharesin the company on which there has been paid up an average sum, permember, of at least £100.

(3) In subsection (2) a “relevant right to vote” means a right to vote at the accountsmeeting.

(4) A request—(a) may be sent to the company in hard copy or electronic form,(b) must identify the statement to which it relates,(c) must be authenticated by the person or persons making it, and(d) must be received by the company at least one week before the meeting

to which it relates.

(5) A quoted company is not required to place on a website a statement under thissection if, on an application by the company or another person who claims tobe aggrieved, the court is satisfied that the rights conferred by this section arebeing abused.

(6) The court may order the members requesting website publication to pay thewhole or part of the company’s costs (in Scotland, expenses) on such anapplication, even if they are not parties to the application.


(1) The following provisions apply for the purposes of section 512 (websitepublication of members’ statement of audit concerns).



(4) The statement—(a) must be made available within three working days of the company

being required to publish it on a website, and(b) must be kept available until after the meeting to which it relates.

(5) A failure to make information available on a website throughout the periodspecified in subsection (4)(b) is disregarded if—



514 Website publication: company’s supplementary duties

(1) A quoted company must in the notice it gives of the accounts meeting drawattention to—

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(a) the possibility of a statement being placed on a website in pursuance ofmembers’ requests under section 512, and

(b) the effect of the following provisions of this section.

(2) A company may not require the members requesting website publication topay its expenses in complying with that section or section 513 (requirements inconnection with website publication).

(3) Where a company is required to place a statement on a website under section512 it must forward the statement to the company’s auditor not later than thetime when it makes the statement available on the website.

(4) Notwithstanding anything in the company’s articles, the business which maybe dealt with at the accounts meeting includes any statement that the companyhas been required under section 512 to publish on a website.

515 Website publication: offences

(1) In the event of default in complying with(a) section 513 (requirements as to website publication), or(b) section 514 (companies’ supplementary duties in relation to request for

website publication)an offence is committed by every officer of the company who is in default.


maximum.

CHAPTER 6

AUDITORS’ LIABILITY

Provisions protecting auditors from liability

516 Provisions protecting auditors from liability

(1) This section applies to any provision—(a) for exempting an auditor of a company (to any extent) from any

liability that would otherwise attach to him in connection with anynegligence, default, breach of duty or breach of trust in relation to thecompany, or

(b) by which a company directly or indirectly provides an indemnity (toany extent) for an auditor of the company, or of an associated company,against any liability attaching to him in connection with anynegligence, default, breach of duty or breach of trust in relation to thecompany of which he is auditor.

(2) Any such provision is void, except as permitted by—(a) section 517 (indemnity for costs of successfully defending

proceedings), or(b) sections 518 to 523 (liability limitation agreements).

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(3) This section applies to any provision, whether contained in a company’sarticles or in any contract with the company or otherwise.

(4) For the purposes of this section companies are associated if one is a subsidiaryof the other or both are subsidiaries of the same body corporate.

517 Indemnity for costs of successfully defending proceedings

Section 516 (general voidness of provisions protecting auditors from liability)does not prevent a company from indemnifying an auditor against any liabilityincurred by him—

(a) in defending proceedings (whether civil or criminal) in whichjudgment is given in his favour or he is acquitted, or

(b) in connection with an application under section 759 (power of court togrant relief in case of honest and reasonable conduct) in which relief isgranted to him by the court.

Liability limitation agreements

518 Liability limitation agreements

(1) A “liability limitation agreement” is an agreement that purports to limit theamount of a liability owed to a company by its auditor in respect of anynegligence, default, breach of duty or breach of trust, occurring in the course ofthe audit of accounts for a financial year specified in the agreement, of whichthe auditor may be guilty in relation to the company.

(2) Section 516 (general voidness of provisions protecting auditors from liability)does not affect the validity of a liability limitation agreement if the agreementhas been authorised by the members of the company in accordance withsection 519.

(3) A liability limitation agreement that has been so authorised—(a) is effective to the extent provided by section 520, and(b) is not subject to section 2(3) or 3(2)(b) of the Unfair Contract Terms Act

1977 (c. 50).

519 Authorisation of agreement by members of the company

(1) A liability limitation agreement between a private company and its auditormay be authorised—

(a) by the company passing a resolution, before it enters into theagreement, waiving the need for approval,

(b) by the company passing a resolution, before it enters into theagreement, approving the agreement’s principal terms, or

(c) by the company passing a resolution, after it enters into the agreement,approving the agreement.

(2) A liability limitation agreement between a public company and its auditor maybe authorised—

(a) by the company passing a resolution in general meeting, before it entersinto the agreement, approving the agreement’s principal terms, or

(b) by the company passing a resolution in general meeting, after it entersinto the agreement, approving the agreement.

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(3) The resolution required is an ordinary resolution, subject to any provision ofthe company’s articles requiring a higher majority (or unanimity).

(4) The “principal terms” of an agreement are terms specifying, or relevant to thedetermination of—

(a) the kind (or kinds) of acts or omissions covered,(b) the financial year in relation to which acts or omissions are covered, or(c) the amount to which the auditor’s liability is limited.

520 Effect of liability limitation agreement

(1) A liability limitation agreement is not effective to limit the auditor’s liability toless than such amount as is fair and reasonable in all the circumstances of thecase having regard to—

(a) the auditor’s responsibilities under this Part,(b) the nature and purpose of the auditor’s contractual obligations to the

company, and(c) the professional standards expected of him.

(2) A liability limitation agreement that purports to limit the auditor’s liability toless than the amount mentioned in subsection (1) shall have effect as if itlimited his liability to that amount.

521 Disclosure of agreement by company

(1) A company which has entered into a liability limitation agreement must makesuch disclosure in connection with the agreement as the Secretary of State mayrequire by regulations.

(2) The regulations may provide, in particular, that any disclosure required by theregulations shall be made—

(a) in a note to the company’s annual accounts (in the case of its individualaccounts) or in such manner as is specified in the regulations (in thecase of group accounts), or

(b) in the directors’ report.

(3) The regulations may make different provision for different cases.


522 Exclusion of agreements for more than one year

A liability limitation agreement is of no effect if it purports to apply in respectof acts or omissions occurring in the course of the audit of accounts for morethan one financial year.

523 Termination of agreement by members of company

(1) The members of a company may by ordinary resolution terminate the effect ofa liability limitation agreement in respect of an act or omission occurring aftera date specified in the resolution.

(2) A resolution under this section may be passed—(a) at the same time as a resolution under section 519 authorising the

agreement is passed, or

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(b) at any time after such a resolution has been passed.

(3) A resolution under this section does not affect the operation of the agreementin relation to an act or omission occurring—

(a) on or before the date on which the resolution is passed, or(b) after the beginning of the financial year to which the agreement relates.

(4) This section has effect notwithstanding anything in the agreement or in thecompany’s articles.

CHAPTER 7



(1) In this Part—“insurance market activity” has the meaning given in section 316(3) of the

Financial Services and Markets Act 2000 (c. 8);“qualified”, in relation to an auditor’s report (or a statement contained in

an auditor’s report), means that the report or statement does not statethe auditor’s unqualified opinion that the accounts have been properlyprepared in accordance with this Act or, in the case of an undertakingnot required to prepare accounts in accordance with this Act, under anycorresponding legislation under which it is required to prepareaccounts;

“regulated activity” has the meaning given in section 22 of the FinancialServices and Markets Act 2000, except that it does not include activitiesof the kind specified in any of the following provisions of the FinancialServices and Markets Act 2000 (Regulated Activities) Order 2001—

(a) article 25A (arranging regulated mortgage contracts),(b) article 39A (assisting administration and performance of a

contract of insurance),(c) article 53A (advising on regulated mortgage contracts), or(d) article 21 (dealing as agent), article 25 (arranging deals in

investments) or article 53 (advising on investments) where theactivity concerns relevant investments that are not contractuallybased investments (within the meaning of article 3 of thatOrder);

“regulated market” has the same meaning as in Directive 2004/39 of theEuropean Parliament and the Council of 21 April 2004 on markets infinancial instruments;

“turnover”, in relation to a company, means the amounts derived from theprovision of goods and services falling within the company’s ordinaryactivities, after deduction of—

(a) trade discounts,(b) value added tax, and(c) any other taxes based on the amounts so derived.

(2) In the case of an undertaking not trading for profit, any reference in this Partto a profit and loss account is to an income and expenditure account.References to profit and loss and, in relation to group accounts, to aconsolidated profit and loss account shall be construed accordingly.

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Chapter 1 — Prohibition of public offers by private companies

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PART 17

PRIVATE AND PUBLIC COMPANIES

CHAPTER 1

PROHIBITION OF PUBLIC OFFERS BY PRIVATE COMPANIES

525 Prohibition of public offers by private company

(1) A private company limited by shares or limited by guarantee and having ashare capital must not—

(a) offer to the public any securities of the company, or(b) allot or agree to allot any securities of the company with a view to their

being offered to the public.

(2) An allotment or agreement to allot securities is presumed to be made with aview to their being offered to the public if an offer of the securities (or any ofthem) to the public is made—

(a) within six months after the allotment or agreement to allot, or(b) before the receipt by the company of the whole of the consideration to

be received by it in respect of the securities.

(3) A company does not contravene this section if—(a) it acts in good faith in pursuance of arrangements under which it is to

re-register as a public company before the securities are allotted, or(b) as part of the terms of the offer it undertakes to re-register as a public

company within a specified period, and that undertaking is compliedwith.

(4) The specified period for the purposes of subsection (3)(b) must be a periodending not later than six months after the day on which the offer is made (or,in the case of an offer made on different days, first made).

(5) In this section—(a) the references to an offer to the public are to be read in accordance with

section 526, and(b) “securities” has the meaning given by section 527.

526 Meaning of “offer to the public”

(1) This section explains what is meant in section 525 (restriction on public offersby private companies) by an offer of securities to the public.

(2) An offer to the public includes an offer to any section of the public, howeverselected.

(3) An offer is not regarded as an offer to the public if it can properly be regarded,in all the circumstances, as—

(a) not being calculated to result, directly or indirectly, in securities of thecompany becoming available to persons other than those receiving theoffer, or

(b) otherwise being a private concern of the person receiving it and theperson making it.

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(4) An offer is not regarded as an offer to the public if—(a) it is made only to persons already connected with the company,(b) if it is made on terms allowing the person to whom it is made to

renounce his rights, they may only be renounced in favour of anotherperson so connected, and

(c) it cannot properly be regarded, in all the circumstances, as beingcalculated to result, directly or indirectly, in securities of the companybecoming available to persons not already connected with thecompany.

(5) An offer is not regarded as an offer to the public if—(a) it is an offer to subscribe for securities to be held under an employees’

share scheme,(b) if it is made on terms allowing the person to whom it is made to

renounce his rights, they may only be renounced in favour of—(i) another person entitled to hold securities under the scheme, or

(ii) a person already connected with the company, and(c) it cannot properly be regarded, in all the circumstances, as being

calculated to result, directly or indirectly, in securities of the companybecoming available to persons other than—

(i) persons entitled to hold securities under the scheme, or(ii) persons already connected with the company.

(6) For the purposes of this section “person already connected with the company”means—

(a) an existing member or employee of the company,(b) a member of the family of a person who is or was a member or

employee of the company,(c) the widow or widower, or surviving civil partner, of a person who was

a member or employee of the company,(d) an existing debenture holder of the company, or(e) a trustee (acting in his capacity as such) of a trust of which the principal

beneficiary is a person within any of paragraphs (a) to (d).

(7) For the purposes of subsection (6)(b) the members of a person’s family are theperson’s spouse or civil partner and children (including step-children) andtheir descendants.

527 Meaning of “securities”

In this Chapter “securities” includes—(a) shares and stock,(b) debentures, including debenture stock, loan stock, bonds, certificates of





security, being a right to which the holder would be entitled if

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he held any such security to which the certificate or otherinstrument relates, or


528 Enforcement of prohibition: order restraining proposed contravention

(1) If it appears to the court—(a) on an application under this section, or(b) in proceedings under section 459 or 460 of the Companies Act 1985

(c. 6) (protection of members against unfair prejudice),that a company is proposing to act in contravention of section 525 (prohibitionof public offers by private companies), the court shall make an order under thissection.

(2) An order under this section is an order restraining the company fromcontravening that section.

(3) An application for an order under this section may be made by—(a) a member or creditor of the company, or(b) the Secretary of State.

529 Enforcement of prohibition: order for re-registration or winding up

(1) If it appears to the court—(a) on an application under this section, or(b) in proceedings under section 459 or 460 of the Companies Act 1985

(protection of members against unfair prejudice),that a company has acted in contravention of section 525 (prohibition of publicoffers by private companies), the court shall make an order under this section.

(2) An order under this section may be—(a) an order requiring the company to re-register as a public company, or(b) an order for the compulsory winding up of the company.

(3) The court must make an order for re-registration (rather than winding up)unless it appears to the court—

(a) that the company does not meet the requirements for re-registration asa public company, and

(b) that it is impractical or undesirable to require it to take steps to do so.

(4) An application under this section may be made by—(a) a member of the company who—

(i) was a member at the time the offer was made (or, if the offer wasmade over a period, at any time during that period), or

(ii) became a member as a result of the offer,(b) a creditor of the company who was a creditor at the time the offer was

made (or, if the offer was made over a period, at any time during thatperiod), or

(c) the Secretary of State.

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530 Validity of allotment etc not affected

(1) Nothing in this Chapter affects the validity of any allotment or sale of securitiesor of any agreement to allot or sell securities.

CHAPTER 2

MINIMUM SHARE CAPITAL REQUIREMENT FOR PUBLIC COMPANIES

531 Public company: requirement as to minimum share capital

(1) A company that is a public company (otherwise than by virtue of re-registration as a public company) must not do business or exercise anyborrowing powers unless the registrar has issued it with a certificate under thissection (a “trading certificate”).

(2) This does not affect the validity of a transaction entered into by the company,but if a company—

(a) enters into a transaction in contravention of this section, and(b) fails to comply with its obligations in connection with the transaction

within 21 days from being called on to do so,the directors of the company are jointly and severally liable to indemnify theother party to the transaction in respect of any loss or damage suffered by himby reason of the company’s failure to comply with its obligations.

(3) The directors who are so liable are those who were directors at the time thecompany entered into the transaction.

(4) The registrar shall issue a trading certificate if, on an application made inaccordance with section 532, he is satisfied that the nominal value of thecompany’s allotted share capital is not less than the authorised minimum.

(5) For this purpose a share allotted in pursuance of an employees’ share schemeshall not be taken into account unless paid up as to—

(a) at least one-quarter of the nominal value of the share, and(b) the whole of any premium on the share.

(6) A trading certificate has effect from the date on which it is issued and isconclusive evidence that the company is entitled to do business and exerciseany borrowing powers.

532 Procedure for obtaining certificate

(1) An application for a certificate under section 531 must—(a) state that the nominal value of the company’s allotted share capital is

not less than the authorised minimum,(b) specify the amount, or estimated amount, of the company’s

preliminary expenses,(c) specify any amount or benefit paid or given, or intended to be paid or

given, to any promoter of the company, and the consideration for thepayment or benefit, and

(d) be accompanied by a statement of compliance.

(2) The statement of compliance is a statement that the company meets therequirements for the issue of a certificate under section 531.

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(3) The registrar may accept the statement of compliance as sufficient evidence ofthe matters stated in it.

533 The authorised minimum

For the purposes of sections 531 and 532 (requirement as to minimum sharecapital of public company) the authorised minimum is £50,000.

PART 18

ALLOTMENT OF SHARES

Power of directors to allot shares

534 Exercise by directors of power to allot shares etc

(1) The directors of a company must not exercise any power of the company—(a) to allot shares in the company, or(b) to grant rights to subscribe for, or to convert any security into, shares in

the company,except in accordance with section 535 (private company with single class ofshares) or section 536 (authorisation by company).

(2) Subsection (1) does not apply—(a) to the allotment of shares in pursuance of an employees’ share scheme,

or(b) to the grant of a right to subscribe for, or to convert any security into,

shares so allotted.

(3) Where this section applies in relation to the grant of a right to subscribe for, orto convert any security into, shares, it does not apply in relation to theallotment of shares pursuant to that right.

(4) This section does not apply to the deemed allotment of shares to thesubscribers to the company’s memorandum on the formation of the company.

(5) A director who knowingly and wilfully contravenes, or permits or authorisesa contravention of, this section commits an offence.

(6) A person guilty of an offence under this paragraph is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum.

(7) Nothing in this section affects the validity of an allotment or other transaction.

535 Power of directors to allot shares etc: private company with only one class of shares

Where a private company has only one class of shares, the directors mayexercise any power of the company—

(a) to allot shares of that class, or(b) to grant rights to subscribe for, or to convert any security into, such

shares,

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except to the extent that they are prohibited from doing so by the company’sarticles.

536 Power of directors to allot shares etc: authorisation by company

(1) The directors of a company may exercise a power of the company—(a) to allot shares in the company, or(b) to grant rights to subscribe for, or to convert any security into, shares in

the company,if they are, in accordance with this section, authorised to do so by thecompany’s articles or by resolution of the company.

(2) Authority under this section may be given for a particular exercise of thepower or for its exercise generally, and may be unconditional or subject toconditions.

(3) The authority must—(a) state the maximum number of shares that may be allotted under it, and(b) specify the date on which it will expire, which must be not more than

five years from—(i) in the case of an authority contained in the company’s articles

at the time of its original incorporation, the date of thatincorporation;

(ii) in any other case, the date on which the resolution is passed byvirtue of which the authority is given.

(4) Authority under this section—(a) may be renewed or further renewed by resolution of the company for a

further period not exceeding five years, and(b) may at any time be revoked or varied by resolution of the company.

(5) A resolution renewing an authority under this section must—(a) state (or restate) the maximum number of shares that may be allotted

under the authority or, as the case may be, the number remaining to beallotted under it, and

(b) specify the date on which the renewed authority will expire.

(6) In relation to rights to subscribe for, or to convert any security into, shares inthe company, references in this section to the maximum number of shares thatmay be allotted under the authority are to the maximum number of shares thatmay be allotted pursuant to the rights.

(7) The directors may allot shares, or grant rights to subscribe for or to convert anysecurity into shares, after an authority under this section has expired if—

(a) the shares are allotted, or the rights are granted, in pursuance of anoffer or agreement made by the company before the authority expired,and

(b) the authority allowed it to make an offer or agreement which would ormight require shares to be allotted, or rights to be granted, after theauthority expired.

(8) A resolution of a company to give, vary, revoke or renew an authority underthis section may be an ordinary resolution, even though it alters the company’sarticles.

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Public companies: allotment where issue not fully subscribed

537 Public companies: allotment where issue not fully subscribed

(1) No allotment shall be made of shares of a public company offered forsubscription unless—

(a) the issue is subscribed for in full,(b) the offer is made on terms that the number of shares subscribed for may

be allotted in any event, or(c) the offer is made on terms that the number of shares subscribed for may

be allotted if specified conditions are met, and those conditions are met.

(2) If shares are prohibited from being allotted by subsection (1) and 40 days haveelapsed after the first making of the offer, all money received from applicantsfor shares must be repaid to them forthwith, without interest.

(3) If any of the money is not repaid within 48 days after the making of the offer,the directors of the company are jointly and severally liable to repay it, withinterest at the rate for the time being specified under section 17 of theJudgments Act 1838 (c. 110) from the expiration of the 48th day.A director is not so liable if he proves that the default in the repayment of themoney was not due to any misconduct or negligence on his part.

(4) This section applies in the case of shares offered as wholly or partly payableotherwise than in cash as it applies in the case of shares offered forsubscription, with the following adaptations—

(a) the references in subsection (1) to subscription shall be construedaccordingly;

(b) in subsections (2) and (3) references to the repayment of moneyreceived from applicants for shares include—

(i) the return of any other consideration so received (including, ifthe case so requires, the release of the applicant from anyundertaking), or

(ii) if it is not reasonably practicable to return the consideration, thepayment of money equal to its value at the time it was soreceived;

(c) any reference in those subsections to interest apply accordingly.

(5) Any condition requiring or binding an applicant for shares to waivecompliance with any requirement of this section is void.

538 Effect of allotment in contravention of section 537

(1) An allotment made by a company to an applicant in contravention of section537 (public companies: allotment where issue not fully subscribed) is voidableat the instance of the applicant within one month after the date of the allotment,and not later.

(2) It is so voidable even if the company is in the course of being wound up.

(3) If a director of a company knowingly permits or authorises the contraventionof section 537 with respect to allotment, he is liable to compensate the companyand the allottee respectively for any loss, damages, costs or expenses that thecompany or allottee may have sustained or incurred by the contravention.

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(4) Proceedings to recover any such loss, damages, costs or expenses may not bebrought more than two years after the date of the allotment.

Return of allotments

539 Return of allotment by limited company

(1) This section applies to a company limited by shares and to a company limitedby guarantee and having a share capital.

(2) The company must, within one month of making an allotment of shares,deliver to the registrar for registration a return of the allotment.

(3) The return must—(a) contain the prescribed information, and(b) be accompanied by a statement of capital.

(4) The statement of capital must state with respect to the company’s share capitalat the date to which the return is made up—





540 Return of allotment of new class of shares by unlimited company

(1) If an unlimited company allots shares with rights that are not in all respectsuniform with shares previously allotted, the company must, within one monthof making an allotment of shares, deliver to the registrar for registration areturn of allotments containing prescribed particulars of those rights.

(2) For this purpose shares are not to be treated as different from shares previouslyallotted by reason only that the former do not carry the same rights todividends as the latter during the twelve months immediately following theformer’s allotment.

541 Offence of failure to make return

(1) If a company makes default in complying with—section 539 (return of allotment of shares by limited company), orsection 540 (return of allotment of new class of shares by unlimited

company,an offence is committed by every officer of the company who is in default.


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(b) on summary conviction, to a fine not exceeding the statutory maximumand, for continued contravention, a daily default fine not exceedingone-tenth of the statutory maximum.

(3) In the case of default in delivering to the registrar within one month after theallotment the return required by section 539 or 540—

(a) any person liable for the default may apply to the court for relief, and(b) the court, if satisfied—

(i) that the omission to deliver the document was accidental or dueto inadvertence, or

(ii) that it is just and equitable to grant relief,may make an order extending the time for delivery of the document forsuch period as the court thinks proper.

Time for accepting pre-emption offer

542 Time for acceptance of pre-emption offers

In section 90 of the Companies Act 1985 (c. 6) (communication of pre-emptionoffers to shareholders) after subsection (6) insert—

“(6A) The Secretary of State may by regulations made by statutoryinstrument—

(a) reduce the period specified in subsection (6) (but not to less than14 days), or

(b) increase that period.

(6B) A statutory instrument containing regulations made under subsection(6A) is subject to affirmative resolution procedure.”.

Disapplication of pre-emption rights

543 Disapplication of pre-emption rights: private company with only one class of shares

(1) The directors of a private company that has only one class of shares may begiven power by the articles, or by a special resolution of the company, to allotequity securities of that class as if section 89(1) of the Companies Act 1985(offers to shareholders to be on pre-emptive basis)—

(a) did not apply to the allotment, or(b) applied to the allotment with such modifications as the directors may

determine.

(2) Where the directors make an allotment under this section, sections 89 to 94 ofthat Act (pre-emption rights) have effect accordingly.

544 Disapplication of pre-emption rights: directors acting under general authorisation

(1) Where the directors of a company are generally authorised for the purposes ofsection 536, they may be given power by the articles, or by a special resolutionof the company, to allot equity securities pursuant to that authority as if section

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89(1) of the Companies Act 1985 (offers to shareholders to be on pre-emptivebasis)—


determine.

(2) Where the directors make an allotment under this section, sections 89 to 94 ofthat Act (pre-emption rights) have effect accordingly.

(3) The power conferred by this section ceases to have effect when the authority towhich it relates—

(a) is revoked or(b) would (if not renewed) expire.

But if the authority is renewed the power may also be renewed, for a period notlonger than that for which the authority is renewed, by a special resolution ofthe company.

(4) Notwithstanding that the power conferred by this section has expired, thedirectors may allot equity securities in pursuance of an offer or agreementpreviously made by the company if the power enabled the company to makean offer or agreement that would or might require equity securities to beallotted after it expired.

545 Disapplication of pre-emption rights by special resolution

(1) Where the directors of a company are authorised for the purposes of section536 (whether generally or otherwise), the company may by special resolutionresolve that section 89(1) of the Companies Act 1985 (c. 6) (offers toshareholders to be on pre-emptive basis)—

(a) shall not apply to a specified allotment of securities to be madepursuant to that authority, or

(b) shall apply to the allotment with such modifications as may bespecified in the resolution.

(2) Where such a resolution is passed sections 89 to 94 of that Act (pre-emptionrights) have effect accordingly.

(3) A special resolution under this section ceases to have effect when the authorityto which it relates—

(a) is revoked or(b) would (if not renewed) expire.

But if the authority is renewed the resolution may also be renewed, for a periodnot longer than that for which the authority is renewed, by a special resolutionof the company.

(4) Notwithstanding that any such resolution has expired, the directors may allotequity securities in pursuance of an offer or agreement previously made by thecompany if the resolution enabled the company to make an offer or agreementthat would or might require equity securities to be allotted after it expired.

(5) A special resolution under this section, or a special resolution to renew such aresolution, must not be proposed unless—

(a) it is recommended by the directors, and(b) the directors have complied with subsections (6) and (7).

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(6) Before such a resolution is proposed, the directors must make a writtenstatement setting out—

(a) their reasons for making the recommendation,(b) the amount to be paid to the company in respect of the equity securities

to be allotted, and(c) the directors’ justification of that amount.

(7) The directors’ statement must—(a) if the resolution is proposed as a written resolution, be sent or

submitted to every eligible member at or before the time at which theproposed resolution is sent or submitted to him;

(b) if the resolution is proposed at a general meeting, be circulated to themembers entitled to notice of the meeting with that notice.

546 Liability for false statement in directors’ statement

(1) This section applies in relation to a statement sent, submitted or circulatedunder section 545(7) (directors’ statement on resolution disapplying pre-emption rights).

(2) A person who knowingly or recklessly authorises or permits the inclusion ofany matter that is misleading, false or deceptive in a material particular in sucha statement commits an offence.





547 Disapplication of pre-emption rights: sale of treasury shares

(1) This section applies in relation to a sale of shares that is an allotment of equitysecurities by virtue of section 94(3A) of the Companies Act 1985 (c. 6) (sale ofshares held by company as treasury shares).

(2) The directors of a company may be given power by the articles, or by a specialresolution of the company, to allot equity securities as if section 89(1) of theCompanies Act 1985 (offers to shareholders to be on pre-emptive basis)—


determine.

(3) The provisions of section 544(2) and (4) apply in that case as they apply to acase within subsection (1) of that section.

(4) The company may by special resolution resolve that section 89(1) of theCompanies Act 1985 (offers to shareholders to be on pre-emptive basis)—

(a) shall not apply to a specified allotment of securities, or

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(b) shall apply to the allotment with such modifications as may bespecified in the resolution.

(5) The provisions of section 545(2) and (4) to (7) apply in that case as they applyto a case within subsection (1) of that section.

Commissions, discounts and allowances

548 Commissions, discounts and allowances

(1) A company may, if the following conditions are satisfied, pay a commission toa person in consideration of his subscribing or agreeing to subscribe (whetherabsolutely or conditionally) for shares in the company, or procuring oragreeing to procure subscriptions (whether absolute or conditional) for sharesin the company,

(2) The conditions are—(a) the payment of the commission is authorised by the company’s articles;(b) the commission paid or agreed to be paid does not exceed—

(i) 10% of the price at which the shares are issued, or(ii) the amount or rate authorised by the articles,

whichever is the less.

(3) A vendor to, or promoter of, or other person who receives payment in moneyor shares from, a company may apply any part of the money or shares soreceived in payment of any commission the payment of which directly by thecompany would be permitted by this section.

(4) Except as permitted by subsections (1) to (3), a company must not apply any ofits shares or capital money, either directly or indirectly, in payment of anycommission, discount or allowance to any person in consideration of hissubscribing or agreeing to subscribe (whether absolutely or conditionally) forshares in the company, or procuring or agreeing to procure subscriptions(whether absolute or conditional) for shares in the company.

(5) It is immaterial how the shares or money are so applied, whether by beingadded to the purchase money of property acquired by the company or to thecontract price of work to be executed for the company, or being paid out of thenominal purchase money or contract price, or otherwise.

(6) Nothing in this section affects the payment of such brokerage as has previouslybeen lawful.

PART 19

SHARE CAPITAL

Share capital and how it may be altered

549 Shares of limited companies to have fixed nominal value

(1) Shares in a limited company having a share capital must each have a fixednominal value.

(2) An allotment of a share that does not have a fixed nominal value is void.

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(3) Shares in a limited company having a share capital may be denominated in anycurrency, and different classes of shares may be denominated in differentcurrencies.

(4) If a company purports to allot shares in contravention of this section, an offenceis committed by every officer of the company who is in default.

(5) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to a fine, and(b) on summary conviction, to a fine not exceeding the statutory maximum

550 Alteration of share capital of limited company

(1) A limited company having a share capital may not alter its share capital exceptin the following ways.

(2) The company may—(a) increase its share capital by allotting new shares in accordance with

Part 18 of this Act and Part 4 of the Companies Act 1985 (c. 6), or(b) reduce its share capital in accordance with Chapter 4 of Part 5 of that

Act.

(3) The company may—(a) sub-divide or consolidate all or any of its share capital in accordance

with section 551 of this Act, or(b) reconvert stock into shares in accordance with section 553 of this Act.

(4) The company may redenominate all or any of its shares in accordance withsection 578 of this Act.

(5) Nothing in this section affects—(a) the power of a company to redeem shares, or to purchase its own

shares, in accordance with Chapter 7 of Part 5 of the Companies Act1985,

(b) the power of a company to purchase shares in pursuance of an order ofthe court under—

(i) section 98 of this Act (litigated objection to resolution forcompany to be re-registered as private), or

(ii) Part 11 of this Act (derivative claims by members) or Part 17 ofCompanies Act 1985 (relief to members unfairly prejudiced),

(c) the forfeiture of shares, or the acceptance of shares surrendered in lieu,in pursuance of the articles, for failure to pay any sum payable inrespect of the shares,

(d) the cancellation of shares under section 146(2) of the Companies Act1985 (treatment of shares held by or for a public company).

551 Sub-division or consolidation of shares

(1) A limited company having a share capital may—(a) sub-divide its shares, or any of them, into shares of a smaller nominal

amount than its existing shares, or(b) consolidate and divide all or any of its share capital into shares of a

larger nominal amount than its existing shares.

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(2) In any sub-division, consolidation or division of shares under this section, theproportion between the amount paid and the amount (if any) unpaid on eachresulting share must be the same as it was in the case of the share from whichthat share is derived.

(3) A company may exercise a power conferred by this section only if its membershave passed an ordinary resolution authorising it to do so.

(4) A resolution under subsection (3) may authorise a company—(a) to exercise more than one of the powers conferred by this section;(b) to exercise a power on more than one occasion;(c) to exercise a power at a specified time or in specified circumstances.

(5) The company’s articles may exclude or restrict the exercise of any powerconferred by this section.

552 Notice to registrar of sub-division or consolidation

(1) If a company exercises a power conferred by section 551 (sub-division orconsolidation of shares) it must within one month after doing so give notice tothe registrar, specifying the shares affected.

(2) The notice must be accompanied by a statement of capital.

(3) The statement of capital must state with respect to the company’s share capitalimmediately following the exercise of the power—





(4) If default is made in complying this section, an offence is committed by—(a) the company, and(b) every officer of the company who is in default.


553 Re-conversion of stock into shares

(1) A company that has converted paid-up shares into stock (before the repeal bythis Act of the power to do so) may re-convert that stock into paid-up shares ofany nominal value.

(2) A company may exercise the power conferred by this section only if itsmembers have passed an ordinary resolution authorising it to do so.

(3) A resolution under subsection (2) may authorise a company to exercise thepower conferred by this section—

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(a) on more than one occasion;(b) at a specified time or in specified circumstances.

(4) If a company exercises the power conferred by this section it must, within onemonth after doing so, give notice to the registrar specifying the stock affected.


(6) The statement of capital must state with respect to the company’s share capitalimmediately following the reconversion—





(7) If a company makes default in complying with subsection (4) or (5), an offenceis committed by—



554 Notice to registrar of alteration of share capital

In section 122 of the Companies Act 1985 (c. 6) (notice to registrar of alterationof share capital) after subsection (1) insert—

“(1A) The notice must be accompanied by a statement of capital.

(1B) The statement of capital must state with respect to the company’s sharecapital immediately following the redemption or cancellation—


(i) prescribed particulars of the rights attached to theshares,

(ii) the total number of shares of that class, and(iii) the aggregate nominal value of shares of that class, and

(d) the amount paid up and the amount (if any) unpaid on eachshare (whether on account of the nominal value of the share orby way of premium).”.

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Reserve capital

555 Abolition of reserve capital

(1) Section 120 of the Companies Act 1985 (c. 6) (reserve liability of limitedcompany) shall cease to have effect.

(2) Section 124 of that Act (reserve capital of unlimited company) shall cease tohave effect.

(3) The repeals made by this section do not affect the validity of—(a) a special resolution passed by a company under section 120 of the

Companies Act 1985 before the date on which this section came intoforce, provided that the resolution is forwarded to the registrar inaccordance with section 380 of that Act or Chapter 2 of Part 3 of this Act,or

(b) the exercise of either of the powers under section 124 of the CompaniesAct 1985 before that date.

Class rights

556 Variation of class rights: companies having a share capital

(1) For section 125 of the Companies Act 1985 (variation of class rights)substitute—

“125 Variation of class rights: companies having a share capital

(1) This section is concerned with the variation of the rights attached to aclass of shares in a company having a share capital.

(2) Rights attached to a class of a company’s shares may be varied if, andonly if, the holders of shares of that class consent to the variation inaccordance with this section.

(3) This is without prejudice to any other restrictions on the variation of therights.

(4) The consent required for the purposes of this section on the part of theholders of a class of a company’s shares is—

(a) consent in writing from the holders of at least three-quarters innominal value of the issued shares of that class (excluding anyshares held as treasury shares), or

(b) a special resolution passed at a separate general meeting of theholders of that class sanctioning the variation.

(5) Any alteration of a provision contained in a company’s articles for thevariation of the rights attached to a class of shares, or the insertion ofany such provision into the articles, is itself to be treated as a variationof those rights.

(6) In this section, and (except where the context otherwise requires) in anyprovision in a company’s articles for the variation of the rights attachedto a class of shares, references to the variation of those rights includereferences to their abrogation.”.

(2) In section 127 of that Act (shareholders’ right to object to variation)—

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(a) omit paragraph (a), and(b) in paragraph (b), for “section 125(2)” substitute “section 125”.

557 Variation of class rights: companies without a share capital

After section 125 of the Companies Act 1985 (c. 6) (variation of class rights:companies having a share capital) (inserted by section 556 above) insert—

“125AVariation of class rights: companies without a share capital

(1) This section is concerned with the variation of the rights of a class ofmembers of a company where the company does not have a sharecapital.

(2) Rights of a class of members may be varied if, and only if, the holdersof shares of that class consent to the variation in accordance with thissection.

(3) This is without prejudice to any other restrictions on the variation of therights.

(4) The consent required for the purposes this section on the part of themembers of a class is—

(a) consent in writing from at least three-quarters of the membersof the class, or

(b) a special resolution passed at a separate general meeting of themembers of that class sanctioning the variation.

(5) Any alteration of a provision contained in a company’s articles for thevariation of the rights attached to a class of shares, or the insertion ofany such provision into the articles, is itself to be treated as a variationof those rights.

(6) In this section, and (except where the context otherwise requires) in anyprovision in a company’s articles for the variation of the rights of a classof members, references to the variation of those rights includereferences to their abrogation.”.

558 Variation of class rights: saving for court’s powers under other provisions

(1) For section 126 of the Companies Act 1985 substitute—

“126 Saving for court’s powers under other provisions

Nothing in section 125 or 125A (variation of class rights) affects thepower of the court under—

section 425 (court control of company compromising withmembers and creditors);

section 427 (company reconstruction or amalgamation;sections 459 to 461 (protection of minorities);section 98 of the Company Law Reform Act 2006 (litigated

objection to public company becoming private by re-registration;

Part 10 of that Act (derivative claims by members).”.

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559 Registration of class rights

(1) In section 128 of the Companies Act 1985 (c. 6) (registration of particulars ofspecial rights)—

(a) in subsection (3) (notification of variation of class rights), omit from“otherwise than” to “section 380”;

(b) in subsection (4) omit from “(otherwise than” to “above)”.

(2) In section 129 of the Companies Act 1985 (registration of newly created classrights of company without share capital)—

(a) in subsection (1) (notification of new class of members)—(i) for “a class of members” substitute “a new class of members”,

and(ii) omit from “with rights which” to “section 380 applies”;

(b) in subsection (2) (notification of variation of class rights), omit from“otherwise than” to “section 380”;

(c) in subsection (3) (notification of variation of name or designation ofclass) omit from “(otherwise than” to “above)”.

Share premiums

560 Application of share premiums

(1) In section 130 of the Companies Act 1985 (application of share premiums) forsubsection (2) substitute—

“(1A) Where, on issuing shares, a company has transferred a sum to the sharepremium account, it may use that sum to write off—

(a) the expenses of the issue of those shares;(b) any commission paid on the issue of those shares.

(2) The company may use the share premium account to pay up newshares to be allotted to members as fully paid bonus shares.”.

(2) In subsection (3) of that section for “this” substitute “subsections (1A) and (2)”.

Reduction of share capital

561 Circumstances in which companies may reduce share capital

(1) Before section 135 of the Companies Act 1985 (special resolution for reductionof share capital) insert—

“Circumstances in which limited companies may reduce share capital”.

(2) Section 135 (special resolution for reduction of share capital) is amended asfollows.

(3) For subsection (1) substitute—

“(1) A private company limited by shares may reduce its share capital byspecial resolution if the resolution is supported by a solvency statementin accordance with section 135A.

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(1A) Any limited company may reduce its share capital by special resolutionif the reduction is confirmed by the court in accordance with sections136 to 139.

(1B) A company may reduce its share capital under this section in any way,provided that as a result of the reduction at least one member of thecompany would hold shares other than redeemable shares or sharesheld as treasury shares.”.

(4) In subsection (2)—(a) for “subsection (1)” substitute “subsection (1B)”;(b) omit the words following paragraph (c).

(5) After subsection (2) insert—

“(2A) A special resolution under this section may not provide for a reductionof share capital to take effect later than the date on which the resolutionhas effect in accordance with this Chapter.

(2B) This Chapter (apart from subsection (2A)) has effect subject to anyprovision of the company’s articles restricting or prohibiting thereduction of the company’s share capital.”.

562 Reduction of capital supported by solvency statement

After section 135 of the Companies Act 1985 (c. 6) insert—

“Reduction of capital of private company supported by solvency statement

135A Requirement for solvency statement

(1) A resolution for reducing share capital of a private company limited byshares is supported by a solvency statement if—

(a) the directors of the company make a statement of the solvencyof the company in accordance with section 135B (a “solvencystatement”) not more than 15 days before the date on which theresolution is passed, and

(b) the resolution and solvency statement are registered inaccordance with section 135C.

(2) Where the resolution is proposed as a written resolution, a copy of thesolvency statement must be sent or submitted to every eligible memberat or before the time at which the proposed resolution is served on him.

(3) Where the resolution is proposed at a general meeting, a copy of thesolvency statement must be made available for inspection by membersof the company throughout that meeting.

(4) The validity of a resolution is not affected by a failure to comply withsubsection (2) or (3).

135B Solvency statement

(1) A solvency statement is a statement that each of the directors—(a) has formed the opinion, as regards the company’s situation at

the date of the statement, that there is no ground on which thecompany could then be found to be unable to pay (or otherwisedischarge) its debts; and

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(b) has also formed the opinion—(i) if it is intended to commence the winding up of the

company within twelve months of that date, that thecompany will be able to pay (or otherwise discharge) itsdebts in full within twelve months of thecommencement of the winding up; or

(ii) in any other case, that the company will be able to pay(or otherwise discharge) its debts as they fall due duringthe year immediately following that date.

(2) In forming those opinions, the directors must take into account all ofthe company’s liabilities (including any contingent or prospectiveliabilities).

(3) The solvency statement must state—(a) the date on which it is made, and(b) the name of each director of the company.

(4) If the directors make a solvency statement without having reasonablegrounds for the opinions expressed in it, and the statement is deliveredto the registrar, an offence is committed by every director who is indefault.

(5) A person guilty of an offence under subsection (4) is liable—(a) on conviction on indictment, to imprisonment for a term not

exceeding two years or a fine (or both);(b) on summary conviction—


(ii) in Scotland or Northern Ireland, to imprisonment for aterm not exceeding six months, or to a fine not exceedingthe statutory maximum (or both).

135C Registration of resolution and supporting documents

(1) Within 15 days after the resolution for reducing share capital is passedthe company must deliver to the registrar—

(a) a copy of the solvency statement, and(b) a statement of capital.

This is in addition to the copy of the resolution itself that is required tobe delivered to the registrar under Chapter 2 of Part 3 of the CompanyLaw Reform Act 2006.

(2) The statement of capital must state with respect to the company’s sharecapital as reduced by the resolution—




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(d) the amount paid up and the amount (if any) unpaid on eachshare (whether on account of the nominal value of the share orby way of premium).

(3) The registrar must register the documents delivered to him undersubsection (1) on receipt.

(4) The resolution does not take effect until those documents areregistered.

(5) The company must also deliver to the registrar, within 15 days after theresolution is passed, a statement by the directors confirming that thesolvency statement was—

(a) made not more than 15 days before the date on which theresolution was passed, and

(b) provided to members in accordance with section 135A(2) or (3).

(6) The validity of a resolution is not affected by— (a) a failure to deliver the documents required to be delivered to

the registrar under subsection (1) to the registrar within the timespecified in that subsection, or

(b) a failure to comply with subsection (5).

(7) If the company delivers to the registrar a solvency statement that wasnot provided to members in accordance with section 135A(2) or (3), anoffence is committed by every officer of the company who is in default.

(8) If the company fails to comply with this section, an offence iscommitted by—


(9) A person guilty of an offence under subsection (7) or (8) is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum.

Reduction of capital confirmed by court”.

563 Registration of court order

(1) Section 138 of the Companies Act 1985 (c. 6) (registration of order and minuteof reduction) is amended as follows.

(2) In the section heading for “minute of reduction” substitute “statement ofcapital”.

(3) In subsection (1) for the words “minute (approved by the court)” to the endsubstitute “a statement of capital (approved by the court) shall register theorder and statement (but subject to section 139).”.

(4) After that subsection insert—

“(1A) The statement of capital must state with respect to the company’s sharecapital as altered by the order—

“(a) the total number of shares of the company,

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(b) the aggregate nominal value of those shares,(c) for each class of shares—





“(2) The resolution for reducing share capital as confirmed by the orderregistered under subsection (1) takes effect on the registration of theorder and statement of capital.This is subject to subsection (2A).

(2A) In the case of a reduction of share capital that forms part of acompromise or arrangement sanctioned by the court under section 425(power of company to compromise with creditors and members), theresolution for reducing share capital as confirmed by the orderregistered under subsection (1) takes effect—

(a) on delivery of the order and statement of capital to the registrar,or

(b) if the court so orders, on the registration of the order andstatement.”.

(6) In subsection (4) for “minute”, in both places where it occurs, substitute“statement of capital”.

(7) Omit subsections (5) and (6).

564 Liability of members on reduced shares

(1) After section 139 of the Companies Act 1985 (c. 6) insert—

“Supplementary”.

(2) In section 140 of the Companies Act 1985 (liability of members on reducedshares)—

(a) in subsection (1) for “as fixed by the minute” substitute “as notified tothe registrar in accordance with section 135C(1) or 138(1)”,

(b) in subsection (2) after “if” insert “a reduction of capital is confirmed bythe court and”, and

(c) in subsection (3) for “minute” substitute “statement of capital”.

Financial assistance

565 Financial assistance by company for acquisition of shares

(1) Chapter 6 of Part 5 of the Companies Act 1985 (financial assistance by acompany for acquisition of its own shares) is amended as follows.

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(2) For section 151 (financial assistance generally prohibited) substitute—

“151 Prohibited financial assistance: acquisition of shares in public company

(1) Where a person is acquiring or proposing to acquire shares in a publiccompany, it is not lawful for the company or any of its subsidiaries togive financial assistance directly or indirectly for the purpose of theacquisition before or at the same time as the acquisition takes place.

(2) Where—(a) a person has acquired shares in a company (“the company”),

and(b) a liability has been incurred (by that or another person) for the

purpose of the acquisition,it is not lawful for the company or any of its subsidiaries to givefinancial assistance directly or indirectly for the purpose of reducing ordischarging the liability if, at the time the assistance is given, thecompany is a public company.

(3) Subsections (1) and (2) have effect subject to section 153 (transactionsnot prohibited).

(4) If a company contravenes this section an offence is committed by—(a) the company, and(b) every officer of the company who is in default.

(5) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to imprisonment for a term not



(ii) in Scotland or Northern Ireland, to imprisonment for aterm not exceeding six months, or to a fine not exceedingthe statutory maximum (or both).

151A Prohibited financial assistance: acquisition of shares in private company

(1) Where a person is acquiring or proposing to acquire shares in a privatecompany, it is not lawful for a public company that is a subsidiary ofthat company to give financial assistance directly or indirectly for thepurpose of the acquisition before or at the same time as the acquisitiontakes place.

(2) Where—(a) a person has acquired shares in a private company, and(b) a liability has been incurred (by that or another person) for the

purpose of the acquisition,it is not lawful for a public company that is a subsidiary of thatcompany to give financial assistance directly or indirectly for thepurpose of reducing or discharging the liability.

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(3) Subsections (1) and (2) have effect subject to section 153 (transactionsnot prohibited).

(4) If a company contravenes this section an offence is committed by—(a) the company, and(b) every officer of the company who is in default.




(ii) in Scotland or Northern Ireland, to imprisonment for aterm not exceeding six months, or to a fine not exceedingthe statutory maximum (or both).”.

(3) Sections 155 to 158 (relaxation of prohibitions for private companies) shallcease to have effect.

566 Circumstances in which financial assistance is not prohibited

(1) Section 153 of the Companies Act 1985 (c. 6) (transactions not prohibited bysection 151) is amended as follows.

(2) In the heading for “s 151” substitute “this Chapter”.


“(2A) Section 151A(1) does not prohibit a company from giving financialassistance for the purpose of an acquisition of shares in its holdingcompany if—

(a) the company’s principal purpose in giving that assistance is notto give it for the purpose of any such acquisition, or the givingof the assistance for that purpose is but an incidental part ofsome larger purpose of the company, and

(b) the assistance is given in good faith in the interests of thecompany.

(2B) Section 151A(2) does not prohibit a company from giving financialassistance if—

(a) the company’s principal purpose in giving the assistance is notto reduce or discharge any liability incurred by a person for thepurpose of the acquisition of shares in its holding company, orthe reduction or discharge of any such liability is but anincidental part of some larger purpose of the company, and

(b) the assistance is given in good faith in the interests of thecompany.”.

(4) In subsection (3) for “Section 151 does not prohibit” substitute “Neither section151 nor section 151A prohibits”.

(5) In subsection (4) for “Section 151 does not prohibit” substitute “Neither section151 nor section 151A prohibits”.

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Redeemable shares

567 Redeemable shares

(1) In subsection (1) of section 159 of the Companies Act 1985 (c. 6) (power to issueredeemable shares)—

(a) omit “, if authorised to do so by its articles,”, and(b) at the end insert “(“redeemable shares”)”.


“(1A) A public company may not issue redeemable shares unless it isauthorised to do so by its articles.”.

(3) In subsection (3) of that section omit “; and the terms of redemption mustprovide for payment on redemption”.

(4) At the end of that section add—

“(4) The terms of redemption may provide that the amount payable onredemption may, by agreement between the company and the holderof the shares, be paid on a date later than the redemption date.

(5) Unless redeemed in accordance with provision authorised bysubsection (4), redeemable shares must be paid for on redemption.”.

(5) After that section insert—

“159ATerms and manner of redemption determined by directors

(1) The directors of a company may determine the terms, conditions andmanner of redemption of shares if they are authorised to do so by—

(a) a resolution of the company, or(b) the company’s articles.

(2) Where the directors are authorised to determine the terms, conditionsor manner of redemption of shares, they must do so before the sharesare allotted.”.

(6) In section 160 of that Act (financing etc of redemption), omit subsection (3).

Purchase by company of its own shares

568 Power of company to purchase own shares

In section 162 of the Companies Act 1985 (power of company to purchase ownshares) for subsection (1) substitute—

“(1) A company limited by shares or limited by guarantee and having ashare capital may purchase its own shares (including any redeemableshares), subject to—

(a) the following provisions of this Chapter, and(b) any restriction or prohibition in the company’s articles.”.

569 Statement of capital on disclosure by company of purchase etc of own shares

(1) In section 169 of the Companies Act 1985 (disclosure by company of purchase

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of own shares) after subsection (1A) insert—

“(1AA) A return required by subsection (1) must be accompanied by astatement of capital.

(1AB) The statement of capital must state with respect to the company’s sharecapital immediately following the delivery to it of the sharespurchased—





(2) After subsection (2) of section 169A of that Act (disclosure by company ofcancellation or disposal of treasury shares) insert—

“(2A) A return required by this section must be accompanied by a statementof capital.

(2B) The statement of capital must state with respect to the company’s sharecapital immediately following cancellation or disposal (as the case maybe) of the shares—





570 Copy of contract or memorandum of terms to be available for inspection

(1) In section 169 (disclosure by company of purchase of own shares), omitsubsections (4), (5) and (7) to (9).


“169AACopy of contract or memorandum of terms to be available for inspection

(1) This section applies where a company enters into—(a) a contract approved under section 164 or 165, or(b) a contract for a purchase authorised under section 166.

(2) A company must keep available for inspection at its registered office—(a) a copy of the contract, or

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(b) if the contract is not in writing, a written memorandum settingout the terms of the contract.

(3) The copy or memorandum must be kept available for inspection fromthe conclusion of the contract until the end of the period of ten yearsbeginning with the date on which the purchase of all the shares inpursuance of the contract is completed or, as the case may be, the dateon which the contract otherwise determines.

(4) Every copy or memorandum required to be kept under this sectionmust be open to inspection without charge—

(a) by any member of the company, and(b) if the company is a public company, by any other person.

(5) If default is made in complying with subsection (2) or (3), or aninspection required under subsection (4) is refused, an offence iscommitted by every officer of the company who is in default.

(6) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and, forcontinued contravention, a daily default fine not exceeding one-tenthof level 3 on the standard scale.

(7) In the case of a refusal of an inspection required under subsection (4)the court may by order compel an immediate inspection.

(8) The provisions of this section apply to a variation of a contract as theyapply to the original contract.”.

571 Power of private companies to redeem or purchase own shares out of capital

(1) For section 173(4) of the Companies Act 1985 (c. 6) (directors’ opinion as tosolvency on exercise of power of private company to redeem or purchase ownshares out of capital) substitute—

“(4) In forming their opinion for the purposes of subsection (3)(a), thedirectors must take into account all of the company’s liabilities(including any contingent or prospective liabilities).”.

(2) After section 177 of that Act (powers of court on application under section 176)insert—

“177ANotice to registrar

(1) The company must, within 15 days after making a payment out ofcapital, give notice to the registrar.


(3) The statement of capital must state with respect to the company’s sharecapital immediately following the payment out of capital—




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(d) the amount paid up and the amount (if any) unpaid on eachshare (whether on account of the nominal value of the share orby way of premium).

(4) If default is made in complying with this section, an offence iscommitted by—


(5) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and, forcontinued contravention, a daily default fine not exceeding one-tenthof level 3 on the standard scale.”.

Transfers of shares etc.

572 Registration of transfers of shares and debentures

(1) In section 183 of the Companies Act 1985 (c. 6) (transfer and registration)—(a) in the heading, omit “and registration”;(b) omit subsections (4) to (6).


“183ARegistration of allotment and transfer of shares and debentures

(1) A company must register an allotment of shares or debentures as soonas practicable and in any event within two months after the date of theallotment.

(2) A company must—(a) register a transfer of shares or debentures, or(b) send to the transferee notice of refusal to register the transfer,

giving reasons for the refusal,as soon as practicable and in any event within two months after thedate on which the transfer is lodged with it.

(3) The directors must provide the transferee with such furtherinformation about the reasons for the refusal as the transferee mayreasonably request, but such information does not include copies ofminutes of meetings of directors.

(4) On the application of the transferor of any share or interest in acompany, the company must enter in its register of members the nameof the transferee in the same manner and subject to the same conditionsas if the application for the entry were made by the transferee.

(5) If a company fails to comply with this section, an offence is committedby—


(6) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and, forcontinued contravention, a daily default fine not exceeding one-tenthof level 2 on the standard scale.”.

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(7) This section does not apply—(a) in relation to an allotment or transfer of shares if the company

has issued a share warrant in respect of the shares (undersection 188);

(b) in relation to the transmission of shares by operation of law.”.

(3) Subsection (2) has effect in relation to allotments and transfers of shares anddebentures that take effect after this section comes into force.

573 Share certificates and share warrants

In section 185 of the Companies Act 1985 (c. 6) (duty of company as to issue ofcertificates), after subsection (2) insert—

“(2A) Subsection (1) does not apply in relation to an allotment or transfer ofshares if, following the allotment or transfer, the company has issued ashare warrant in respect of the shares (under section 188).

(2B) A company must, within two months of the surrender of a sharewarrant for cancellation, complete and have ready for delivery thecertificates of the shares specified in the warrant (unless its articlesprovide otherwise).”.

Register of debenture holders

574 Register of debenture holders

(1) Any register of debenture holders of a company that is kept by the companymust be kept available for inspection—

(a) at the company’s registered office, or(b) at another place in the part of the United Kingdom in which the

company is registered.

(2) A company must give notice to the registrar of the place where any suchregister is kept available for inspection and of any change in that place.

(3) No such notice is required if the register has, at all times since it came intoexistence been kept available for inspection at the company’s registered office.

(4) If a company makes default for 14 days in complying with subsection (2), anoffence is committed by—

(a) the company, and(b) every officer of the company who is in default,


(6) References in this section to a register of debenture holders include aduplicate—

(a) of a register of debenture holders that is kept outside the UnitedKingdom, or

(b) of any part of such a register.

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575 Right to inspect register etc

(1) Every register of debenture holders of a company must, except when dulyclosed, be open to the inspection—

(a) of the registered holder of any such debentures, or any holder of sharesin the company, without charge, and

(b) of any other person on payment of such fee as may be prescribed.

(2) Any person may require a copy of the register, or any part of it, on payment ofsuch fee as may be prescribed.

(3) Any holder of debentures of a company is entitled, on request and on paymentof such fee as may be prescribed, to be provided with a copy of any trust deedfor securing the debentures.

(4) If an inspection required under subsection (1) is refused, or default is made incomplying with subsection (2) or (3), an offence is committed by every officerof the company who is in default.



(7) For the purposes of this section a register is “duly closed” if it is closed inaccordance with provision contained—

(a) in the articles or in the debentures,(b) in the case of debenture stock in the stock certificates, or(c) in the trust deed or other document securing the debentures or

debenture stock.The total period for which a register is closed in any year must not exceed 30days.

(8) References in this section to a register of debenture holders include aduplicate—

(a) of a register of debenture holders that is kept outside the UnitedKingdom, or

(b) of any part of such a register.

576 Time limit for claims arising from entry in register

(1) Liability incurred by a company—(a) from the making or deletion of an entry in the register of debenture

holders, or(b) from a failure to make or delete any such entry,

is not enforceable more than ten years after the date on which the entry wasmade or deleted or, as the case may be, the failure first occurred.

(2) This is without prejudice to any lesser period of limitation.

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Distributions

577 Distributions in kind

(1) Part 8 of the Companies Act 1985 (c. 6) (distributions) is amended as follows.

(2) After section 275 insert—

“Distributions in kind

275A Distribution in kind arising on disposition of non-cash asset at an undervalue: determination of amount

(1) This section applies for the purpose of determining the amount of anydistribution arising from the sale, transfer or other disposition by acompany of a non-cash asset.

(2) If the conditions in subsection (3) are met, the amount of thedistribution is—

(a) in a case in which the book value of the asset exceeds theamount or value of the consideration for the disposition, theamount of the excess, and

(b) in any other case, zero.

(3) The conditions are—(a) that, at the time of the disposition of the asset, the company has

profits available for distribution, and(b) that, if the amount of the distribution were determined in

accordance with subsection (2), the company could make thedistribution without contravening—

(i) section 263 (general limit on distributions), or(ii) section 264 (restriction on distribution of assets by

public companies).

(4) For the purposes of subsection (3)(a) the company’s profits availablefor distribution are treated as increased by the amount, if any, by whichthe amount or value of the consideration for the disposition exceeds thebook value of the asset.

(5) If the conditions in subsection (3) are not met, the amount of thedistribution is the amount by which the market value of the asset as atthe date of the disposition exceeds the amount or value of theconsideration for the disposition.

(6) In this section “book value”, in relation to an asset, means—(a) the amount at which the asset is stated in the accounts relevant

for the purposes of the distribution in accordance with sections270 to 275, or

(b) where the asset is not stated in those accounts at any amount,zero.

(7) The provisions of sections 270 to 275 (distribution to be justified byreference to company’s accounts) have effect subject to this section.”.

(3) In section 276 (distributions in kind)—(a) at the end of the heading insert “: treatment of unrealised profits”, and

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(b) for “of or including” substitute “arising from the sale, transfer or otherdisposition by it of”.

(4) After section 280 insert—

“280AApplication of rules of law restricting distribution

(1) Except as provided in this section, the provisions of this Part arewithout prejudice to any rule of law restricting the sums out of which,or the cases in which, a distribution may be made.

(2) For the purposes of any rule of law requiring distributions to be paidout of profits or restricting the return of capital to members—

(a) the amount of any distribution or return of capital arising fromthe sale, transfer or other disposition by a company of a non-cash asset must be determined in accordance with section 275A(distributions in kind: determination of amount); and

(b) section 276 (distributions in kind: treatment of unrealisedprofits) applies as it applies for the purposes of this Part.

(3) In this section references to distributions are to amounts regarded asdistributions for the purposes of any such rule of law as is referred to insubsection (1).”.

(5) In section 281 (saving for other restraints on distribution), omit “or rule of law”.

Redenomination of share capital

578 Redenomination of share capital

(1) A limited company having a share capital may by ordinary resolutionredenominate its share capital or any class of its share capital.“Redenominate” means convert shares from having a fixed nominal value inone currency to having a fixed nominal value in another currency.

(2) The conversion must be made at an appropriate spot rate of exchange specifiedin the resolution.

(3) The rate must be either—(a) a rate prevailing on a day specified in the resolution, or(b) a rate determined by taking the average of rates prevailing on each

consecutive day of a period specified in the resolution.The day or period specified for the purposes of paragraph (a) or (b) must bewithin the period of 28 days ending on the day before the resolution is passed.

(4) A resolution under this section may specify conditions which must be metbefore the redenomination takes effect.

(5) Redenomination in accordance with a resolution under this section takeseffect—

(a) on the day on which the resolution is passed, or(b) on such later day as may be determined in accordance with the

resolution.

(6) A resolution under this section lapses if the redenomination for which itprovides has not taken effect at the end of the period of 15 days beginning onthe date on which it is passed.

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(7) A company’s articles may prohibit or restrict the exercise of the powerconferred by this section.

579 Calculation of new nominal values

For each class of share the new nominal value of each share is calculated asfollows:Step OneTake the aggregate of the old nominal values of all the shares of that class.Step TwoTranslate that amount into the new currency at the rate of exchange specifiedin the resolution.Step ThreeRound the resulting figure to the nearest unit or sub-unit of the new currency.Step FourDivide that amount by the number of shares in the class.

580 Effect of redenomination

(1) The redenomination of shares does not affect any rights or obligations ofmembers under the company’s constitution, or any restrictions affectingmembers under the company’s constitution.In particular, it does not affect entitlement to dividends (including entitlementto dividends in a particular currency), voting rights or any liability in respectof amounts unpaid on shares.

(2) For this purpose the company’s constitution includes the terms on which anyshares of the company are allotted or held.

(3) Subject to subsection (1), references to the old nominal value of the shares inany agreement or statement, or in any deed, instrument or document, shall(unless the context otherwise requires) be read after the resolution takes effectas references to the new nominal value of the shares.

581 Notice to registrar of redenomination

(1) If a company having a share capital redenominates any of its share capital, itmust within one month after doing so give notice to the registrar, specifyingthe shares redenominated.

(2) The notice must—(a) state the date on which the resolution was passed, and(b) be accompanied by a statement of capital.

(3) The statement of capital must state with respect to the company’s share capitalas redenominated by the resolution—



(iii) the aggregate nominal value of shares of that class, and

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(d) the amount paid up and the amount (if any) unpaid on each share(whether on account of the nominal value of the share or by way ofpremium).



582 Reduction of capital in connection with redenomination

(1) A company that passes a resolution redenominating some or all of its sharesmay, for the purpose of adjusting the nominal values of the redenominatedshares to obtain values that are, in the opinion of the company, more suitable,reduce its share capital under this section.

(2) A reduction of capital under this section requires a special resolution of thecompany.

(3) Any such resolution must be passed within three months of the resolutioneffecting the redenomination.

(4) The amount by which a company’s share capital is reduced under this sectionmust not exceed 10% of the nominal value of the company’s allotted sharecapital immediately after the reduction.

(5) A reduction of capital under this section does not extinguish or reduce anyliability in respect of share capital not paid up.

(6) Nothing in—(a) sections 135 to 135C of the Companies Act 1985 (c. 6) (reduction of

capital supported by solvency statement), or(b) sections 135 and 136 to 141 of that Act (reduction of capital requiring

confirmation by court),applies to a reduction of capital under this section.

583 Notice to registrar of reduction of capital in connection with redenomination

(1) A company that passes a resolution under section 582 (reduction of capital inconnection with redenomination) must within 15 days after the resolution ispassed give notice to the registrar stating—

(a) the date of the resolution, and(b) the date of the resolution under section 578 in connection with which it

was passed.This is in addition to the copies of the resolutions themselves that are requiredto be delivered to the registrar under Chapter 2 of Part 3.


(3) The statement of capital must state with respect to the company’s share capitalas reduced by the resolution—

(a) the total number of shares of the company,

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(b) the aggregate nominal value of those shares,(c) for each class of shares—




(4) The registrar must register the notice and the statements on receipt.

(5) The reduction of capital is not effective until those documents are registered.

(6) The company must also deliver to the registrar, within 15 days after theresolution is passed, a statement by the directors confirming that the reductionin share capital is in accordance with section 582(4) (reduction of capital not toexceed 10% of nominal value of allotted shares immediately after reduction).

(7) If a company fails to comply with this section, an offence is committed by—(a) the company, and(b) every officer of the company who is in default.

(8) A person guilty of an offence under this section is liable—(a) on conviction on indictment to a fine, and(b) on summary conviction to a fine not exceeding the statutory maximum.

584 Redenomination reserve

(1) The amount by which a company’s share capital is reduced under section 582(reduction of capital in connection with redenomination) must be transferredto a reserve, called “the redenomination reserve”.

(2) The redenomination reserve may be applied by the company in paying upshares to be allotted to members as fully paid bonus shares.

(3) Subject to that, the provisions of the Companies Acts relating to the reductionof a company’s share capital apply as if the redenomination reserve were paid-up share capital of the company.

PART 20

TRANSFER OF SECURITIES

585 Transfer of securities: power to make regulations

(1) The power to make regulations under section 207 of the Companies Act 1989(c. 40) (regulations enabling title to securities to be evidenced and transferredwithout a written instrument) is exercisable by the Treasury and the Secretaryof State, either jointly or concurrently.

(2) The references in that section to the Secretary of State, which by virtue of theTransfer of Functions (Financial Services) Order 1992 are to be read asreferences to the Treasury, shall accordingly be read as references to both oreither of them, as the case may require.

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586 Transfer of securities: extension of powers

(1) Regulations under section 207 of the Companies Act 1989 (c. 40) may makeprovision—

(a) enabling the members of a company, or of any designated class ofcompanies to adopt, by ordinary resolution, arrangements underwhich title to securities is required to be evidenced and transferredwithout a written instrument; or

(b) requiring companies, or any designated class of companies, to adoptsuch arrangements.

(2) The regulations may make such provision—(a) in respect of all securities issued by a company, or(b) in respect of all securities of a specified description.

(3) The references in subsection (1) to a designated class of companies are to a classdesignated by the Treasury or the Secretary of State, in the regulations or byorder.

(4) The arrangements provided for by regulations making such provision as ismentioned in subsection (1) must not be such that a person who, but for thearrangements would be entitled—

(a) to have his name entered in the company’s register of members, or(b) to give instructions in respect of any securities,

ceases to be so entitled.

(5) The regulations may—(a) prohibit the issue of any certificate by the company in respect of the

issue or transfer of securities,(b) require the provision by the company to holders of securities of

statements (at specified intervals or on specified occasions) of thesecurities held in their name, and

(c) make provision as to the matters of which any such certificate orstatement is, or is not, evidence.

This is without prejudice to the generality of the power conferred by section207 of the Companies Act 1989.

(6) In this section—(a) “company” has the meaning given by section 1 of this Act;(b) “specified” means specified in the regulations; and(c) expressions that are also used in section 207 of the Companies Act 1989

have the same meaning as in that section.

587 Transfer of securities: supplementary provisions

(1) Before making regulations under section 207 of the Companies Act 1989, or anyorder under section 586(3) (designation orders), the Treasury or the Secretaryof State must carry out such consultation as appears to them to be appropriate.

(2) In section 207 of the Companies Act 1989—(a) the requirement in the second sentence of subsection (4) (rights and

obligations under regulations to correspond with those that wouldarise apart from the regulations) shall cease to have effect, and

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(b) in subsection (7) for “the purposes mentioned above” substitute “thepurposes of this section and section 586 of the Company Law ReformAct 2006”.

PART 21

INFORMATION ABOUT INTERESTS IN COMPANY’S SHARES

Introductory

588 Companies to which this Part applies

This Part applies only to public companies.

589 Shares to which this Part applies

(1) References in this Part to a company’s shares are to the company’s issuedshares of a class carrying rights to vote in all circumstances at general meetingsof the company (excluding any shares held as treasury shares).

(2) The temporary suspension of voting rights in respect of any shares does notaffect the application of this Part in relation to interests in those or any othershares.

Notice requiring information about interests in shares

590 Notice by company requiring information about interests in its shares

(1) A public company may give notice under this section to any person whom thecompany knows or has reasonable cause to believe—

(a) to be interested in the company’s shares, or(b) to have been so interested at any time during the three years

immediately preceding the date on which the notice is issued.

(2) The notice may require the person—(a) to confirm that fact or (as the case may be) to state whether or not it is

the case, and(b) if he holds, or has during that time held, any such interest, to give such

further information as may be required in accordance with thefollowing provisions of this section.

(3) The notice may require the person to whom it is addressed to give particularsof his own present or past interest in the company’s shares (held by him at anytime during the three year period mentioned in subsection (1)(b)).

(4) The notice may require the person to whom it is addressed, where—(a) his interest is a present interest and another interest in the shares

subsists, or(b) another interest in the shares subsisted during that three year period at

a time when his interest subsisted,to give, so far as lies within his knowledge, such particulars with respect to thatother interest as may be required by the notice.

(5) The particulars referred to in subsections (3) and (4) include—

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(a) the identity of persons interested in the shares in question, and(b) whether persons interested in the same shares are or were parties to—

(i) an agreement to which section 613 applies (certain shareacquisition agreements), or

(ii) an agreement or arrangement relating to the exercise of anyrights conferred by the holding of the shares.

(6) The notice may require the person to whom it is addressed, where his interestis a past interest, to give (so far as lies within his knowledge) particulars of theidentity of the person who held that interest immediately upon his ceasing tohold it.

(7) The information required by the notice must be given within such reasonabletime as may be specified in the notice.

591 Notice requiring information: order imposing restrictions on shares

(1) Where—(a) a notice under section 590 (notice requiring information about interests

in company’s shares) is served by a company on a person who is or wasinterested in shares in the company, and

(b) that person fails to give the company the information required by thenotice within the time specified in it,

the company may apply to the court for an order directing that the shares inquestion be subject to the restrictions of Part 15 of the Companies Act 1985(c. 6).

(2) If the court is satisfied that such an order may unfairly affect the rights of thirdparties in respect of the shares, the court may, for the purpose of protectingthose rights and subject to such terms as it thinks fit, direct that such acts bysuch persons or descriptions of persons and for such purposes as may be setout in the order shall not constitute a breach of the restrictions.

(3) On an application under this section the court may make an interim order.Any such order may be made unconditionally or on such terms as the courtthinks fit.

(4) An order under this section may be made by the court notwithstanding anypower contained in the applicant company’s articles enabling the companyitself to impose similar restrictions on the shares in question.

592 Notice requiring information: offences

(1) A person who—(a) fails to comply with a notice under section 590 (notice requiring

information about interests in company’s shares), or(b) in purported compliance with such a notice—

(i) makes a statement that he knows to be false in a materialparticular, or

(ii) recklessly makes a statement that is false in a materialparticular,

commits an offence.

(2) A person does not commit an offence under subsection (1)(a) if he proves thatthe requirement to give information was frivolous or vexatious.

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593 Notice requiring information: persons exempted from obligation to comply

(1) A person is not obliged to comply with a notice under section 590 (noticerequiring information about interests in company’s shares) if he is for the timebeing exempted by the Secretary of State from the operation of that section.

(2) The Secretary of State must not grant any such exemption unless—(a) he has consulted the Governor of the Bank of England, and(b) he (the Secretary of State) is satisfied that, having regard to any

undertaking given by the person in question with respect to anyinterest held or to be held by him in any shares, there are specialreasons why that person should not be subject to the obligationsimposed by that section.

Power of members to require company to act

594 Power of members to require company to act

(1) The members of a company may require it to exercise its powers under section590 (notice requiring information about interests in shares).

(2) A company is required to do so once it has received requests from members ofthe company holding at least 10% of such of the paid-up capital of the companyas carries a right to vote at general meetings of the company (excluding anyvoting rights attached to any shares in the company held as treasury shares).

(3) A request—(a) may be in hard copy form or in electronic form,(b) must—

(i) state that the company is requested to exercise its powers undersection 590,

(ii) specify the manner in which the company is requested to act,and

(iii) give reasonable grounds for requiring the company to exercisethose powers in the manner specified, and

(c) must be authenticated by the person or persons making it.

595 Duty of company to comply with requisition

(1) On the making of a requisition complying with section 594, it is the company’sduty to exercise its powers under section 590 (notice requiring informationabout interests in company’s shares) in the manner specified in the requisition.

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(2) If default is made in complying with subsection (1) an offence is committed byevery officer of the company who is in default.


maximum.

596 Report to members on outcome of investigation

(1) On the conclusion of an investigation carried out by a company in pursuanceof a requisition under section 594 the company must cause a report of theinformation received in pursuance of the investigation to be prepared.The report must be made available at the company’s registered office within areasonable period (not more than 15 days) after the conclusion of theinvestigation.

(2) Where—(a) a company undertakes an investigation in pursuance of a requisition

under section 594, and(b) the investigation is not concluded within three months after the date on

which the requisition was made,the company must cause to be prepared in respect of that period, and in respectof each succeeding period of three months ending before the conclusion of theinvestigation, an interim report of the information received during that periodin pursuance of the investigation.

(3) Each such report must be made available at the company’s registered officewithin a reasonable period (not more than 15 days) after the end of the periodto which it relates.

(4) The company must within three days of making any report prepared underthis section available at its registered office, notify the requisitionists that thereport is so available.

(5) For the purposes of this section an investigation carried out by a company inpursuance of a requisition under section 594 is concluded when—

(a) the company has made all such inquiries as are necessary or expedientfor the purposes of the requisition, and

(b) in the case of each such inquiry—(i) a response has been received by the company, or

(ii) the time allowed for a response has elapsed.

(6) A report prepared under this section must be kept at the company’s registeredoffice for at least six years after the day on which it is first made available there.

597 Report to members: offences

(1) If default is made in complying with section 596 (report to members onoutcome of investigation), an offence is committed by every officer of thecompany who is in default.


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598 Right to inspect and request copy of reports

(1) Any report prepared under section 596 must be open to inspection by anyperson without charge.

(2) Any person is entitled, on request and on payment of such fee as may beprescribed, to be provided with a copy of any such report or any part of it.The copy must be provided within ten days after the request is received by thecompany.

(3) If an inspection required under subsection (1) is refused, or default is made incomplying with subsection (2), an offence is committed by—




Register of interests disclosed

599 Register of interests disclosed

(1) The company must keep a register of information received by it in pursuanceof a requirement imposed under section 590 (notice requiring informationabout interests in company’s shares).

(2) Whenever the company receives any such information, it must enter in theregister—

(a) the fact that the requirement was imposed and the date on which it wasimposed, and

(b) the information received in pursuance of the requirement.

(3) The information must be entered against the name of the present holder of theshares in question or, if there is no present holder or the present holder is notknown, against the name of the person holding the interest.

(4) It must do so within the period of three days after the information is receivedby it.

(5) The register must be made up so that the entries against the names entered init appear in chronological order.

(6) If default is made in complying with this section an offence is committed by—(a) the company, and(b) every officer of the company who is in default.

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(8) The company is not by virtue of anything done for the purposes of this sectionaffected with notice or, or put upon inquiry as to, the rights of any person inrelation to any shares.

600 Register to be kept available for inspection

(1) The register kept under section 599 (register of interests disclosed) must bekept available for inspection at the company’s registered office or at the placewhere the company’s register of members is kept.

(2) A company must give notice to the registrar of companies of the place wherethe register is kept available for inspection and of any change in that place.

(3) No such notice is required if the register has at all times been kept available forinspection at the company’s registered office.

(4) If default is made in complying with subsection (1), or a company makesdefault for 14 days in complying with subsection (2), an offence is committedby—



601 Associated index

(1) Unless the register kept under section 599 (register of interests disclosed) iskept in such a form as itself to constitute an index, the company must keep anindex of the names entered in it.

(2) The company must make any necessary entry or alteration in the index withinten days after the date on which any entry or alteration is made in the register.

(3) The index must contain, in respect of each name, a sufficient indication toenable the information entered against it to be readily found.

(4) The index must be at all times kept available for inspection at the same place asthe register.



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602 Right to inspect and request copy of entries

(1) The register required to be kept under section 599 (register of interestsdisclosed), and any associated index, must be open to inspection by any personwithout charge.

(2) Any person is entitled, on request and on payment of such fee as may beprescribed, to be provided with a copy of any entry in the register.The copy must be provided within ten days after the request is received by thecompany.

(3) If an inspection required under subsection (1) is refused, or default is made incomplying with subsection (2), an offence is committed by—




603 Entries not to be removed from register

(1) Entries in the register kept under section 599 (register of interests disclosed)must not be deleted except in accordance with—

section 604 (old entries), orsection 605 (incorrect entry relating to third party).

(2) If an entry is deleted in contravention of subsection (1), the company mustrestore it as soon as reasonably practicable.

(3) If default is made in complying with subsection (1) or (2), an offence iscommitted by—


(4) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and, forcontinued contravention of subsection (2), a daily default fine not exceedingone-tenth of level 3 on the standard scale.

604 Removal of entries from register: old entries

A company may remove an entry from the register kept under section 599(register of interests disclosed) if more than six years have elapsed since theentry was made.

605 Removal of entries from register: incorrect entry relating to third party

(1) This section applies where in pursuance of an obligation imposed by a noticeunder section 590 (notice requiring information about interests in company’s

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shares) a person gives to a company the name and address of another personas being interested in shares in the company.

(2) That other person may apply to the company for the removal of the entry fromthe register.

(3) If the company is satisfied that the information in pursuance of which the entrywas made is incorrect, it shall remove the entry.

(4) If an application under subsection (3) is refused, the applicant may apply to thecourt for an order directing the company to remove the entry in question fromthe register.The court may make such an order if it thinks fit.

606 Adjustment of entry relating to share acquisition agreement

(1) If a person who is identified in the register kept by a company under section599 (register of interests disclosed) as being a party to an agreement to whichsection 613 applies (certain share acquisition agreements) ceases to be a partyto the agreement, he may apply to the company for the inclusion of thatinformation in the register.

(2) If the company is satisfied that he has ceased to be a party to the agreement, itshall record that information (if not already recorded) in every place where hisname appears in the register as a party to the agreement.

(3) If an application under this section is refused (otherwise than on the groundthat the information has already been recorded), the applicant may apply to thecourt for an order directing the company to include the information in questionin the register.The court may make such an order if it thinks fit.

607 Duty of company ceasing to be public company

(1) If a company ceases to be a public company, it must continue to keep anyregister kept under section 599 (register of interests disclosed), and anyassociated index, until the end of the period of six years after it ceased to besuch a company.



Meaning of interest in shares

608 Interest in shares: general

(1) This section applies to determine for the purposes of this Part whether a personhas an interest in shares.

(2) In this Part—

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(a) a reference to an interest in shares includes an interest of any kindwhatsoever in the shares, and

(b) any restraints or restrictions to which the exercise of any right attachedto the interest is or may be subject shall be disregarded.

(3) Where an interest in shares is comprised in property held on trust, everybeneficiary of the trust is treated as having an interest in the shares.

(4) A person is treated as having an interest in shares if—(a) he enters into a contract for their purchase by him (whether for cash or

other consideration), or(b) not being the registered holder, he is entitled—

(i) to exercise any right conferred by the holding of the shares, or(ii) to control the exercise of any such right.

(5) For the purposes of subsection (4)(b) a person is entitled to exercise or controlthe exercise of a right conferred by the holding of shares if he—

(a) has a right (whether subject to conditions or not) the exercise of whichwould make him so entitled, or

(b) is under an obligation (whether subject to conditions or not) thefulfilment of which would make him so entitled.

(6) A person is treated as having an interest in shares if—(a) he has a right to call for delivery of the shares to himself or to his order,

or(b) he has a right to acquire an interest in shares or is under an obligation

to take an interest in shares.This applies whether the right or obligation is conditional or absolute.

(7) Persons having a joint interest are treated as each having that interest.

(8) It is immaterial that shares in which a person has an interest are unidentifiable.

609 Interest in shares: right to subscribe for shares

(1) Section 590 (notice by company requiring information about interests in itsshares) applies in relation to a person who has, or previously had, or is or wasentitled to acquire, a right to subscribe for shares in the company as it appliesin relation to a person who is or was interested in shares in that company.

(2) References in that section to an interest in shares shall be read accordingly.

610 Interest in shares: family interests

(1) For the purposes of this Part a person is taken to be interested in shares inwhich—

(a) his spouse or civil partner, or(b) any infant child or step-child of his,

is interested.

(2) In relation to Scotland “infant” means a person under the age of 18 years.

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611 Interest in shares: corporate interests

(1) For the purposes of this Part a person is taken to be interested in shares if abody corporate is interested in them and—

(a) the body or its directors are accustomed to act in accordance with hisdirections or instructions, or

(b) he is entitled to exercise or control the exercise of one-third or more ofthe voting power at general meetings of the body.

(2) For the purposes of this section a person is treated as entitled to exercise orcontrol the exercise of voting power if—

(a) another body corporate is entitled to exercise or control the exercise ofthat voting power, and

(b) he is entitled to exercise or control the exercise of one-third or more ofthe voting power at general meetings of that body corporate.

(3) For the purposes of this section a person is treated as entitled to exercise orcontrol the exercise of voting power if—

(a) he has a right (whether or not subject to conditions) the exercise ofwhich would make him so entitled, or

(b) he is under an obligation (whether or not subject to conditions) thefulfilment of which would make him so entitled.

612 Interest in shares: agreement to acquire interests in a particular company

(1) The obligation of disclosure may arise from an agreement between two ormore persons that includes provision for the acquisition by any one or more ofthem of interests in shares of a particular public company (the “targetcompany” for that agreement).

(2) This section applies to such an agreement if—(a) the agreement includes provision imposing obligations or restrictions

on any one or more of the parties to it with respect to their use, retentionor disposal of their interests in the shares of the target companyacquired in pursuance of the agreement (whether or not together withany other interests of theirs in the company’s shares to which theagreement relates), and

(b) an interest in the target company’s shares is in fact acquired by any ofthe parties in pursuance of the agreement.

(3) The reference in subsection (2) to the use of interests in shares in the targetcompany is to the exercise of any rights or of any control or influence arisingfrom those interests (including the right to enter into an agreement for theexercise, or for control of the exercise, of any of those rights by another person).

(4) Once an interest in shares in the target company has been acquired inpursuance of the agreement, this section continues to apply to the agreementso long as the agreement continues to include provisions of any descriptionmentioned in subsection (2).This applies irrespective of—

(a) whether or not any further acquisitions of interests in the company’sshares take place in pursuance of the agreement;

(b) any change in the persons who are for the time being parties to it;(c) any variation of the agreement.

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References in this subsection to the agreement include any agreement havingeffect (whether directly or indirectly) in substitution for the originalagreement.

(5) In this section—(a) “agreement” includes any agreement or arrangement, and(b) references to provisions of an agreement include—

(i) undertakings, expectations or understandings operative underan arrangement, and

(ii) any provision whether express or implied and whetherabsolute or not.

References elsewhere in this Part to an agreement to which this section applieshave a corresponding meaning.

(6) This section does not apply—(a) to an agreement that is not legally binding unless it involves mutuality

in the undertakings, expectations or understandings of the parties to it;or

(b) to an agreement to underwrite or sub-underwrite an offer of shares ina company, provided the agreement is confined to that purpose andany matters incidental to it.

613 Extent of obligation in case of share acquisition agreement

(1) For the purposes of this Part each party to an agreement to which this sectionapplies is treated as interested in all shares in the target company in which anyother party to the agreement is interested apart from the agreement (whetheror not the interest of the other party was acquired, or includes any interest thatwas acquired, in pursuance of the agreement).

(2) For those purposes an interest of a party to such an agreement in shares in thetarget company is an interest apart from the agreement if he is interested inthose shares otherwise than by virtue of the application of section 612 (and thissection) in relation to the agreement.

(3) Accordingly, any such interest of the person (apart from the agreement)includes for those purposes any interest treated as his under section 610 or 611(family or corporate interests) or by the application of section 612 (and thissection) in relation to any other agreement with respect to shares in the targetcompany to which he is a party.

(4) A notification with respect to his interest in shares in the target company madeto the company under this Part by a person who is for the time being a party toan agreement to which section 612 applies must—

(a) state that the person making the notification is a party to such anagreement,

(b) include the names and (so far as known to him) the addresses of theother parties to the agreement, identifying them as such, and

(c) state whether or not any of the shares to which the notification relatesare shares in which he is interested by virtue of section 612 (and thissection) and, if so, the number of those shares.

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614 Information protected from wider disclosure

(1) Information in respect of which a company is for the time being entitled to anyexemption conferred by regulations under section 382(3) (information aboutrelated undertakings to be given in notes to accounts: exemption wheredisclosure harmful to company’s business)—

(a) must not be included in a report under section 596 (report to memberson outcome of investigation), and

(b) must not be made available under section 602 (right to inspect andrequest copy of entries).

(2) Where any such information is omitted from a report under section 596, thatfact must be stated in the report.

615 Reckoning of periods for fulfilling obligations

Where the period allowed by any provision of this Part for fulfilling anobligation is expressed as a number of days, any day that is a Saturday orSunday or a bank holiday in the part of the United Kingdom in which thecompany is registered shall be disregarded in reckoning that period.

616 Power to make further provision by regulations

(1) The Secretary of State may by regulations amend—(a) the definition of shares to which this Part applies (section 589),(b) the provisions as to notice by a company requiring information about

interests in its shares (section 590), and(c) the provisions as to what is taken to be an interest in shares (sections

608 and 609).

(2) The regulations may amend, repeal or replace those provisions and make suchother consequential amendments or repeals of provisions of this Part as appearto the Secretary of State to be appropriate.


PART 22

TAKEOVERS ETC

CHAPTER 1

THE TAKEOVER PANEL

The Panel and its rules

617 The Panel

(1) The body known as the Panel on Takeovers and Mergers (“the Panel”) is tohave the functions conferred on it by or under this Chapter.

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(2) The Panel may do anything that it considers necessary or expedient for thepurposes of, or in connection with, its functions.

(3) The Panel may make arrangements for any of its functions to be dischargedby—

(a) a committee or sub-committee of the Panel, or(b) an officer or member of staff of the Panel, or a person acting as such.

618 Rules

(1) The Panel must make rules giving effect to Articles 3.1, 4.2, 5, 6.1 to 6.3, 7 to 9and 13 of the Takeovers Directive.

(2) Rules made by the Panel may also make other provision—(a) for or in connection with the regulation of—

(i) takeover bids,(ii) merger transactions, and

(iii) transactions (not falling within sub-paragraph (i) or (ii)) thathave or may have, directly or indirectly, an effect on theownership or control of companies;

(b) for or in connection with the regulation of things done in consequenceof, or otherwise in relation to, any such bid or transaction;

(c) about cases where—(i) any such bid or transaction is, or has been, contemplated or

apprehended, or(ii) an announcement is made denying that any such bid or

transaction is intended.

(3) The provision that may be made under subsection (2) includes, in particular,provision for a matter that is, or is similar to, a matter provided for by the Panelin—

(a) the City Code on Takeovers and Mergers, or(b) the Rules Governing Substantial Acquisitions of Shares,

as that Code or those Rules had effect immediately before the passing of thisAct.

(4) When discharging its functions under this section the Panel must do so by acommittee of the Panel.

(5) Subsection (4) does not apply in relation to rules made by virtue of section 632(fees and charges).

(6) Section 1 (meaning of “company”) does not apply for the purposes of thissection.

(7) In this section “takeover bid” includes a takeover bid within the meaning of theTakeovers Directive.

(8) In this Chapter “the Takeovers Directive” means Directive 2004/25/EC of theEuropean Parliament and of the Council.

(9) A reference to rules in the following provisions of this Chapter is to rules underthis section.

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619 Further provisions about rules

(1) Rules may—(a) make different provision for different purposes;(b) make provision subject to exceptions or exemptions;(c) contain incidental, supplemental, consequential or transitional

provision;(d) authorise the Panel to dispense with or modify the application of rules

in particular cases and by reference to any circumstances.Rules made by virtue of paragraph (d) must require the Panel to give reasonsfor acting as mentioned in that paragraph.

(2) Rules must be made by an instrument in writing.

(3) Immediately after an instrument containing rules is made, the text must bemade available to the public, with or without payment, in whatever way thePanel thinks appropriate.

(4) A person is not to be taken to have contravened a rule if he shows that at thetime of the alleged contravention the text of the rule had not been madeavailable as required by subsection (3).

(5) The production of a printed copy of an instrument purporting to be made bythe Panel on which is endorsed a certificate signed by an officer of the Panelauthorised by it for that purpose and stating—

(a) that the instrument was made by the Panel,(b) that the copy is a true copy of the instrument, and(c) that on a specified date the text of the instrument was made available

to the public as required by subsection (3),is evidence (or in Scotland sufficient evidence) of the facts stated in thecertificate.

(6) A certificate purporting to be signed as mentioned in subsection (5) is to betreated as having been properly signed unless the contrary is shown.

(7) A person who wishes in any legal proceedings to rely on an instrument bywhich rules are made may require the Panel to endorse a copy of theinstrument with a certificate of the kind mentioned in subsection (5).

620 Rulings

(1) The Panel may give rulings on the interpretation, application or effect of rules.

(2) To the extent and in the circumstances specified in rules, and subject to anyreview or appeal, a ruling has binding effect.

621 Directions

Rules may contain provision conferring power on the Panel to give anydirection that appears to the Panel to be necessary in order—

(a) to restrain a person from acting (or continuing to act) in breach of rules;(b) to restrain a person from doing (or continuing to do) a particular thing,

pending determination of whether that or any other conduct of his is orwould be a breach of rules;

(c) otherwise to secure compliance with rules.

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Information

622 Power to require documents and information

(1) The Panel may by notice in writing require a person—(a) to produce any documents that are specified or described in the notice;(b) to provide, in the form and manner specified in the notice, such

information as may be specified or described in the notice.

(2) A requirement under subsection (1) must be complied with—(a) at a place specified in the notice, and(b) before the end of such reasonable period as may be so specified.

(3) This section applies only to documents and information reasonably required inconnection with the exercise by the Panel of its functions.

(4) The Panel may require—(a) any document produced to be authenticated, or(b) any information provided (whether in a document or otherwise) to be

verified,in such manner as it may reasonably require.

(5) The Panel may authorise a person to exercise any of its powers under thissection.

(6) A person exercising a power by virtue of subsection (5) must, if required to doso, produce evidence of his authority to exercise the power.

(7) The production of a document in pursuance of this section does not affect anylien that a person has on the document.

(8) The Panel may take copies of or extracts from a document produced inpursuance of this section.

(9) A reference in this section to the production of a document includes a referenceto the production of—

(a) a legible and intelligible copy of information recorded otherwise thanin legible form, or

(b) information in a form from which it can readily be produced in legibleand intelligible form.

(10) A person is not required by this section to disclose documents or informationin respect of which a claim to legal professional privilege (in Scotland, toconfidentiality of communications) could be maintained in legal proceedings.

623 Restrictions on disclosure

(1) This section applies to information (in whatever form)—(a) relating to the private affairs of an individual, or(b) relating to any particular business,

that is provided to the Panel in connection with the exercise of its functions.

(2) No such information may, during the lifetime of the individual or so long asthe business continues to be carried on, be disclosed without the consent of thatindividual or (as the case may be) the person for the time being carrying on thatbusiness.

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(3) Subsection (2) does not apply to any disclosure of information that—(a) is made for the purpose of facilitating the carrying out by the Panel of

any of its functions,(b) is made to a person specified in Part 1 of Schedule 2,(c) is of a description specified in Part 2 of that Schedule, or(d) is made in accordance with Part 3 of that Schedule.

(4) The Secretary of State may amend Schedule 2 by order subject to negativeresolution procedure.

(5) An order under subsection (4) must not—(a) amend Part 1 of Schedule 2 by specifying a person unless the person

exercises functions of a public nature (whether or not he exercises anyother function);

(b) amend Part 2 of Schedule 2 by adding or modifying a description ofdisclosure unless the purpose for which the disclosure is permitted islikely to facilitate the exercise of a function of a public nature;

(c) amend Part 3 of Schedule 2 so as to have the effect of permittingdisclosures to be made to a body other than one that exercises functionsof a public nature in a country or territory outside the United Kingdom.

(6) Subsection (2) does not apply to the disclosure, by an authority withinsubsection (7), of information disclosed by the Panel to that authority inreliance on subsection (3).

(7) The authorities within this subsection are—(a) the Financial Services Authority;(b) an authority designated as a supervisory authority for the purposes of

Article 4.1 of the Takeovers Directive;(c) any other person or body that exercises functions of a public nature,

under legislation in an EEA State other than the United Kingdom, thatare similar to the Panel’s functions or those of the Financial ServicesAuthority.

(8) This section does not prohibit the disclosure of information if the informationis or has been available to the public from any other source.

(9) Nothing in this section authorises the making of a disclosure in contraventionof the Data Protection Act 1998 (c. 29).

624 Offence of disclosure in contravention of section 623

(1) A person who discloses information in contravention of section 623 is guilty ofan offence, unless—

(a) he did not know, and had no reason to suspect, that the informationhad been provided as mentioned in section 623(1), or

(b) he took all reasonable steps and exercised all due diligence to avoid thecommission of the offence.



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(3) Where a company or other body corporate commits an offence under thissection, an offence is also committed by every officer of the company or otherbody corporate who is in default.

Co-operation

625 Panel’s duty of co-operation

(1) The Panel must take such steps as it considers appropriate to co-operate with—(a) the Financial Services Authority;(b) an authority designated as a supervisory authority for the purposes of

Article 4.1 of the Takeovers Directive;(c) any other person or body that exercises functions of a public nature,

under legislation in any country or territory outside the UnitedKingdom, that appear to the Panel to be similar to its own functions orthose of the Financial Services Authority.

(2) Co-operation may include the sharing of information that the Panel is notprevented from disclosing.

Hearings and appeals

626 Hearings and appeals

(1) Rules must provide for a decision of the Panel to be subject to review by acommittee of the Panel (the “Hearings Committee”) at the instance of suchpersons affected by the decision as are specified in the rules.

(2) Rules may also confer other functions on the Hearings Committee.

(3) Rules must provide for there to be a right of appeal against a decision of theHearings Committee to an independent tribunal (the “Takeover AppealBoard”) in such circumstances and subject to such conditions as are specifiedin the rules.

(4) Rules may contain—(a) provision as to matters of procedure in relation to proceedings before

the Hearings Committee (including provision imposing time limits);(b) provision about evidence in such proceedings;(c) provision as to the powers of the Hearings Committee dealing with a

matter referred to it;(d) provision about enforcement of decisions of the Hearings Committee

and the Takeover Appeal Board.

(5) Rules must contain provision—

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(a) requiring the Panel, when acting in relation to any proceedings beforethe Hearings Committee or the Takeover Appeal Board, to do so by anofficer or member of staff of the Panel (or a person acting as such);

(b) preventing a person who is or has been a member of the committeementioned in section 618(4) from being a member of the HearingsCommittee or the Takeover Appeal Board;

(c) preventing a person who is a member of the committee mentioned insection 618(4), of the Hearings Committee or of the Takeover AppealBoard from acting as mentioned in paragraph (a).

Contravention of rules etc

627 Sanctions

Rules may contain provision conferring power on the Panel to imposesanctions on a person who has—

(a) acted in breach of rules, or(b) failed to comply with a direction given by virtue of section 621.

628 Failure to comply with rules about bid documentation

(1) This section applies where a takeover bid is made for a company that hassecurities carrying voting rights admitted to trading on a regulated market.

(2) Where an offer document published in respect of the bid does not comply withoffer document rules, an offence is committed by—

(a) the person making the bid, and(b) any director, member, employee or agent of the person making the bid

who caused the document to be published.

(3) A person commits an offence under subsection (2) only if—(a) he knew that the offer document did not comply, or was reckless as to

whether it complied, and(b) he failed to take all reasonable steps to secure that it did comply.

(4) Where a company or other body corporate commits an offence undersubsection (2), an offence is also committed by every officer of the company orother body corporate who is in default.

(5) Where a response document published in respect of the bid does not complywith response document rules, an offence is committed by any director orother officer of the company referred to in subsection (1) who—

(a) knew that the response document did not comply, or was reckless as towhether it complied, and

(b) failed to take all reasonable steps to secure that it did comply.

(6) A person guilty of an offence under this section is liable— (a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum.

(7) Nothing in this section affects any power of the Panel in relation to theenforcement of its rules.

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(8) Section 1 (meaning of “company”) does not apply for the purposes of thissection.

(9) In this section—“designated” means designated in rules;“offer document” means a document required to be published by rules

giving effect to Article 6.2 of the Takeovers Directive;“offer document rules” means rules designated as rules that give effect to

Article 6.3 of that Directive;“regulated market” has the meaning given by Article 4.1(14) of Directive

2004/39/EC of the European Parliament and of the Council on marketsin financial instruments;

“response document” means a document required to be published byrules giving effect to Article 9.5 of the Takeovers Directive;

“response document rules” means rules designated as rules that giveeffect to the first sentence of Article 9.5 of that Directive;

“securities” means shares or debentures;“takeover bid” includes a takeover bid within the meaning of that

Directive;“voting rights” means rights to vote at general meetings of the company

in question, including rights that arise only in certain circumstances.

629 Compensation

(1) Rules may confer power on the Panel to order a person to pay suchcompensation as it thinks just and reasonable if he is in breach of a rule theeffect of which is to require the payment of money.

(2) Rules made by virtue of this section may include provision for the payment ofinterest (including compound interest).

630 Enforcement by the court

(1) If, on the application of the Panel, the court is satisfied—(a) that there is a reasonable likelihood that a person will contravene a

rule-based requirement, or(b) that a person has contravened a rule-based requirement or a disclosure

requirement,the court may make any order it thinks fit to secure compliance with therequirement.

(2) In subsection (1) “the court” means the High Court or, in Scotland, the Court ofSession.

(3) Except as provided by subsection (1), no person—(a) has a right to seek an injunction, or(b) in Scotland, has title or interest to seek an interdict or an order for

specific performance,to prevent a person from contravening (or continuing to contravene) a rule-based requirement or a disclosure requirement.

(4) In this section—“contravene” includes fail to comply;

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“disclosure requirement” means a requirement imposed under section622;

“rule-based requirement” means a requirement imposed by or underrules.

631 No action for breach of statutory duty etc

(1) Contravention of a rule-based requirement or a disclosure requirement doesnot give rise to any right of action for breach of statutory duty.

(2) Contravention of a rule-based requirement does not make any transaction voidor unenforceable or (subject to any provision made by rules) affect the validityof any other thing.

(3) In this section—(a) “contravention” includes failure to comply;(b) “disclosure requirement” and “rule-based requirement” have the same

meaning as in section 630.

Funding

632 Fees and charges

(1) Rules may provide for fees or charges to be payable to the Panel for thepurpose of meeting any part of its expenses.

(2) A reference in this section or section 633 to expenses of the Panel is to anyexpenses that have been or are to be incurred by the Panel in, or in connectionwith, the discharge of its functions, including in particular—

(a) payments in respect of the expenses of the Takeover Appeal Board;(b) the cost of repaying the principal of, and of paying any interest on, any

money borrowed by the Panel;(c) the cost of maintaining adequate reserves.

633 Levy

(1) For the purpose of meeting any part of the expenses of the Panel, the Secretaryof State may by regulations provide for a levy to be payable to the Panel—

(a) by specified persons or bodies, or persons or bodies of a specifieddescription, or

(b) on transactions, of a specified description, in securities on specifiedmarkets.

In this subsection “specified” means specified in the regulations.

(2) The power to specify (or to specify descriptions of) persons or bodies must beexercised in such a way that the levy is payable only by persons or bodies thatappear to the Secretary of State—

(a) to be capable of being directly affected by the exercise of any of thefunctions of the Panel, or

(b) otherwise to have a substantial interest in the exercise of any of thosefunctions.

(3) Regulations under this section may in particular—

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(a) specify the rate of the levy and the period in respect of which it ispayable at that rate;

(b) make provision as to the times when, and the manner in which,payments are to be made in respect of the levy.

(4) In determining the rate of the levy payable in respect of a particular period, theSecretary of State—

(a) must take into account any other income received or expected by thePanel in respect of that period;

(b) may take into account estimated as well as actual expenses of the Panelin respect of that period.

(5) The Panel must—(a) keep proper accounts in respect of any amounts of levy received by

virtue of this section;(b) prepare, in relation to each period in respect of which any such

amounts are received, a statement of account relating to those amountsin such form and manner as is specified in the regulations.

Those accounts must be audited, and the statement certified, by personsappointed by the Secretary of State.

(6) Regulations under this section—(a) are subject to affirmative resolution procedure if subsection (7) applies

to them;(b) otherwise, are subject to negative resolution procedure.

(7) This subsection applies to—(a) the first regulations under this section;(b) any other regulations under this section that would result in a change

in the persons or bodies by whom, or the transactions on which, thelevy is payable.

(8) If a draft of an instrument containing regulations under this section would,apart from this subsection, be treated for the purposes of the Standing Ordersof either House of Parliament as a hybrid instrument, it is to proceed in thatHouse as if it were not such an instrument.

634 Recovery of fees, charges or levy

An amount payable by any person or body by virtue of section 632 or 633 is adebt due from that person or body to the Panel, and is recoverable accordingly.

Miscellaneous and supplementary

635 Panel as party to proceedings

The Panel is capable (despite being an unincorporated body) of—(a) bringing proceedings under this Chapter in its own name;(b) bringing or defending any other proceedings in its own name.

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636 Exemption from liability in damages

(1) Neither the Panel, nor any person within subsection (2), is to be liable indamages for anything done (or omitted to be done) in, or in connection with,the discharge or purported discharge of the Panel’s functions.

(2) A person is within this subsection if—(a) he is (or is acting as) a member, officer or member of staff of the Panel,

or(b) he is a person authorised under section 622(5).

(3) Subsection (1) does not apply—(a) if the act or omission is shown to have been in bad faith, or(b) so as to prevent an award of damages in respect of the act or omission

on the ground that it was unlawful as a result of section 6(1) of theHuman Rights Act 1998 (c. 42) (acts of public authorities incompatiblewith Convention rights).

637 Privilege against self-incrimination

(1) A statement made by a person in response to—(a) a requirement under section 622(1), or(b) an order made by the court under section 630 to secure compliance with

such a requirement,may not be used against him in criminal proceedings in which he is chargedwith an offence to which this subsection applies.

(2) Subsection (1) applies to any offence other than an offence under one of thefollowing provisions (which concern false statements made otherwise than onoath)—

(a) section 5 of the Perjury Act 1911 (c. 6);(b) section 44(2) of the Criminal Law (Consolidation) (Scotland) Act 1995

(c. 39);(c) Article 10 of the Perjury (Northern Ireland) Order 1979 (S.I. 1979/1714

(N.I. 19)).

638 Annual reports

(1) After the end of each financial year the Panel must publish a report.

(2) The report must—(a) set out how the Panel’s functions were discharged in the year in

question;(b) include the Panel’s accounts for that year;(c) mention any matters the Panel considers to be of relevance to the

discharge of its functions.

639 Amendments to Financial Services and Markets Act 2000

(1) The Financial Services and Markets Act 2000 (c. 8) is amended as follows.

(2) Section 143 (power to make rules endorsing the City Code on Takeovers andMergers etc) is repealed.

(3) In section 144 (power to make price stabilising rules), for subsection (7)

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substitute—

“(7) “Consultation procedures” means procedures designed to provide anopportunity for persons likely to be affected by alterations to thoseprovisions to make representations about proposed alterations to anyof those provisions.”.

(4) In section 349 (exceptions from restrictions on disclosure of confidentialinformation), after subsection (3) insert—

“(3A) Section 348 does not apply to a disclosure, by a recipient to whichsubsection (3B) applies, of confidential information disclosed by theAuthority to that recipient in reliance on subsection (1).

(3B) This subsection applies to—(a) the Panel on Takeovers and Mergers;(b) an authority designated as a supervisory authority for the

purposes of Article 4.1 of the Takeovers Directive;(c) any other person or body that exercises public functions, under

legislation in an EEA State other than the United Kingdom, thatare similar to the Authority’s functions or those of the Panel onTakeovers and Mergers.”.

(5) In section 354 (Financial Services Authority’s duty to co-operate with others),after subsection (1) insert—

“(1A) The Authority must take such steps as it considers appropriate to co-operate with—

(a) the Panel on Takeovers and Mergers;(b) an authority designated as a supervisory authority for the

purposes of Article 4.1 of the Takeovers Directive;(c) any other person or body that exercises functions of a public

nature, under legislation in any country or territory outside theUnited Kingdom, that appear to the Authority to be similar tothose of the Panel on Takeovers and Mergers.”.

640 Power to extend to Isle of Man and Channel Islands

Her Majesty may by Order in Council direct that any of the provisions of thisChapter extend, with such modifications as may be specified in the Order, tothe Isle of Man or any of the Channel Islands.

CHAPTER 2

IMPEDIMENTS TO TAKEOVERS

Opting in and opting out

641 Opting in and opting out

(1) A company may by special resolution (an “opting-in resolution”) opt in for thepurposes of this Chapter if the following three conditions are met in relation tothe company.

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(2) The first condition is that the company has voting shares admitted to tradingon a regulated market.

(3) The second condition is that—(a) the company’s articles of association—

(i) do not contain any such restrictions as are mentioned in Article11 of the Takeovers Directive, or

(ii) if they do contain any such restrictions, provide for therestrictions not to apply at a time when, or in circumstances inwhich, they would be disapplied by that Article,

and(b) those articles do not contain any other provision which would be

incompatible with that Article.

(4) The third condition is that—(a) no shares conferring special rights in the company are held by—

(i) a minister,(ii) a nominee of, or any other person acting on behalf of, a minister,

(iii) a company directly or indirectly controlled by a minister,and

(b) no such rights are exercisable by or on behalf of a minister under anyenactment.

(5) A company may revoke an opting-in resolution by a further special resolution(an “opting-out resolution”).

(6) For the purposes of subsection (3), a reference in Article 11 of the TakeoversDirective to Article 7(1) or 9 of that Directive is to be read as referring to rulesunder section 618(1) giving effect to the relevant Article.

(7) In subsection (4) “minister” means—(a) the holder of an office in Her Majesty’s Government in the United

Kingdom;(b) the Scottish Ministers;(c) a Minister within the meaning given by section 7(3) of the Northern

Ireland Act 1998 (c. 47);and for the purposes of that subsection “minister” also includes the Treasury,the Board of Trade, the Defence Council and the National Assembly for Wales.

(8) The Secretary of State may by order subject to negative resolution procedureprovide that subsection (4) applies in relation to a specified person or body thatexercises functions of a public nature as it applies in relation to a minister.“Specified” means specified in the order.

642 Further provision about opting-in and opting-out resolutions

(1) An opting-in resolution or an opting-out resolution must specify the date fromwhich it is to have effect (the “effective date”).

(2) The effective date of an opting-in resolution may not be earlier than the date onwhich the resolution is passed.

(3) The second and third conditions in section 641 must be met at the time whenan opting-in resolution is passed, but the first one does not need to be met untilthe effective date.

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(4) An opting-in resolution passed before the time when voting shares of thecompany are admitted to trading on a regulated market complies with therequirement in subsection (1) if, instead of specifying a particular date, itprovides for the resolution to have effect from that time.

(5) An opting-in resolution passed before the commencement of this sectioncomplies with the requirement in subsection (1) if, instead of specifying aparticular date, it provides for the resolution to have effect from thatcommencement.

(6) The effective date of an opting-out resolution may not be earlier than the firstanniversary of the date on which a copy of the opting-in resolution wasforwarded to the registrar.

(7) Where a company has passed an opting-in resolution, any alteration of itsarticles of association that would prevent the second condition in section 641from being met is of no effect until the effective date of an opting-out resolutionpassed by the company.

Consequences of opting in

643 Effect on contractual restrictions

(1) The following provisions have effect where a takeover bid is made for anopted-in company.

(2) An agreement to which this section applies is invalid in so far as it places anyrestriction—

(a) on the transfer to the offeror, or at his direction to another person, ofshares in the company during the offer period;

(b) on the transfer to any person of shares in the company at a time duringthe offer period when the offeror holds shares amounting to not lessthan 75% in value of all the voting shares in the company;

(c) on rights to vote at a general meeting of the company that decideswhether to take any action which might result in the frustration of thebid;

(d) on rights to vote at a general meeting of the company that—(i) is the first such meeting to be held after the end of the offer

period, and(ii) is held at a time when the offeror holds shares amounting to not

less than 75% in value of all the voting shares in the company.

(3) This section applies to an agreement—(a) entered into between a person holding shares in the company and

another such person on or after 21st April 2004, or(b) entered into at any time between such a person and the company,

and it applies to such an agreement even if the law applicable to the agreement(apart from this section) is not the law of a part of the United Kingdom.

(4) For the purposes of subsection (2)(c), action which might result in thefrustration of a bid is any action of that kind specified in rules under section618(1) giving effect to Article 9 of the Takeovers Directive.

(5) If a person suffers loss as a result of any act or omission that would (but for thissection) be a breach of an agreement to which this section applies, he is entitled

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to compensation, of such amount as the court considers just and equitable,from any person who would (but for this section) be liable to him forcommitting or inducing the breach.

(6) In subsection (5) “the court” means the High Court or, in Scotland, the Court ofSession.

(7) A reference in this section to voting shares in the company does not include—(a) debentures, or(b) shares carrying rights to vote that, under the company’s articles of

association, arise only where specified pecuniary advantages are notprovided.

In paragraph (b) “rights to vote” means rights to vote at general meetings of thecompany.

644 Power of offeror to require general meeting to be called

(1) Where a takeover bid is made for an opted-in company, the offeror may bymaking a request to the directors of the company require them to call a generalmeeting of the company if, at the date at which the request is made, he holdsshares amounting to not less than 75% in value of all the voting shares in thecompany.

(2) The reference in subsection (1) to voting shares in the company does notinclude—

(a) debentures, or(b) shares carrying rights to vote that, under the company’s articles of



(3) Sections 279 to 281 (members’ power to require general meetings to be called)apply as they would do if subsection (1) above were substituted for subsections(1) and (2) of section 279, and with any other necessary modifications.

Supplementary

645 Communication of decisions

(1) A company that has passed an opting-in resolution or an opting-out resolutionmust notify—

(a) the Panel on Takeovers and Mergers, and(b) where the company—

(i) has voting shares admitted to trading on a regulated market inan EEA State other than the United Kingdom, or

(ii) has requested such admission,the authority designated by that state as the supervisory authority forthe purposes of Article 4.1 of the Takeovers Directive.

(2) Notification must be given within 15 days after the resolution is passed and, ifany admission or request such as is mentioned in subsection (1)(b) occurs at alater time, within 15 days after that time.

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(3) If a company fails to comply with this section, an offence is committed by—(a) the company, and(b) every officer of it who is in default.


646 Interpretation of Chapter

(1) In this Chapter—“company” means—

(a) a company within the meaning of this Act, or(b) an unregistered company within the meaning of section 718 of

the Companies Act 1985 (c. 6);“offeror” and “takeover bid” have the same meaning as in the Takeovers

Directive;“offer period”, in relation to a takeover bid, means the time allowed for

acceptance of the bid by—(a) rules under section 618(1) giving effect to Article 7(1) of the

Takeovers Directive, or(b) where the rules giving effect to that Article which apply to the

bid are those of an EEA State other than the United Kingdom,those rules;

“opted-in company” means a company in relation to which—(a) an opting-in resolution has effect, and(b) the conditions in section 641(2) and (4) continue to be met;

“opting-in resolution” has the meaning given by section 641(1);“opting-out resolution” has the meaning given by section 641(5);“regulated market” has the meaning given by Article 4.1(14) of Directive


“the Takeovers Directive” means Directive 2004/25/EC of the EuropeanParliament and of the Council;

“voting rights” means rights to vote at general meetings of the companyin question, including rights that arise only in certain circumstances;

“voting shares” means shares carrying voting rights.

(2) For the purposes of this Chapter— (a) securities of a company are treated as shares in the company if they are

convertible into or entitle the holder to subscribe for such shares;(b) debentures issued by a company are treated as shares in the company

if they carry voting rights.

647 Transitory provision

(1) Where a takeover bid is made for an opted-in company, section 368 of theCompanies Act 1985 (extraordinary general meeting on members’ requisition)and section 378 of that Act (extraordinary and special resolutions) have effectas follows until their repeal by this Act.

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(2) Section 368 has effect as if a members’ requisition included a requisition of aperson who—

(a) is the offeror in relation to the takeover bid, and(b) holds at the date of the deposit of the requisition shares amounting to

not less than 75% in value of all the voting shares in the company.

(3) In relation to a general meeting of the company that—(a) is the first such meeting to be held after the end of the offer period, and(b) is held at a time when the offeror holds shares amounting to not less

than 75% in value of all the voting shares in the company,section 378(2) (meaning of “special resolution”) has effect as if “14 days’ notice”were substituted for “21 days’ notice”.

(4) A reference in this section to voting shares in the company does not include—(a) debentures, or(b) shares carrying rights to vote that, under the company’s articles of



648 Power to extend to Isle of Man and Channel Islands

Her Majesty may by Order in Council direct that any of the provisions of thisChapter extend, with such modifications as may be specified in the Order, tothe Isle of Man or any of the Channel Islands.

CHAPTER 3

AMENDMENTS TO COMPANIES ACT 1985

649 Matters to be dealt with in directors’ report

(1) Part 7 of the Companies Act 1985 (c. 6) (accounts and audit) is amended asfollows.

(2) In Schedule 7 (matters to be dealt with in directors’ report), after Part 6 insert—

“PART 7

DISCLOSURE REQUIRED BY CERTAIN PUBLICLY-TRADED COMPANIES

13 (1) This Part of this Schedule applies to the directors’ report for afinancial year if the company had securities carrying voting rightsadmitted to trading on a regulated market at the end of that year.

(2) The report shall contain detailed information, by reference to the endof that year, on the following matters—

(a) the structure of the company’s capital, including inparticular—

(i) the rights and obligations attaching to the shares or,as the case may be, to each class of shares in thecompany, and

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(ii) where there are two or more such classes, thepercentage of the total share capital represented byeach class;

(b) any restrictions on the transfer of securities in the company,including in particular—

(i) limitations on the holding of securities, and(ii) requirements to obtain the approval of the company,

or of other holders of securities in the company, for atransfer of securities;

(c) in the case of each person with a significant direct or indirectholding of securities in the company, such details as areknown to the company of—

(i) the identity of the person,(ii) the size of the holding, and

(iii) the nature of the holding;(d) in the case of each person who holds securities carrying

special rights with regard to control of the company—(i) the identity of the person, and

(ii) the nature of the rights;(e) where—

(i) the company has an employees’ share scheme, and(ii) shares to which the scheme relates have rights with

regard to control of the company that are notexercisable directly by the employees,

how those rights are exercisable;(f) any restrictions on voting rights, including in particular—

(i) limitations on voting rights of holders of a givenpercentage or number of votes,

(ii) deadlines for exercising voting rights, and(iii) arrangements by which, with the company’s co-

operation, financial rights carried by securities areheld by a person other than the holder of thesecurities;

(g) any agreements between holders of securities that are knownto the company and may result in restrictions on the transferof securities or on voting rights;

(h) any rules that the company has about—(i) appointment and replacement of directors, or

(ii) amendment of the company’s articles of association;(i) the powers of the company’s directors, including in

particular any powers in relation to the issuing or buyingback by the company of its shares;

(j) any significant agreements to which the company is a partythat take effect, alter or terminate upon a change of control ofthe company following a takeover bid, and the effects of anysuch agreements;

(k) any agreements between the company and its directors oremployees providing for compensation for loss of office oremployment (whether through resignation, purportedredundancy or otherwise) that occurs because of a takeoverbid.

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(3) For the purposes of sub-paragraph (2)(a) a company’s capitalincludes any securities in the company that are not admitted totrading on a regulated market.

(4) For the purposes of sub-paragraph (2)(c) a person has an indirectholding of securities if—

(a) they are held on his behalf, or(b) he is able to secure that rights carried by the securities are

exercised in accordance with his wishes.

(5) Sub-paragraph (2)(j) does not apply to an agreement if—(a) disclosure of the agreement would be seriously prejudicial to

the company, and(b) the company is not under any other obligation to disclose it.

(6) In this paragraph—“regulated market” has the meaning given by Article 4.1(14) of

Directive 2004/39/EC of the European Parliament and of theCouncil on markets in financial instruments;

“securities” means shares or debentures;“takeover bid” has the same meaning as in the Takeovers

Directive;“the Takeovers Directive” means Directive 2004/25/EC of the

European Parliament and of the Council;“voting rights” means rights to vote at general meetings of the

company in question, including rights that arise only incertain circumstances.”.

(3) In section 234ZZA (requirements of directors’ reports), at the end of subsection(4) (contents of Schedule 7) insert—

“Part 7 specifies information to be disclosed by certain publicly-traded companies.”.


“(5) A directors’ report shall also contain any necessary explanatorymaterial with regard to information that is required to be included inthe report by Part 7 of Schedule 7 (or is excepted from that requirementby section 234(4) because it is included in the operating and financialreview).”.

(5) In section 251 (summary financial statements), after subsection (2ZA) insert—

“(2ZB) A company that sends to an entitled person a summary financialstatement instead of a copy of its directors’ report shall—

(a) include in the statement the explanatory material required to beincluded in the directors’ report by section 234ZZA(5), or

(b) send that material to the entitled person at the same time as itsends the statement.

For the purposes of paragraph (b), subsections (2A) to (2E) apply inrelation to the material referred to in that paragraph as they apply inrelation to a summary financial statement.”.

(6) The amendments made by this section apply in relation to directors’ reports forfinancial years beginning on or after 20th May 2006.

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650 Takeover offers

(1) Schedule 3 (which makes amendments to Part 13A of the Companies Act 1985(c. 6)) has effect.

(2) In Schedule 22 to the Companies Act 1985 (provisions of that Act applying tounregistered companies), at the appropriate place insert—

PART 23

COMPANY INVESTIGATIONS

651 Powers of Secretary of State to give directions to inspectors

(1) In Part 14 of the Companies Act 1985 (investigation of companies and theiraffairs), after section 446 insert—

“Powers of Secretary of State to give directions to inspectors

446A General powers to give directions

(1) In exercising his functions an inspector shall comply with any directiongiven to him by the Secretary of State under this section.

(2) The Secretary of State may give an inspector appointed under section431, 432(2) or 442(1) a direction—

(a) as to the subject matter of his investigation (whether byreference to a specified area of a company’s operation, aspecified transaction, a period of time or otherwise), or

(b) which requires the inspector to take or not to take a specifiedstep in his investigation.

(3) The Secretary of State may give an inspector appointed under anyprovision of this Part a direction requiring him to secure that a specifiedreport under section 437—

(a) includes the inspector’s views on a specified matter,(b) does not include any reference to a specified matter,(c) is made in a specified form or manner, or(d) is made by a specified date.

(4) A direction under this section—(a) may be given on an inspector’s appointment,(b) may vary or revoke a direction previously given, and(c) may be given at the request of an inspector.

“Part 13A Takeover offers. In relation to the companyreferred to in section 428(8), toapply only if the company hasvoting shares (within themeaning given by section 430H)admitted to trading on aregulated market (within themeaning of Directive 2004/39/EC).”.

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(5) In this section—(a) a reference to an inspector’s investigation includes any

investigation he undertakes, or could undertake, under section433(1) (power to investigate affairs of holding company orsubsidiary);

(b) “specified” means specified in a direction under this section.

446B Direction to terminate investigation

(1) The Secretary of State may direct an inspector to take no further stepsin his investigation.

(2) The Secretary of State may give a direction under this section to aninspector appointed under section 432(1) or 442(3) only on the groundsthat it appears to him that—

(a) matters have come to light in the course of the inspector’sinvestigation which suggest that a criminal offence has beencommitted, and

(b) those matters have been referred to the appropriate prosecutingauthority.

(3) Where the Secretary of State gives a direction under this section, anydirection already given to the inspector under section 437(1) to producean interim report, and any direction given to him under section 446A(3)in relation to such a report, shall cease to have effect.

(4) Where the Secretary of State gives a direction under this section, theinspector shall not make a final report to the Secretary of State unless—

(a) the direction was made on the grounds mentioned in subsection(2) and the Secretary of State directs the inspector to make afinal report to him, or

(b) the inspector was appointed under section 432(1) (appointmentin pursuance of order of the court).

(5) An inspector shall comply with any direction given to him under thissection.

(6) In this section, a reference to an inspector’s investigation includes anyinvestigation he undertakes, or could undertake, under section 433(1)(power to investigate affairs of holding company or subsidiary).”.

(2) In section 431 of that Act (inspectors’ powers during investigation) insubsection (1) for “report on them in such manner as he may direct” substitute“report the result of their investigations to him”.

(3) In section 432 of that Act (other company investigations) in subsection (1) for“report on them in such manner as he directs” substitute “report the result oftheir investigations to him”.

(4) In section 437 of that Act (inspectors’ reports)—(a) in subsection (1) omit the second sentence, and(b) subsections (1B) and (1C) shall cease to have effect.

(5) In section 442 of that Act (power to investigate company ownership), omitsubsection (2).

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652 Resignation, removal and replacement of inspectors

After section 446B of the Companies Act 1985 (c. 6) (inserted by section 651above) insert—

“Resignation, removal and replacement of inspectors

“446CResignation and revocation of appointment

(1) An inspector may resign by notice in writing to the Secretary of State.

(2) The Secretary of State may revoke the appointment of an inspector bynotice in writing to the inspector.

446D Appointment of replacement inspectors

(1) Where—(a) an inspector resigns,(b) an inspector’s appointment is revoked, or(c) an inspector dies,

the Secretary of State may appoint one or more competent inspectors tocontinue the investigation.

(2) An appointment under subsection (1) shall be treated for the purposesof this Part (apart from this section) as an appointment under theprovision of this Part under which the former inspector was appointed.

(3) The Secretary of State must exercise his power under subsection (1) soas to secure that at least one inspector continues the investigation.

(4) Subsection (3) does not apply if—(a) the Secretary of State could give any replacement inspector a

direction under section 446B (termination of investigation), and(b) such a direction would (under subsection (4) of that section)

result in a final report not being made.

(5) In this section, references to an investigation include any investigationthe former inspector conducted under section 433(1) (power toinvestigate affairs of holding company or subsidiary).”.

653 Power to obtain information from former inspectors etc

(1) After section 446D of the Companies Act 1985 (inserted by section 652 above)insert—

“Power to obtain information from former inspectors etc

“446E Obtaining information from former inspectors etc

(1) This section applies to a person who was appointed as an inspectorunder this Part—

(a) who has resigned, or(b) whose appointment has been revoked.

(2) This section also applies to an inspector to whom the Secretary of Statehas given a direction under section 446B (termination of investigation).

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(3) The Secretary of State may direct a person to whom this section appliesto produce documents obtained or generated by that person during thecourse of his investigation to—

(a) the Secretary of State, or(b) an inspector appointed under this Part.

(4) The power under subsection (3) to require documents to be producedincludes power to require the production of a copy of the document—

(a) in hard copy, or(b) in a form from which a hard copy can be readily obtained.

(5) The Secretary of State may direct a person to whom this section appliesto inform him of any matters that came to that person’s knowledge asa result of his investigation.

(6) A person shall comply with any direction given to him under thissection.

(7) In this section—(a) references to the investigation of a former inspector or inspector

include any investigation he conducted under section 433(1)(power to investigate affairs of holding company or subsidiary),and

(b) “document” includes information recorded in any form.”.

(2) In section 451A of that Act (disclosure of information by Secretary of State orinspector), in subsection (1)(a) for “446” substitute “446E”.

(3) In section 452(1) of that Act (privileged information) for “446” substitute“446E”.

654 Disqualification orders: consequential amendments

In section 8(1A)(b)(i) of the Company Directors Disqualification Act 1986(c. 46) (disqualification after investigation of company: meaning of“investigative material”)—

(a) after “section” insert “437, 446E,”, and(b) after “448” insert “, 451A”.

PART 24

UK COMPANIES NOT FORMED UNDER THE COMPANIES ACTS

CHAPTER 1

COMPANIES NOT FORMED UNDER THE COMPANIES ACTS BUT AUTHORISED TO REGISTER

655 Companies authorised to register under the Companies Acts

(1) This section applies to—(a) any company that was in existence on 2nd November 1862 (including

any company registered under the Joint Stock Companies Acts), and(b) any company formed after that date (whether before or after the

commencement of this Act)—

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(i) in pursuance of an Act of Parliament other than the CompaniesActs or any of the former Companies Acts,

(ii) in pursuance of letters patent, or(iii) that is otherwise duly constituted according to law.

(2) Any such company may on making application register under this Act.

(3) Subject to the following provisions, it may register as an unlimited company,as a company limited by shares or as a company limited by guarantee.

(4) A company having the liability of its members limited by Act of Parliament orletters patent—

(a) may not register under this section unless it is a joint stock company,and

(b) may not register under this section as an unlimited company or acompany limited by guarantee.

(5) A company that is not a joint stock company may not register under thissection as a company limited by shares.

(6) The registration of a company under this section is not invalid by reason thatit has taken place with a view to the company’s being wound up.

656 Definition of “joint stock company”

(1) For purposes of section 655 (companies authorised to register under theCompanies Acts) “joint stock company” means a company—

(a) having a permanent paid-up or nominal share capital of fixed amountdivided into shares, also of fixed amount, or held and transferable asstock, or dividend and held partly in one way and partly in the other,and

(b) formed on the principle of having for its members the holders of thoseshares or that stock, and no other persons.

(2) Such a company when registered with limited liability under the CompaniesActs is deemed a company limited by shares.

657 Power to make provision by regulations

(1) The Secretary of State may make provision by regulations—(a) for and in connection with registration under section 655 (companies

not formed under the Companies Acts but authorised to register), and(b) as to the application to companies so registered of the provisions of the

Companies Acts.

(2) Without prejudice to the generality of that power, regulations under thissection may make provision corresponding to any provision formerly made byChapter 2 of Part 22 of the Companies Act 1985 (c. 6).


658 Application of provisions to existing companies

The provisions of the Companies Acts apply to companies registered but notformed under any of the former Companies Acts in the same manner as theyapply to companies registered under section 655

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CHAPTER 2

UNREGISTERED COMPANIES

659 Unregistered companies

(1) This section applies to bodies corporate incorporated in and having a principalplace of business in the United Kingdom, other than—

(a) bodies incorporated by, or registered under, a public general Act ofParliament;

(b) bodies not formed for the purpose of carrying on a business that has forits object the acquisition of gain by the body or its individual members;

(c) bodies for the time being exempted from this section by direction of theSecretary of State;

(d) open-ended investment companies.

(2) The Secretary of State may make provision by regulations applying specifiedprovisions of the Companies Acts to all, or any specified description of, thebodies to which this section applies.

(3) The regulations may provide that the specified provisions of the CompaniesActs apply subject to any specified limitations and to such adaptations andmodifications (if any) as may be specified.

(4) This section does not—(a) repeal or revoke in whole or in part any enactment, royal charter or

other instrument constituting or regulating any body in relation towhich provisions of the Companies Acts are applied by regulationsunder this section, or

(b) restrict the power of Her Majesty to grant a charter in lieu orsupplementary to any such charter.

But in relation to any such body the operation of any such enactment, charteror instrument is suspended in so far as it is inconsistent with any of thoseprovisions as they apply for the time being to that body.


PART 25

OVERSEA COMPANIES

Introductory

660 Oversea companies

In the Companies Acts an “oversea company” means a company incorporatedoutside the United Kingdom.

Registration of particulars

661 Duty to register particulars

(1) The Secretary of State may make provision by regulations requiring an overseacompany—

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(a) to deliver to the registrar for registration a return containing specifiedparticulars, and

(b) to deliver to the registrar with the return specified documents.

(2) The regulations—(a) must require an oversea company to register particulars if the company

opens a branch in the United Kingdom, and(b) may require the registration of particulars in such other circumstances

as may be specified.

(3) The regulations may provide that where a company has registered particularsunder this section and any alteration is made—

(a) in the specified particulars, or(b) in any document delivered with the return,

the company must deliver to the registrar for registration a return containingspecified particulars of the alteration.

(4) The regulations may make provision—(a) requiring the return under this section to be delivered for registration

to the registrar for a specified part of the United Kingdom, and(b) requiring it to be so delivered before the end of a specified period.

(5) The regulations may make different provision according to—(a) the place where the company is incorporated, and(b) the activities carried on (or proposed to be carried on) by it.

This is without prejudice to the general power to make different provision fordifferent cases.


662 Registered name of oversea company

(1) Regulations under section 661 (duty to register particulars) must require anoversea company that is required to register particulars to state the nameunder which it proposes to be registered.

(2) This may be—(a) the company’s corporate name (that is, its name under the law of the

country or territory in which it is incorporated) or(b) an alternative name specified in accordance with section 663.

(3) An EEA company may always be registered under its corporate name.

(4) In any other case, the following provisions of Part 5 (a company’s name) applyin relation to the registration of the name of an oversea company—

(a) section 54 (prohibited names);(b) sections 55 to 57 (sensitive words and expressions);(c) section 66(inappropriate use of indications of company type or legal

form);(d) sections 67 to 74 (similarity to other names);(e) section 75 (provision of misleading information etc);(f) section 76 (misleading indication of activities).

(5) The provisions of section 58 (permitted characters etc) apply in every case.

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(6) Any reference in the provisions mentioned in subsection (4) or (5) to a changeof name shall be read as a reference to registration of a different name undersection 663.

663 Registration under alternative name

(1) An oversea company that is required to register particulars under section 661may at any time deliver to the registrar for registration a statement specifyinga name, other than its corporate name, under which it proposes to carry onbusiness in the United Kingdom.

(2) An oversea company that has registered an alternative name may at any timedeliver to the registrar of companies for registration a statement specifying adifferent name under which it proposes to carry on business in the UnitedKingdom (which may be its corporate name or a further alternative) insubstitution for the name previously registered.

(3) The name by which an oversea company is for the time being registered underthis section is, for all purposes of the law applying in the United Kingdom,deemed to be the company’s corporate name.

(4) This does not—(a) affect the references in this section or section 662 to the company’s

corporate name,(b) affect any rights or obligation of the company, or(c) render defective any legal proceedings by or against the company.

(5) Any legal proceedings that might have been continued or commenced againstthe company by its corporate name, or any name previously registered underthis section, may be continued or commenced against it by its name for the timebeing so registered.

Other requirements

664 Accounts and reports: general

(1) The Secretary of State may make provision by regulations requiring an overseacompany that is required to register particulars under section 661—

(a) to prepare the like accounts and directors’ report, and(b) cause to be prepared such an auditor’s report,

as would be required if the company were formed and registered under thisAct.

(2) The regulations may for this purpose apply, with or without modifications, allor any of the provisions of—

Part 15 (accounts and reports), andPart 16 (audit).

(3) The Secretary of State may make provision by regulations requiring an overseacompany to deliver to the registrar copies of—

(a) the accounts and reports prepared in accordance with the regulations,or

(b) the accounts and reports that it is required by its parent law to prepareand have audited.

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665 Accounts and reports: credit or financial institutions

(1) This section applies to a credit or financial institution—(a) that is incorporated or otherwise formed outside the United Kingdom

and Gibraltar,(b) whose head office is outside the United Kingdom and Gibraltar, and(c) that has a branch in the United Kingdom.

(2) In subsection (1) “branch” means a place of business that forms a legallydependent part of the institution and conducts directly all or some of theoperations inherent in its business.

(3) The Secretary of State may make provision by regulations requiring aninstitution to which this section applies—

(a) to prepare the like accounts and directors’ report, and(b) cause to be prepared such an auditor’s report,

as would be required if the institution were a company formed and registeredunder this Act.

(4) The regulations may for this purpose apply, with or without modifications, allor any of the provisions of—

Part 15 (accounts and reports), andPart 16 (audit).

(5) The Secretary of State may make provision by regulations requiring aninstitution to which this section applies to deliver to the registrar copies of—

(a) accounts and reports prepared in accordance with the regulations, or(b) accounts and reports that it is required by its parent law to prepare and

have audited.


666 Trading disclosures

(1) The Secretary of State may by regulations make provision requiring overseacompanies carrying on business in the United Kingdom—

(a) to display specified information in specified locations,(b) to state specified information in specified descriptions of document or

communication, and(c) to provide specified information on request to those they deal with in

the course of their business.

(2) The regulations—(a) shall in every case require disclosure of the name under which the

company is registered to carry on business in the United Kingdom, and(b) may make provision as to the manner in which any specified

information is to be displayed, stated or provided.

(3) The regulations may make provision corresponding to that made by—section 83 (civil consequences of failure to make required disclosure), andsection 84 (criminal consequences of failure to make required disclosure).


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Supplementary

667 Offences

(1) Regulations under this Part may specify the person or persons responsible forcomplying with any specified requirement of the regulations.

(2) Regulations under this Part may make provision for offences, includingprovision as to—

(a) the person or persons liable in the case of any specified contraventionof the regulations, and

(b) circumstances that are, or are not, to be a defence on a charge of such anoffence.

(3) The regulations must not provide—(a) for imprisonment, or(b) for the imposition on summary conviction of a fine exceeding level 5 on

the standard scale and, in the case of continued contravention, a dailydefault fine not exceeding one-tenth of level 5 on the standard scale.


668 Disclosure of individual’s residential address: non-disclosure certificate

Where regulations under section 661 (oversea companies: duty to registerparticulars) require an oversea company to register particulars of anindividual’s usual residential address, they must contain provisioncorresponding to that made by Chapter 8 of Part 10 (directors’ residentialaddresses: non-disclosure certificates).

669 Requirement to identify persons to accept service of documents

Regulations under section 661 (oversea companies: duty to register particulars)must require an oversea company to specify one or more persons resident inthe United Kingdom who are authorised to accept service of documents on thecompany’s behalf.

670 Duty to give notice of ceasing to have registrable presence in the UK

(1) If an oversea company whose particulars are registered under section 661ceases to have any connection with the United Kingdom by virtue of which itis required to register particulars under that section, it must give notice of thatfact to the registrar.



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PART 26

THE REGISTRAR OF COMPANIES

The registrar

671 The registrar

(1) There shall continue to be—(a) a registrar of companies for England and Wales,(b) a registrar of companies for Scotland, and(c) a registrar of companies for Northern Ireland.

(2) The registrars shall be appointed by the Secretary of State.

(3) In the Companies Acts “the registrar of companies” and “the registrar” meanthe registrar of companies for England and Wales, Scotland or NorthernIreland, as the case may require.

672 The registrar’s functions

(1) The registrar shall continue—(a) to perform the functions conferred on the registrar by provisions of the

Companies Acts and other enactments, and(b) to perform such functions on behalf of the Secretary of State, in relation

to the registration of companies or other matters, as the Secretary ofState may from time to time direct.

(2) References in this Act to the functions of the registrar are to functions withinsubsection (1)(a) or (b).

673 The registrar’s official seal

The registrar shall have an official seal for the authentication of documents inconnection with the performance of the registrar’s functions.

674 Fees payable to registrar

(1) The Secretary of State may make provision by regulations requiring thepayment to the registrar of fees in respect of—

(a) the performance of any of the registrar’s functions, or(b) the provision by the registrar of services or facilities for purposes

incidental to, or otherwise connected with, the performance of any ofthe registrar’s functions.

(2) The matters for which fees may be charged include—(a) the performance of a duty imposed on the registrar or the Secretary of

State,(b) the receipt of documents delivered to the registrar, and(c) the inspection, or provision of copies, of documents kept by the

registrar.

(3) The regulations may—

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(a) provide for the amount of the fees to be fixed by or determined underthe regulations;

(b) provide for different fees to be payable in respect of the same matter indifferent circumstances;

(c) specify the person by whom any fee payable under the regulations is tobe paid;

(d) specify when and how fees are to be paid.


(5) In respect of the performance of functions or the provision of services orfacilities—

(a) for which fees are not provided for by regulations, or(b) in circumstances other than those for which fees are provided for by

regulations,the registrar may determine from time to time what fees (if any) are chargeable.

(6) Fees received by the registrar are to be paid into the Consolidated Fund.

Certificates of incorporation

675 Public notice of issue of certificate of incorporation

(1) The registrar must cause to be published—(a) in the Gazette, or(b) in accordance with section 724 (alternative means of giving public

notice),notice of the issue by the registrar of any certificate of incorporation of acompany.

(2) The notice must state the name of the company and the date of issue of thecertificate.

(3) This section applies to a certificate of incorporation issued under—(a) section 80 (change of name), (b) section 88 (Welsh companies) or(c) any provision of Part 7 (re-registration),

as well as to the certificate issued on a company’s formation.

676 Right to certificate of incorporation

Any person may require the registrar to provide him with a copy of anycertificate of incorporation of a company, signed by the registrar orauthenticated by the registrar’s seal.

Registered numbers

677 Company’s registered numbers

(1) The registrar shall allocate to every company a number, which shall be knownas the company’s registered number.

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(2) Companies’ registered numbers shall be in such form, consisting of one ormore sequences of figures or letters, as the registrar may determine.

(3) The registrar may on adopting a new form of registered number make suchchanges of existing registered numbers as appear necessary.

(4) A change of a company’s registered number has effect from the date on whichthe company is notified by the registrar of the change.

(5) For a period of three years beginning with that date any requirement todisclose the company’s registered number imposed by regulations undersection 82 or section 666 (trading disclosures) is satisfied by the use of either theold number or the new.

(6) In this section “company” includes—(a) an oversea company whose particulars have been registered under

section 661, other than a company that appears to the registrar not to berequired to register particulars under that section;

(b) any body to which any provision of the Companies Acts applies byvirtue of regulations under section 659 (unregistered companies).

678 Registered numbers of branches of oversea company

(1) The registrar shall allocate to every branch of an oversea company whoseparticulars are registered under section 661 a number, which shall be known asthe branch’s registered number.

(2) Branches’ registered numbers shall be in such form, consisting of one or moresequences of figures or letters, as the registrar may determine.

(3) The registrar may on adopting a new form of registered number make suchchanges of existing registered numbers as appear necessary.

(4) A change of a branch’s registered number has effect from the date on which thecompany is notified by the registrar of the change.

(5) For a period of three years beginning with that date any requirement todisclose the branch’s registered number imposed by regulations under section666 (trading disclosures) is satisfied by the use of either the old number or thenew.

Delivery of documents to the registrar

679 Prescribed forms etc

(1) In any provision of an enactment that refers to prescribing—(a) the form of a document to be delivered to the registrar, or(b) the manner of certifying the correctness of a translation or copy to be so

delivered,“prescribed” means prescribed by the registrar.

(2) Regulations made by the Secretary of State under any such provision that arein force immediately before this section comes into force continue to have effectuntil superseded by provision made by the registrar under this section.

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680 Registrar’s requirements as to form and manner of delivery

(1) The registrar may impose requirements as to the form and manner in whichdocuments are to be delivered to the registrar under any enactment.

(2) For this purpose “form and manner” includes—(a) the form of the document (for example, hard copy or electronic form);(b) the means to be used for communicating the document (for example, by

post or electronic means);(c) the format of the document (for example, that it is to be in a standard

form);(d) the address to which the document is to be sent;(e) in the case of a document to be communicated by electronic means, the

hardware and software to be used, and technical specifications (forexample, matters relating to protocol, security, anti-virus protection orencryption).

(3) The registrar may under this section—(a) require a document to be authenticated by a particular person or a

person of a particular description;(b) specify the means of authentication of any information which any

relevant enactment or the registrar requires to be authenticated;(c) require a document to contain or be accompanied by the name or

registered number of the company to which it relates (or both);(d) impose requirements for the purpose of enabling the document to be

scanned or copied.

(4) Requirements imposed under this section must not be inconsistent with, andare additional to, any requirements imposed by or under the provisionrequiring or authorising the delivery of the document to the registrar.

(5) The registrar must secure that as from 1st January 2007 all documents subjectto the Directive disclosure requirements (see section 690) may be delivered tothe registrar by electronic means.

(6) The power conferred by this section does not authorise the registrar to requiredocuments to be delivered by electronic means (see section 681).

681 Power to require delivery by electronic means

(1) The Secretary of State may make regulations requiring documents that areauthorised or required to be delivered to the registrar to be delivered byelectronic means.

(2) Any such requirement to deliver documents by electronic means is effectiveonly if registrar’s rules have been published with respect to the detailedrequirements for such delivery.


682 Agreement for delivery by electronic means

(1) The registrar may agree with a company that documents relating to thecompany that are required or authorised to be delivered to the registrar—

(a) will be delivered by electronic means, except as provided for in theagreement, and

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(b) will conform to such requirements as may be specified in the agreementor specified by the registrar in accordance with the agreement.

(2) An agreement under this section may relate to all or any description ofdocuments to be delivered to the registrar.

(3) Documents in relation to which an agreement is in force under this sectionmust be delivered in accordance with the agreement.

683 Document not delivered until received

(1) A document is not delivered to the registrar until it is received by the registrar.

(2) Provision may be made by registrar’s rules as to when a document is to beregarded as received.

Defective delivery

684 Defective delivery

(1) A document delivered to the registrar is not properly delivered unless all thefollowing requirements are met—

(a) the requirements of the provision under which the document is to bedelivered to the registrar as regards—

(i) the contents of the document,(ii) authentication, and

(iii) form and manner of delivery;(b) any applicable requirements under—

section 680 (registrar’s requirements as to form and manner ofdelivery),

section 681 (power to require delivery by electronic means), orsection 682 (agreement for delivery by electronic means);

(c) any requirements of this Part as to the language in which the documentis drawn up and delivered or as to its being accompanied on deliveryby a certified translation into English;

(d) in so far as it consists of or includes names and addresses, anyrequirements of this Part as to permitted characters, letters or symbolsor as to its being accompanied on delivery by a certificate as to thetransliteration of any element;

(e) any requirement of regulations under section 694 (use of uniqueidentifiers);

(f) any requirements as regards payment of a fee in respect of its receipt bythe registrar.

(2) The registrar may accept (and register) a document that does not comply withthose requirements.

(3) The acceptance (or registration) of such a document by the registrar does notaffect—

(a) any liability for failure to comply with the requirements of theprovision under which the document is delivered to the registrar asregards the contents of the document;

(b) the continuing obligation to comply with the requirements mentionedin subsection (1);

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(c) the exercise of the registrar’s powers under—section 685 (informal correction), orsection 688 (notice to remedy defective delivery).

(4) No objection may be taken to the legal effect of any such action taken by theregistrar on the ground that the requirements mentioned in subsection (1)above are not met.

685 Informal correction of document

(1) A document delivered to the registrar may be corrected by the registrar if itappears to the registrar to be incomplete or internally inconsistent.

(2) This power is exercisable only—(a) on instructions, and(b) if the company has given (and has not withdrawn) its consent to

instructions being given under this section.

(3) The following requirements must be met as regards the instructions—(a) the instructions must be given in response to an enquiry by the

registrar;(b) the registrar must be satisfied that the person giving the instructions is

authorised to do so—(i) by the person by whom the document was delivered, or

(ii) by the company to which the document relates;(c) the instructions must meet any requirements of registrar’s rules as to—

(i) the form and manner in which they are given, and(ii) authentication.

(4) The company’s consent to instructions being given under this section (and anywithdrawal of such consent)—

(a) may be in hard copy or electronic form, and(b) must be notified to the registrar.

(5) This section applies in relation to documents delivered under Part 12 of theCompanies Act 1985 (c. 6) (registration of charges) by a person other than thecompany as if the references to the company were to the company or theperson by whom the document was delivered.

(6) A document that is corrected under this section is treated, for the purposes ofany enactment relating to its delivery, as having been delivered when thecorrection is made.

686 Voluntary replacement of document previously delivered

(1) The registrar may accept a replacement for a document previously deliveredthat did not comply with the requirements for proper delivery.

(2) A replacement document must not be accepted unless the registrar is satisfiedthat it is delivered by—

(a) the person by whom the original document was delivered, or(b) the company to which the original document relates,

and that it complies with the requirements for proper delivery.

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(3) The power of the registrar to impose requirements as to the form and mannerof delivery includes power to impose requirements as to the identification ofthe original document and the delivery of the replacement in a form andmanner enabling it to be associated with the original.

(4) For the purposes of this section the requirements for proper delivery are thoselisted in section 684(1).

687 Exclusion of unnecessary material

(1) If a document delivered to the registrar contains unnecessary material that inthe opinion of the registrar ought to be excluded from the register, theprovisions of—

section 684(2) to (4) (defective delivery),section 685 (informal correction of document), andsection 688 (registrar’s notice to remedy defective delivery),

apply as they apply to a document that does not meet the requirements listedin section 684(1) (requirements for proper delivery).

(2) “Unnecessary material” means material that—(a) is not needed to comply with an obligation under any enactment, and(b) is not specifically authorised to be delivered to the registrar.

(3) For this purpose an obligation to deliver a document of a particulardescription, or conforming to certain requirements, is regarded as notextending to anything that is not needed for a document of that description or,as the case may be, conforming to those requirements.

688 Registrar’s notice to remedy defective delivery

(1) This section applies where a document delivered to the registrar—(a) does not meet the requirements for proper delivery, and(b) is not either corrected under section 685 (informal correction by

registrar) or replaced under section 686 (voluntary replacement).The “requirements for proper delivery” are those mentioned in section 684(1).

(2) The registrar may give notice—(a) to the person by whom the document was delivered (if the identity, and

name and address of that person are known), or(b) to the company to which the document relates (if notice cannot be given

under paragraph (a) and the identity of that company is known).

(3) The notice must—(a) state in what respects the document does not appear to meet the

requirements for proper delivery,(b) state the date on which it is issued, and(c) require a replacement document complying with the requirements for

proper delivery to be delivered to the registrar within 14 days after thatdate.

(4) If no replacement document is delivered within the period specified, anoffence is committed by—


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Public notice of receipt of certain documents

689 Public notice of receipt of certain documents

(1) The registrar must cause to be published—(a) in the Gazette, or(b) in accordance with section 724 (alternative means of giving public

notice),notice of the receipt by the registrar of any document subject to the Directivedisclosure requirements (see section 690).

(2) The notice must state the name of the company, the description of documentand the date of receipt.

690 Documents subject to Directive disclosure requirements

(1) The documents subject to the “Directive disclosure requirements” are asfollows.The requirements referred to are those of Article 3 of the First Company LawDirective (68/151/EEC), as amended, extended and applied.

(2) In the case of every company—A. Constitutional documents1. The company’s memorandum and articles.2. The statement required by section 13 (statement of proposed officers).3. Any amendment of the company’s articles (including every resolution oragreement required to be embodied in or annexed to copies of the company’sarticles issued by the company).4. After any amendment of the company’s articles, the text of the articles asamended.5. Any notice of a change of the company’s name.B. Directors1. Notification of any change among the company’s directors.2. Notification of any change in the particulars of directors required to bedelivered to the registrar.C. Accounts, reports and returns1. All documents required to be delivered to the registrar under section 419(annual accounts and reports).2. The company’s annual return.D. Registered officeNotification of any change of the company’s registered office.E. Winding up1. Copy of any winding-up order in respect of the company.2. Notice of the appointment of liquidators.3. Order for the dissolution of a company on a winding up.4. Return by a liquidator of the final meeting of a company on a winding up.

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(3) In the case of a public company—Share capital1. Copy of any resolution under section 95(1), (2) or (3) of that Act(disapplication of pre-emption rights).2. Copy of any report under section 103 or 104 of that Act as to the value of anon-cash asset.3. Any statement of compliance delivered under section 532 of this Act(statement that company meets conditions for issue of trading certificate).4. Notification (under section 122 of the Companies Act 1985) of theredemption of shares.5. Statement or notice delivered under section 128 of that Act (registration ofparticulars of special rights).6. Any return of allotments.Mergers and divisions1. Copy of any draft of the terms of a scheme required to be delivered to theregistrar under paragraph 2(1) of Schedule 15B to the Companies Act 1985.2. Copy of any order under section 425(2) or 427 of that Act in respect of acompromise or arrangement to which section 427A of that Act applies.

(4) In the case of an oversea company, such particulars, returns and otherdocuments required to be delivered under Part 25 of this Act as may bespecified by the Secretary of State by regulations.

(5) Regulations under subsection (4) are subject to negative resolution procedure.

691 Effect of failure to give public notice

(1) A company is not entitled to rely against other persons on the happening ofany event to which this section applies unless—

(a) the event has been officially notified at the material time, or(b) the company shows that the person concerned knew of the event at the

material time.

(2) The events to which this section applies are—(a) an amendment of the company’s articles,(b) a change among the company’s directors,(c) (as regards service of any document on the company) a change of the

company’s registered office,(d) the making of a winding-up order in respect of the company, or(e) the appointment of a liquidator in a voluntary winding-up of the

company.

(3) If the material time falls—(a) on or before the 15th day after the date of official notification, or(b) where the 15th day was not a working day, on or before the next day

that was,the company is not entitled to rely on the happening of the event as against aperson who shows that he was unavoidably prevented from knowing of theevent at that time.

(4) “Official notification” means—(a) in relation to an amendment of the company’s articles, notification in

accordance with section 689 (public notice of receipt by registrar of

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certain documents) of the amendment and the amended text of thearticles;

(b) in relation to anything else stated in a document subject to the Directivedisclosure requirements, notification of that document in accordancewith that section;

(c) in relation to the appointment of a liquidator in a voluntary windingup, notification of that event in accordance with section 109 of theInsolvency Act 1986 (c. 45) or Article 95 of the Insolvency (NorthernIreland) Order 1989 (S.I.1989/2405 (N.I. 19)).

The register

692 The register

(1) The registrar shall continue to keep records of—(a) the information contained in documents delivered to the registrar

under any enactment,(b) certificates of incorporation issued by the registrar, and(c) certificates issued by the registrar under section 401(2) or 418 of the

Companies Act 1985 (c. 6) (certificates of registration of charge).

(2) The records relating to companies are referred to collectively in the CompaniesActs as “the register”.

(3) Information deriving from documents subject to the Directive disclosurerequirements (see section 690) that are delivered to the registrar on or after 1stJanuary 2007 must be kept by the registrar in electronic form.

(4) Subject to that, information contained in documents delivered to the registrarmay be recorded and kept in any form the registrar thinks fit, provided it ispossible to inspect it and produce a copy of it.This is sufficient compliance with any duty of the registrar to keep, file orregister the document or to record the information contained in it.

(5) The records kept by the registrar must be such that information relating to acompany is associated with that company, in such manner as the registrar maydetermine, so as to enable all the information relating to the company to beretrieved.

693 Annotation of the register

(1) The registrar must place a note in the register recording—(a) the date on which a document is delivered to the registrar;(b) if a document is corrected under section 685, the nature and date of the

correction;(c) if a document is replaced (whether or not material derived from it is

removed), the fact that it has been replaced and the date of delivery ofthe replacement;

(d) if material is removed—(i) what was removed (giving a general description of its contents),

(ii) under what power, and(iii) the date on which that was done.

(2) The Secretary of State may make provision by regulations—

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(a) authorising or requiring the registrar to annotate the register in suchother circumstances as may be specified in the regulations, and

(b) as to the contents of any such annotation.

(3) No annotation is required in the case of a document that by virtue of section684 (defective delivery) is not registered.

(4) An annotation may be removed if it no longer serves any useful purpose.

(5) Where the court makes an order for the removal of anything from the registerunder section 705 (rectification of the register) it may, if satisfied that—

(a) that the presence of an annotation on the register may cause damage tothe company, and

(b) that the company’s interest in there not being an annotation on theregister outweigh any interest of other persons in there being one,

direct that any related annotation shall be removed and that no annotationshall be made as a result of the court’s order.

(6) Notes placed in the register in accordance with subsection (1), or in pursuanceof regulations under subsection (2), are part of the register for all purposes ofthe Companies Acts.


694 Allocation of unique identifiers

(1) The Secretary of State may make provision for the use in connection with theregister of reference numbers (“unique identifiers”) to identify each personwho—

(a) is a director of a company,(b) in the case of an oversea company whose particulars are registered

under section 661, holds any such position as may be specified for thepurposes of this section by regulations under that section, or

(c) who with a view to being appointed—(i) a director of a company, or

(ii) to any such position,applies for a certificate of non-disclosure in respect of his usualresidential address.

(2) The regulations may—(a) provide that a unique identifier may be in such form, consisting of one

or more sequences of letters or numbers, as the registrar may from timeto time determine;

(b) make provision for the allocation of unique identifiers by the registrar;(c) require there to be included, in any specified description of documents

delivered to the registrar, as well as a statement of the person’s name—(i) a statement of the person’s unique identifier, or

(ii) a statement that the person has not been allocated a uniqueidentifier;

(d) enable the registrar to take steps where a person appears to have morethan one unique identifier to discontinue the use of all but one of them.

(3) The regulations may contain provision for the application of the scheme inrelation to persons appointed, and documents registered, before thecommencement of this Act.

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(4) The regulations may make different provision for different descriptions ofperson and different descriptions of document.


695 Preservation of original documents

(1) The originals of documents delivered to the registrar in hard copy form mustbe kept for three years after they are received by the registrar, after which theymay be destroyed provided the information contained in them has beenrecorded in the register.This is subject to section 699(3) (extent of obligation to retain material notavailable for public inspection).

(2) The registrar is under no obligation to keep the originals of documentsdelivered in electronic form, provided the information contained in them hasbeen recorded in the register.

(3) This section applies to documents held by the registrar when this section comesinto force as well as to documents subsequently received.

696 Records relating to companies that have been dissolved etc

(1) This section applies where—(a) a company is dissolved,(b) an oversea company ceases to have any connection with the United

Kingdom by virtue of which it is required to register particulars undersection 661, or

(c) a credit or financial institution ceases to be within section 665 (overseainstitutions required to file accounts with the registrar).

(2) The registrar may, at any time after two years from the date on which itappears to the registrar that—

(a) the company has been dissolved,(b) the oversea company has ceased to have any connection with the

United Kingdom by virtue of which it is required to register particularsunder section 661, or

(c) the credit or financial institution has ceased to be within section 665(oversea institutions required to file accounts with the registrar),

the registrar may direct that records relating to the company or institution maybe removed to the Public Record Office or, as the case may be, the PublicRecords Office for Northern Ireland.

(3) Records in respect of which such a direction is given shall be disposed of underthe enactments relating to that Office and the rules made under them.

(4) In subsection (1)(a) “company” includes a company provisionally orcompletely registered under the Joint Stock Companies Act 1844.

(5) This section does not extend to Scotland.

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Inspection etc of the register

697 Inspection of the register

(1) Any person may inspect the register.

(2) The right of inspection extends to the originals of documents delivered to theregistrar in hard copy form if, and only if, the record kept by the registrar of thecontents of the document is illegible or unavailable.The period for which such originals are to be kept is limited by section 695(1).

(3) This section has effect subject to section 699 (records not available for publicinspection).

698 Right to copy of material on the registrar

(1) Any person may require a copy of any material on the register.

(2) The fee for any such copy of material derived from a document subject to theDirective disclosure requirements (see section 690), whether in hard copy orelectronic form, must not exceed the administrative cost of providing it.

(3) This section has effect subject to section 699 (material not available for publicinspection).

699 Material not available for public inspection

(1) The following material must not be made available by the registrar for publicinspection—

(a) a protected address as stated—(i) on an application for a non-disclosure certificate or on a

notification of change of address where such a certificate is inforce, or

(ii) on any other document where a residential address wouldnormally be required to be notified;

(b) any application or other document delivered to the registrar underChapter 8 of Part 10 (directors’ residential addresses: non-disclosurecertificates);

(c) the contents of any document sent to the registrar containing viewsexpressed pursuant to section 57 (comments on proposal by companyto use certain words or expressions in company name);

(d) any document received by the register in connection with the giving orwithdrawal of consent under section 685 (informal correction ofdocuments);

(e) the contents of—(i) any instrument creating or evidencing a charge and delivered to

the registrar under section 395 of the Companies Act 1985 (c. 6)(registration of company charges: England and Wales orNorthern Ireland), or

(ii) any certified copy of an instrument creating or evidencing acharge and delivered to the registrar under section 410 of thatAct (registration of company charges: Scotland);

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(f) any e-mail address, identification code or password deriving from adocument delivered for the purpose of authorising or facilitatingelectronic filing procedures or providing information by telephone;

(g) the contents of any documents held by the registrar pending a decisionof the registrar of community interest companies under section 36 or 38of the Companies (Audit, Investigations and Community Enterprise)Act 2004 (c. 27) (decision on eligibility for registration as communityinterest company) and that the registrar is not later required to record;

(h) any other material excluded from public inspection by or under anyother enactment.

(2) A restriction applying by reference to material deriving from a particulardescription of document does not affect the availability for public inspection ofthe same information contained in material derived from another descriptionof document in relation to which no such restriction applies.

(3) Material to which this section applies need not be retained by the registrar forlonger than appears to the registrar reasonably necessary for the purposes forwhich the material was delivered to the registrar.

700 Form of application for inspection or copy

(1) The registrar may specify the form and manner in which application is to bemade for—

(a) inspection under section 697, or(b) a copy under section 698.

(2) As from 1st January 2007, applications in respect of documents subject to theDirective disclosure requirements may be submitted to the registrar in hardcopy or electronic form, as the applicant chooses.This does not affect the registrar’s power under subsection (1) above to imposerequirements in respect of other matters.

701 Form and manner in which copies to be provided

(1) The following provisions apply as regards the form and manner in whichcopies are to be provided under section 698.

(2) As from 1st January 2007, copies of documents subject to the Directivedisclosure requirements must be provided in hard copy or electronic form, asthe applicant chooses.This is subject to the following proviso.

(3) The registrar is not obliged by subsection (2) to provide copies in electronicform of a document that was delivered to the registrar in hard copy form if—

(a) the document was delivered to the registrar on or before 31st December1996, or

(b) the document was delivered to the registrar on or before 31st December2006 and ten years or more elapsed between the date of delivery andthe date of receipt of the first application for a copy on or after 1stJanuary 2007.

(4) Subject to the preceding provisions of this section, the registrar may determinethe form and manner in which copies are to be provided.

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702 Certification of copies as accurate

(1) Copies provided under section 698 in hard copy form must be certified as truecopies unless the applicant dispenses with such certification.

(2) Copies so provided in electronic form must not be certified as true copiesunless the applicant expressly requests such certification.

(3) A copy provided under section 698, certified by the registrar (whose officialposition it is unnecessary to prove) to be an accurate record of the contents ofthe original document, is in all legal proceedings admissible in evidence—

(a) as of equal validity with the original document, and(b) as evidence (in Scotland, sufficient evidence) of any fact stated in the

original document of which direct oral evidence would be admissible.

(4) The Secretary of State may make provision by regulations as to the manner inwhich such a certificate is to be provided in a case where the copy is providedin electronic form.

(5) Except in the case of documents that are subject to the Directive disclosurerequirements (see section 690), copies provided by the registrar may, instead ofbeing certified in writing to be an accurate record, be sealed with the registrar’sofficial seal.

703 Issue of process for production of records kept by the registrar

(1) No process for compelling the production of a record kept by the registrar shallissue from any court except with the permission of the court.

(2) Any such process shall bear on it a statement that it is issued with thepermission of the court.

Correction or removal of material on the register

704 Registrar’s notice to resolve inconsistency on the register

(1) Where it appears to the registrar that the information contained in a documentdelivered to the registrar is inconsistent with other information on the register,the registrar may give notice to the company to which the document relates—

(a) stating in what respects the information contained in it appears to beinconsistent with other information on the register, and

(b) requiring the company to take steps to resolve the inconsistency.

(2) The notice must—(a) state the date on which it is issued, and(b) require the delivery to the registrar, within 14 days after that date, of

such replacement or additional documents as may be required toresolve the inconsistency.

(3) If the necessary documents are not delivered within the period specified, anoffence is committed by—


(4) A person guilty of an offence under subsection (4) is liable on summaryconviction to a fine not exceeding level 5 on the standard scale and, for

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705 Administrative removal of material from the register

(1) The registrar may remove from the register anything that there was power, butno duty, to include.

(2) This power is exercisable, in particular, so as to remove—(a) unnecessary material within the meaning of section 687, and(b) material derived from a document that has been replaced under—

section 686 (voluntary replacement of document previouslydelivered,

section 688 (notice to remedy defective delivery), orsection 704 (notice to remedy inconsistency on the register).

(3) This section does not authorise the removal from the register of—(a) anything whose registration has had legal consequences in relation to

the company as regards—(i) its formation,

(ii) a change of name,(iii) its re-registration,(iv) its becoming or ceasing to be a community interest company,(v) a reduction of capital,

(vi) a change of registered office,(vii) the registration of a charge, or

(viii) its dissolution;(b) an address that is a person’s registered address for the purposes of

section 747 (service of documents on directors, secretaries and others).In these cases the remedy is to apply to the court (see section 706).

(4) On or before removing any material under this section (otherwise than at therequest of the company) the registrar must give notice—

(a) to the person by whom the material was delivered (if the identity, andname and address of that person are known), or

(b) to the company to which the material relates (if notice cannot be givenunder paragraph (a) and the identity of that company is known).

(5) The notice must—(a) state what material the registrar proposes to remove, or has removed,

and on what grounds, and(b) state the date on which it is issued.

706 Rectification of the register under court order

(1) The registrar shall remove from the register any material—(a) that derives from anything that the court has declared to be invalid or

ineffective, or to have been done without the authority of the company,or

(b) that a court declares to be factually inaccurate, or to be derived fromsomething that is factually inaccurate, or forged,

and that the court directs should be removed from the register.

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(2) The court order must specify what is to be removed from the register andindicate where on the register it is.

(3) The court must not make an order for the removal from the register of anythingthe registration of which had legal consequences as mentioned in section 705(3)unless satisfied—

(a) that the presence of the material on the register has caused, or maycause, damage to the company, and

(b) that the company’s interest in removing the material outweigh anyinterest of other persons in the material continuing to appear on theregister.

(4) Where in such a case the court does make an order for removal, it may makesuch consequential orders as appear just with respect to the legal effect (if any)to be accorded to the material by virtue of its having appeared on the register.

(5) A copy of the court’s order must be sent to the registrar for registration.

(6) This section does not apply where the court has other, specific powers to dealwith the matter, for example under—

(a) the provisions of Part 15 of this Act relating to the revision of defectiveaccounts and reports, or

(b) section 404 or 420 of the Companies Act 1985 (rectification of theregister of charges).

The registrar’s index of company names

707 The registrar’s index of company names

(1) The registrar of companies must keep an index of the names of the companiesand other bodies to which this section applies.This is “the registrar’s index of company names”.

(2) This section applies to—(a) companies as defined by section 1 of this Act;(b) companies registered under the Companies Acts by virtue of section

655 (companies not formed under the Companies Acts but able toregister);

(c) any body to which any provision of the Companies Acts applies byvirtue of regulations under section 659 (unregistered companies); and

(d) oversea companies that have registered particulars with the registrarunder Part 25, other than companies that appear to the registrar not tobe required to do so.

(3) This section also applies to—(a) limited partnerships registered in the United Kingdom;(b) limited liability partnerships incorporated in the United Kingdom;(c) European Economic Interest Groupings registered in the United

Kingdom;(d) open-ended investment companies authorised in the United Kingdom;(e) societies registered under the Industrial and Provident Societies Act

1965 (c. 12) or the Industrial and Provident Societies Act (NorthernIreland) 1969.

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(4) The Secretary of State may by order amend subsection (3)—(a) by the addition of any description of body;(b) by the deletion of any description of body.

(5) Any such order is subject to negative resolution procedure.

708 Right to inspect index

Any person may inspect the registrar’s index of company names.

709 Power to amend enactments relating to bodies other than companies

(1) The Secretary of State may by regulations amend the enactments relating toany description of body for the time being within section 707(3) (bodies otherthan companies whose names are to be entered in the registrar’s index), so asto—

(a) require the registrar to be provided with information as to the names ofbodies registered, incorporated, authorised or otherwise regulatedunder those enactments, and

(b) make provision in relation to such bodies corresponding to that madeby—

section 67 (company name not to be the same as another in theindex), and

sections 68 and 69 (power to direct change of company name incase of similarity to existing name).

(2) An order under this section is subject to affirmative resolution procedure.

Language requirements: translation

710 Application of language requirements

(1) The provisions listed below apply to all documents required to be delivered tothe registrar under any provision of—

(a) the Companies Acts, or(b) the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order

1989.

(2) The Secretary of State may make provision by regulations applying all or anyof the listed provisions, with or without modifications, in relation todocuments delivered to the registrar under any other enactment.

(3) The provisions are—section 711 (documents to be drawn up and delivered in English),section 712 (documents relating to Welsh companies),section 713 (documents that may be drawn up and delivered in other

languages),section 715 (certified translations).

(4) Regulations under this section are subject to the negative resolution procedure.

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711 Documents to be drawn up and delivered in English

(1) The general rule is that all documents required to be delivered to the registrarmust be drawn up and delivered in English.

(2) This is subject to—section 712 (documents relating to Welsh companies) andsection 713 (documents that may be drawn up and delivered in other

languages).

712 Documents relating to Welsh companies

(1) Documents relating to a Welsh company may be drawn up and delivered tothe registrar in Welsh.

(2) On delivery to the registrar any such document must be accompanied by acertified translation into English, unless it is—

(a) of a description excepted from that requirement by regulations madeby the Secretary of State, or

(b) in a form prescribed in Welsh (or partly in Welsh and partly in English)by virtue of section 26 of the Welsh Language Act 1993 (c. 38).

(3) Where a document is properly delivered to the registrar in Welsh without acertified translation into English, the registrar must obtain such a translation ifthe document is to be available for public inspection.The translation is treated as if delivered to the registrar in accordance with thesame provision as the original.

(4) A Welsh company may deliver to the registrar a certified translation intoWelsh of any document in English that relates to the company and is or hasbeen delivered to the registrar.

(5) Section 713 (which requires a certified translations into English of documentsdelivered to the registrar in another language) does not apply to a documentrelating to a Welsh company that is drawn up and delivered in Welsh.

713 Documents that may be drawn up and delivered in other languages

(1) Documents to which this section applies may be drawn up and delivered to theregistrar in a language other than English, but when delivered to the registrarthey must be accompanied by a certified translation into English.

(2) This section applies to—(a) agreements required to be forwarded to the registrar under Chapter 3

of Part 3 of this Act (agreements affecting the company’s constitution);(b) documents required to be delivered under section 373(2)(e) or section

374(2)(f) (company included in accounts of larger group: required todeliver copy of group accounts);

(c) instruments or copy instruments required to be delivered under Part 12of the Companies Act 1985 (c. 6) (registration of charges);

(d) documents of any other description specified in regulations made bythe Secretary of State.

(3) Regulations under this section are subject to the negative resolution procedure.

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714 Voluntary filing of translations

(1) A company may deliver to the registrar one or more certified translations ofany document relating to the company that is or has been delivered to theregistrar.

(2) The Secretary of State may by regulations specify—(a) the languages, and(b) the descriptions of document,

in relation to which this facility is available.

(3) The regulations must provide that it is available as from 1st January 2007—(a) in relation to all the official languages of the European Union, and(b) in relation to all documents subject to the Directive disclosure

requirements (see section 690).

(4) The power of the registrar to impose requirements as to the form and mannerof delivery includes power to impose requirements as to the identification ofthe original document and the delivery of the translation in a form and mannerenabling it to be associated with the original.


(6) This section does not apply where the original document was delivered to theregistrar before this section came into force.

715 Certified translations

(1) In this Part a “certified translation” means a translation certified in theprescribed manner to be a correct translation.

(2) In the case of any discrepancy between the original language version of adocument and a certified translation—

(a) the company may not rely on the translation as against a third party,but

(b) a third party may rely on the translation unless the company shows thatthe third party had knowledge of the original.

(3) A “third party” means a person other than the company or the registrar.

Language requirements: transliteration

716 Transliteration of names and addresses: permitted characters

(1) Names and addresses in a document delivered to the registrar must containonly letters, characters and symbols (including accents and other diacriticalmarks) that are permitted.

(2) The Secretary of State may make provision by regulations—(a) as to the letters, characters and symbols (including accents and other

diacritical marks) that are permitted, and(b) permitting or requiring the delivery of documents in which names and

addresses have not been transliterated into a permitted form.


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717 Transliteration of names and addresses: voluntary transliteration into Roman characters

(1) Where a name or address is or has been delivered to the registrar in a permittedform using other than Roman characters, the company may deliver to theregistrar a transliteration into Roman characters.

(2) The power of the registrar to impose requirements as to the form and mannerof delivery includes power to impose requirement as to the identification of theoriginal document and the delivery of the transliteration in a form and mannerenabling it to be associated with the original.

718 Transliteration of names and addresses: certification

(1) The Secretary of State may make provision by regulations requiring thecertification of transliterations and prescribing the form of certification.

(2) Different provision may be made for compulsory and voluntarytransliterations.



719 General false statement offence

(1) It is an offence for a person knowingly or recklessly—(a) to deliver or cause to be delivered to the registrar, for any purpose of

the Companies Acts, a document, or (b) to make to the registrar, for any such purpose, a statement,

that is misleading, false or deceptive in a material particular.





720 Enforcement of company’s filing obligations

(1) This section applies where a company has made default in complying with anyobligation under the Companies Acts—

(a) to deliver a document to the registrar, or(b) to give notice to the registrar of any matter.

(2) The registrar, or any member or creditor of the company, may give notice onthe company requiring it to comply with the obligation.

(3) If the company fails to make good the default within 14 days after service of thenotice, the registrar, or any member or creditor of the company, may apply to

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the court for an order directing the company, and any specified officer of it, tomake good the default within a specified time.

(4) The court’s order may provide that all costs (in Scotland, expenses) of orincidental to the application are to be borne by the company or by any officersof it responsible for the default.

(5) This section does not affect the operation of any enactment making it anoffence, or imposing a civil penalty, for the default.

721 Application of provisions about documents and delivery

(1) In this Part—(a) “document” means information recorded in any form, and(b) references to delivering a document include forwarding, lodging,

registering, sending, producing or submitting it or (in the case of anotice) giving it.

(2) Except as otherwise provided, this Part applies in relation to the supply to theregistrar of information otherwise than in documentary form as it applies inrelation to the delivery of a document.

722 Meaning of “hard copy”, “electronic form” and “electronic means”

(1) A document is delivered or provided in “hard copy form” if it is delivered orprovided in a paper copy or similar form capable of being read with the nakedeye.

(2) A document is delivered or provided in “electronic form” if it is delivered orprovided—

(a) by electronic means (for example, by e-mail or fax), or(b) by any other means while in an electronic form.

(3) A document is delivered or provided “by electronic means” if it is—(a) sent initially and received at its destination by means of electronic

equipment for the processing (including digital compression) andstorage of data, and

(b) entirely transmitted, conveyed and received by wire, by radio, byoptical means or by other electromagnetic means.

723 Supplementary provisions relating to electronic communications

(1) Registrar’s rules may require a company to give any necessary consents to theuse of electronic means for communications by the registrar to the company asa condition of making use of any facility to deliver material to the registrar byelectronic means.

(2) A document that is required to be signed by the registrar or authenticated bythe registrar’s seal shall, if sent by electronic means, be authenticated in suchmanner as may be specified by registrar’s rules.

724 Alternative to publication in the Gazette

(1) Notices that would otherwise need to be published by the registrar in theGazette may instead be published by such means as may from time to time be

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approved by the registrar in accordance with regulations made by theSecretary of State.

(2) The Secretary of State may make provision by regulations as to whatalternative means may be approved.

(3) The regulations may, in particular—(a) require the use of electronic means;(b) require the same means to be used—

(i) for all notices or for all notices of specified descriptions, and(ii) whether the company is registered in England and Wales,

Scotland or Northern Ireland;(c) impose conditions as to the manner in which access to the notices is to

be made available.


(5) Before starting to publish notices by means approved under this section theregistrar must publish at least one notice to that effect in the Gazette.

(6) Nothing in this section prevents the registrar from giving public notice both inthe Gazette and by means approved under this section.In that case, the requirement of public notice is met when notice is first givenby either means.

725 Registrar’s rules

(1) Where any provision of this Part enables the registrar to make provision, orimpose requirements, as to any matter, the registrar may make such provisionor impose such requirements by means of rules under this section.This is without prejudice to the making of such provision or the imposing ofsuch requirements by other means.

(2) Registrar’s rules—(a) may make different provision for different cases, and(b) may allow the registrar to disapply or modify any of the rules.

(3) The registrar must—(a) publicise the rules in a manner appropriate to bring them to the notice

of persons affected by them, and(b) make copies of the rules available to the public (in hard copy or

electronic form).

726 Payments into the Consolidated Fund

Nothing in the Companies Acts or any other enactment as to the payment ofreceipts into the Consolidated Fund shall be read as affecting the operation inrelation to the registrar of section 3(1) of the Government Trading Funds Act1973 (c. 63).

727 Contracting out of registrar’s functions

(1) Where by virtue of an order made under section 69 of the Deregulation andContracting Out Act 1994 (c. 40) a person is authorised by the registrar toaccept delivery of any class of documents that are under any enactment to be

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delivered to the registrar, the registrar may direct that documents of that classshall be delivered to a specified address of the authorised person.Any such direction must be printed and made available to the public (with orwithout payment).

(2) A document of that class that is delivered to an address other than the specifiedaddress is treated as not having been delivered.

(3) Registrar’s rules are not subordinate legislation for the purposes of section 71of the Deregulation and Contracting Out Act 1994 (c. 40) (functions excludedfrom contracting out).

728 Application of Part to oversea companies

Unless the context otherwise requires, the provisions of this Part apply to anoversea company as they apply to a company registered under the CompaniesActs.

729 Application of Part to functions under other enactments

(1) Unless the context otherwise requires, the provisions of this Part apply inrelation to functions of the registrar under the following enactments as theyapply to functions under the Companies Acts.

(2) The enactments are—the Joint Stock Companies Acts;the Newspaper Libel and Registration Act 1881 (c. 60);the Limited Partnerships Act 1907 (c. 24);section 53 of the Industrial and Provident Societies Act 1965 (c. 12);Parts 1 to 7 and sections 411, 413, 414, 416 and 417 of the Insolvency Act

1986 (c. 45);section 12 of the Statutory Water Companies Act 1991 (c. 58);sections 3, 4, 6, 63 and 64 of, and Schedule 1 to, the Housing Act 1996

(c. 52);sections 2, 4 and 26 of the Commonwealth Development Corporation Act

1999 (c. 20);Part 6 and section 366 of the Financial Services and Markets Act 2000 (c. 8);the Limited Liability Partnerships Act 2000 (c. 12);section 15 and Schedule 1 to the Insolvency Act 2000 (c. 39);section 121 of the Land Registration Act 2002 (c. 9);section 844 of this Act.

(3) The provisions applied by this section do not include sections 710 to 715(language requirements).

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Company Law Reform Bill [HL]Part 27 — Offences under the Companies Acts

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PART 27

OFFENCES UNDER THE COMPANIES ACTS

Liability of officer in default

730 Liability of officer in default

(1) This section has effect for the purposes of any provision of the Companies Actsto the effect that, in the event of contravention of an enactment in relation to acompany, an offence is committed by every officer of the company who is indefault.

(2) For this purpose “officer” includes—(a) any director, manager or secretary, and(b) any person who is to be treated as an officer of the company for the

purposes of the provision in question.

(3) An officer is “in default” for the purposes of the provision if he authorises orpermits, participates in, or fails to take all reasonable steps to prevent, thecontravention.

731 Liability of company as officer in default

(1) Where a company is an officer of another company, it does not commit anoffence as an officer in default unless one of its officers is in default.

(2) Where any such offence is committed by a company the officer in question alsocommits the offence and is liable to be proceeded against and punishedaccordingly.

(3) In this section “officer” and “in default” have the meanings given by section730.

732 Application to bodies other than companies

(1) Section 730 (liability of officers in default) applies to a body other than acompany as it applies to a company.

(2) As it applies in relation to a body corporate other than a company—(a) the reference to a director of the company shall be read as referring—

(i) where the body’s affairs are managed by its members, to amember of the body,

(ii) in any other case, to any corresponding officer of the body, and(b) the reference to a manager or secretary of the company shall be read as

referring to any manager, secretary or similar officer of the body.

(3) As it applies in relation to a partnership—(a) the reference to a director of the company shall be read as referring to a

member of the partnership, and(b) the reference to a manager or secretary of the company shall be read as

referring to any manager, secretary or similar officer of the partnership.

(4) As it applies in relation to an unincorporated body other than a partnership—(a) the reference to a director of the company shall be read as referring—

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(i) where the body’s affairs are managed by its members, to amember of the body,

(ii) in any other case, to a member of the governing body, and(b) the reference to a manager or secretary of the company shall be read as

referring to any manager, secretary or similar officer of the body.

Offences under the Companies Act 1985

733 Amendments of the Companies Act 1985

Schedule 4 contains amendments of the Companies Act 1985 (c. 6) relating tooffences.

General provisions

734 Meaning of “daily default fine”

(1) This section defines what is meant in the Companies Acts where it is providedthat a person guilty of an offence is liable on summary conviction to a fine notexceeding a specified amount “and in the case of continued contravention to adaily default fine” not exceeding a specified amount.

(2) This means that the person is liable on a second or subsequent summaryconviction of the offence to a fine not exceeding the latter amount for each dayon which the contravention is continued (instead of being liable to a fine notexceeding the former amount).

735 Consents required for certain prosecutions

(1) This section applies to proceedings for an offence under any of the followingprovisions—

section 436, 438 or 624 of this Act (offences of unauthorised disclosure ofinformation)

section 628 of this Act (failure to comply with rules about takeover biddocuments);

section 448, 449, 450, 451 or 453A of the Companies Act 1985 (offences inconnection with company investigations);

section 455 of that Act (offence of attempting to evade restrictions onshares).

(2) No such proceedings are to be brought in England and Wales except by or withthe consent of—

(a) in the case of an offence under—(i) section 436, 438 or 624 of this Act,

(ii) section 628 of this Act, or(iii) section 448, 449, 450, 451 or 453A of the Companies Act 1985,

the Secretary of State or the Director of Public Prosecutions;(b) in the case of an offence under section 455 of the Companies Act 1985,

the Secretary of State.

(3) No such proceedings are to be brought in Northern Ireland except by or withthe consent of—

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(a) in the case of an offence under—(i) section 436, 438 or 624 of this Act,

(ii) section 628 of this Act, or(iii) section 448, 449, 450, 451 or 453A of the Companies Act 1985,

the Secretary of State or the Director of Public Prosecutions forNorthern Ireland;

(b) in the case of an offence under section 455 of the Companies Act 1985,the Secretary of State.

736 Summary proceedings: venue

(1) Summary proceedings for any offence under the Companies Acts may betaken—

(a) against a body corporate, at any place at which the body has a place ofbusiness, and

(b) against any other person, at any place at which he is for the time being.

(2) This is without prejudice to any jurisdiction exercisable apart from this section.

737 Summary proceedings: time limit for proceedings

(1) An information relating to an offence under the Companies Acts that is triableby a magistrates’ court in England and Wales may be so tried if it is laid—

(a) at any time within three years after the commission of the offence, and(b) within twelve months after the date on which evidence sufficient in the

opinion of the Director of Public Prosecutions or the Secretary of State(as the case may be) to justify the proceedings comes to his knowledge.

(2) Summary proceedings in Scotland for an offence under the Companies Acts—(a) must not be commenced after the expiration of three years from the

commission of the offence;(b) subject to that, may be commenced at any time—

(i) within twelve months after the date on which evidencesufficient in the Lord Advocate’s opinion to justify theproceedings came to his knowledge, or

(ii) where such evidence was reported to him by the Secretary ofState, within twelve months after the date on which it came tothe knowledge of the latter.

Section 136(3) of the Criminal Procedure (Scotland) Act 1995 (c. 46) (date whenproceedings deemed to be commenced) applies for the purposes of thissubsection as for the purposes of that section.

(3) A magistrates’ court in Northern Ireland has jurisdiction to hear and determinea complaint charging the commission of a summary offence under theCompanies Acts provided that the complaint is made—

(a) within three years from the time when the offence was committed, and(b) within twelve months from the date on which evidence sufficient in the

opinion of the Director of Public Prosecutions for Northern Ireland orthe Secretary of State (as the case may be) to justify the proceedingscomes to his knowledge.

(4) For the purposes of this section a certificate of the Director of PublicProsecutions, the Lord Advocate, the Director of Public Prosecutions for

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Northern Ireland or the Secretary of State (as the case may be) as to the date onwhich such evidence as is referred to above came to his notice is conclusiveevidence.

738 Legal professional privilege

In proceedings against a person for an offence under the Companies Acts,nothing in those Acts is to be taken to require any person to disclose anyinformation that he is entitled to refuse to disclose on grounds of legalprofessional privilege (in Scotland, confidentiality of communications).

739 Proceedings against unincorporated bodies

(1) Proceedings for an offence under the Companies Acts alleged to have beencommitted by an unincorporated body must be brought in the name of thebody (and not in that of any of its members).

(2) For the purposes of such proceedings—(a) any rules of court relating to the service of documents have effect as if

the body were a body corporate, and(b) the following provisions apply as they apply in relation to a body

corporate—(i) in England and Wales, section 33 of the Criminal Justice Act

1925 (c. 86) and Schedule 3 to the Magistrates’ Courts Act 1980(c. 43),

(ii) in Scotland, sections 70 and 143 of the Criminal Procedure(Scotland) Act 1995 (c. 46),

(iii) in Northern Ireland, section 18 of the Criminal Justice Act(Northern Ireland) 1945 and Article 166 of and Schedule 4 to theMagistrates’ Courts (Northern Ireland) Order 1981.

(3) A fine imposed on an unincorporated body on its conviction of an offenceunder the Companies Acts must be paid out of the funds of the body.

740 Imprisonment on summary conviction in England and Wales: transitory provision

(1) This section applies to any provision of the Companies Acts that provides thata person guilty of an offence is liable on summary conviction in England andWales to imprisonment for a term not exceeding twelve months.

(2) In relation to an offence committed before the commencement of section 154(1)of the Criminal Justice Act 2003 (c. 44), for “twelve months” substitute “sixmonths”.

Supplementary

741 Transitional provision

The provisions of this Part do not apply to offences committed before thecommencement of the relevant provision.

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Company Law Reform Bill [HL]Part 28 — Companies: supplementary provisions

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PART 28

COMPANIES: SUPPLEMENTARY PROVISIONS

Company records

742 Meaning of “company records”

In this Part “company records” means any register, index, accounting records,agreement, memorandum, minutes or other document required by theCompanies Acts to be kept by a company.

743 Form of company records

(1) Company records—(a) may be kept in hard copy or electronic form, and(b) may be arranged in such manner as the directors of the company think

fit,provided the information in question is adequately recorded for futurereference.

(2) Where the records are kept in electronic form, they must be capable of beingreproduced in hard copy form.



(5) Any provision of an instrument made by a company before 12th February 1979that requires a register of holders of the company’s debentures to be kept inhard copy form is to be read as requiring it to be kept in hard copy or electronicform.

744 Regulations about inspection of records and provision of copies

(1) The Secretary of State may make provision by regulations as to the obligationsof a company that is required by any provision of the Companies Acts—

(a) to make available for inspection any company records, or(b) to provide copies of any company records.

(2) A company that fails to comply with the regulations is treated as havingrefused inspection or, as the case may be, having failed to provide a copy.

(3) The regulations may—(a) make provision as to the time, duration and manner of inspection,

including the circumstances in which and extent to which the copyingof information is permitted in the course of inspection, and

(b) define what may be required of the company as regards the nature,extent and manner of extracting or presenting any information for thepurposes of inspection or the provision of copies.

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(4) Where there is power to charge a fee, the regulations may make provision as tothe amount of the fee and the basis of its calculation.

(5) Nothing in any provision of this Act or in the regulations shall be read aspreventing a company—

(a) from affording more extensive facilities than are required by theregulations, or

(b) where a fee may be charged, from charging a lesser fee than thatprescribed or none at all.


745 Duty to take precautions against falsification

(1) Where company records are kept otherwise than in bound books, adequateprecautions must be taken—

(a) to guard against falsification, and(b) to facilitate the discovery of falsification.



(4) This section does not apply to the documents required to be kept under—(a) section 206 (copy of director’s service contract or memorandum of its

terms); or(b) section 214 (qualifying third party indemnity provision);

Service addresses

746 Service of documents on company

(1) A document may be served on a company registered under the CompaniesActs by leaving it at, or sending it by post to, the company’s registered office.

(2) A document may be served on an oversea company whose particulars areregistered under section 661—

(a) by leaving it at, or sending it by post to, the registered address of anyperson resident in the United Kingdom who is authorised to acceptservice of documents on the company’s behalf, or

(b) if there is no such person, or if any such person refuses service orservice cannot for any other reason be effected, by leaving it at orsending by post to any place of business of the company in the UnitedKingdom.

(3) Where a company registered in Scotland carries on business in England andWales, the process of any court in England and Wales may be served on thecompany by leaving it at, or sending it by post to, the company’s principalplace of business in England and Wales, addressed to the manager or otherhead officer in England and Wales of the company.

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Where process is served on a company under this subsection, the personissuing out the process must send a copy of it by post to the company’sregistered office.

747 Service of documents on directors, secretaries and others

(1) A document may be served on a person to whom this section applies byleaving it at, or sending it by post to, the person’s registered address.

(2) This section applies to—(a) a director or secretary of a company;(b) in the case of an oversea company whose particulars are registered

under section 661, a person holding any such position as may bespecified for the purposes of this section by regulations under thatsection;

(c) a person appointed in relation to a company as—(i) a judicial factor (in Scotland),

(ii) a receiver and manager appointed under section 18 of theCharities Act 1993 (c. 10), or

(iii) a manager appointed under section 47 of the Companies(Audit, Investigations and Community Enterprise) Act 2004(c. 27).

(3) This section applies whatever the purpose of the document in question.It is not restricted to service for purposes arising out or in connection with theappointment or position mentioned in subsection (2) or in connection with thecompany concerned.

(4) For the purposes of this section a person’s “registered address” means—(a) in the case of an individual in relation to whom a non-disclosure

certificate is in force in respect of his usual residential address, theservice address shown in the register kept by the registrar ofcompanies;

(b) in any other case, any address for the time being shown in relation tothat person in that register.

(5) If notice of a change of that address is given to the registrar, a person mayvalidly serve a document at the address previously registered until the end ofthe period of 14 days beginning with the date on which notice of the change isregistered.

(6) Service may not be effected by virtue of this section at an address—(a) if notice has been registered of the termination of the appointment in

relation to which the address was registered and the address is not aregistered address of the person concerned in relation to any otherappointment;

(b) in the case of a person holding any such position as is mentioned insubsection (2)(b), if the oversea company has ceased to have anyconnection with the United Kingdom by virtue of which it is requiredto register particulars under section 661.

(7) Nothing in this section shall be read as affecting any enactment or rule of lawunder which permission is required for service out of the jurisdiction.

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748 Service addresses

(1) In the Companies Acts a “service address”, in relation to a person, means anaddress at which document may be effectively served on that person.

(2) The Secretary of State may by regulations specify conditions with which aservice address must comply.


Sending or supplying documents or information

749 The company communications provisions

(1) The provisions of sections 750 to 754 (“the company communicationsprovisions”) have effect for the purposes of any provision of the CompaniesActs that authorises or requires documents or information to be sent orsupplied by or to a company.

(2) As regards documents or information to be sent or supplied to the registrar thecompany communications provisions have effect subject to the provisions ofPart 26.

750 Sending or supplying documents or information

(1) Documents or information to be sent or supplied to a company must be sent orsupplied in accordance with the provisions of Schedule 5.

(2) Documents or information to be sent or supplied by a company must be sentor supplied—

(a) in the case of a company other than a traded company, in accordancewith the provisions of Schedule 6;

(b) in the case of a traded company, in accordance with the provisions ofSchedule 7.

(3) Those Schedules apply notwithstanding anything in the company’s articles.

(4) The provisions referred to in subsection (2) apply (and those referred to insubsection (1) do not apply) in relation to documents or information that are tobe sent or supplied by one company to another.

751 Meaning of “in hard copy form”, “in electronic form” and “by means of a website”

(1) A document or information is sent or supplied “in hard copy form” if it is sentor supplied in a paper copy or similar form capable of being read with thenaked eye.

(2) A document or information is sent or supplied “in electronic form” if it is sentor supplied—

(a) by electronic means (for example, by e-mail or fax), or(b) by any other means while in an electronic form (for example, sending a

disk by post).

(3) A document is sent or supplied “by electronic means” if it is—

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(a) sent initially and received at its destination by means of electronicequipment for the processing (including digital compression) andstorage of data, and

(b) entirely transmitted, conveyed and received by wire, by radio, byoptical means or by other electromagnetic means.

(4) A document or information authorised or required to be sent or supplied inhard copy or electronic form must be sent or supplied in a form, and by ameans, that the sender or supplier reasonably considers will enable therecipient—

(a) to read it, and(b) to retain a copy of it.

(5) A provision that requires a document or information to be sent or supplied inhard copy form, and does not authorise its being sent or supplied in electronicform, is not complied with by sending or supplying it by electronic means.

(6) A provision that authorises documents or information to be sent or supplied inhard copy form, in electronic form or by means of a website only authorisesthem to be sent or supplied in accordance with the company communicationsprovisions (unless it expressly states otherwise).

(7) A requirement to send or supply documents or information in hard copy form,in electronic form or by means of a website is a requirement to send or supplythem in accordance with the company communications provisions (unless itexpressly states otherwise).

752 Right to hard copy version

(1) Where a member of a company or a holder of a company’s debentures hasreceived a document or information from the company otherwise than in hardcopy form, he is entitled to require the company to send him a version of thedocument or information in hard copy form.

(2) The company must send the document or information in hard copy formwithin 21 days of receipt of the request from the member or debenture holder.

(3) The company may not make a charge for providing the document orinformation in that form.

(4) If a company fails to comply with this section, an offence is committed by thecompany and every officer of it who is in default.


(6) This section has effect subject to any contrary provision in an enactment.

753 Meaning of “authenticated”

A document or information sent or supplied by a person to a company isauthenticated if—

(a) in the case of a document or information in hard copy form, it is signedby the person sending or supplying it;

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(b) in the case of a document or information in electronic form, the identityof the sender or supplier of the document is confirmed—

(i) in a manner specified by the company, or(ii) if no such manner has been specified by the company, in

accordance with normal commercial practice.

754 Interpretation of company communications provisions

(1) In the company communications provisions— “address” includes a number or address used for the purposes of sending

or receiving documents or information by electronic means;“document” includes summons, notice, order or other legal process and

registers;“traded company” means a company whose securities are admitted to

trading on a regulated market within the meaning of Directive 2004/39of the European Parliament and the Council of 21 April 2004 onmarkets in financial instruments.

(2) References in the company communications provisions to provisions of theCompanies Acts authorising or requiring a document or information to be sentor supplied include all such provisions, whatever expression is used, andreferences to documents or information being sent or supplied shall beconstrued accordingly.

(3) References in the company communications provisions to documents orinformation being sent or supplied by or to a company include references todocuments or information being sent or supplied by or to the directors of acompany acting on behalf of the company.

755 Deemed delivery of documents and information sent by post or electronic means

(1) This section applies in relation to documents and information sent or suppliedby a company.

(2) Where—(a) the document or information was sent by post (whether in hard copy or

electronic form) to an address in the United Kingdom, and(b) the company is able to show that it was properly addressed, prepaid

and posted,it is deemed to have been received by the intended recipient 48 hours after itwas sent.

(3) Where— (a) the document or information is sent or supplied by electronic means,

and(b) the company is able to show that it was properly addressed,

it is deemed to have been received by the intended recipient 48 hours after itwas sent.

(4) In calculating a period of hours for the purposes of this section, no accountshall be taken of any part of a Saturday or Sunday, Christmas Day, GoodFriday or any day that is a bank holiday in the part of the United Kingdom inwhich the company is registered.

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(5) This section has effect—(a) subject to any contrary provision in the Companies Acts, and(b) in its application to documents or information sent by a company to its

members, subject to any contrary provision in the company’s articles.

Notice of appointment of certain officers

756 Duty to notify registrar of certain appointments etc

(1) Notice must be given to the registrar of the appointment in relation to acompany of—

(a) a judicial factor (in Scotland),(b) a receiver and manager appointed under section 18 of the Charities Act

1993 (c. 10), or(c) a manager appointed under section 47 of the Companies (Audit,

Investigations and Community Enterprise) Act 2004 (c. 27).

(2) The notice must be given—(a) in the case of appointment of a judicial factor, by the judicial factor,(b) in the case of appointment of a receiver and manager under section 18

of the Charities Act 1993, by the Charity Commissioners;(c) in the case appointment of a manager under section 47 of the

Companies (Audit, Investigations and Community Enterprise) Act2004, by the Regulator of Community Interest Companies.

(3) The notice must specify an address at which service of documents (includinglegal process) may be effected on the person appointed.Notice of a change in the address for service may be given to the registrar bythe person appointed.

(4) Where notice has been given under this section of the appointment of a person,notice must also be given to the registrar of the termination of the appointment.This notice must be given by the person specified in subsection (2).

(5) In this section “company” includes—(a) [an oversea company that has [complied with the new disclosure

requirements, other than a company that appears to the registrar not tobe required to comply with those requirement];

(b) a body to which any provisions of the Companies Acts apply by virtueof section 659 (unregistered companies).

757 Offence of failure to give notice

(1) If a judicial factor fails to give notice of his appointment in accordance withsection 756 he commits an offence.


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Courts and legal proceedings

758 Meaning of “the court”

(1) Except as otherwise provided, in the Companies Acts “the court” means—(a) in England and Wales, the High Court or the county court;(b) in Scotland, the Court of Session or the sheriff court;(c) in Northern Ireland, the High Court.

(2) The provisions of the Companies Acts conferring jurisdiction on “the court” asdefined above have effect subject to any enactment or rule of law relating to theallocation of jurisdiction or distribution of business between courts in any partof the United Kingdom.

759 Power of court to grant relief in certain cases

(1) If in proceedings for negligence, default, breach of duty or breach of trustagainst—

(a) an officer of a company, or(b) a person employed by a company as auditor (whether he is or is not an

officer of the company),it appears to the court hearing the case that the officer or person is or may beliable but that he acted honestly and reasonably, and that having regard to allthe circumstances of the case (including those connected with hisappointment) he ought fairly to be excused, the court may relieve him, eitherwholly or in part, from his liability on such terms as it thinks fit.

(2) If any such officer or person has reason to apprehend that a claim will or mightbe made against him in respect of negligence, default, breach of duty or breachof trust—

(a) he may apply to the court for relief, and(b) the court has the same power to relieve him as it would have had if it

had been a court before which proceedings against him for negligence,default, breach of duty or breach of trust had been brought.

(3) Where the directors of a company take advantage of the exemption conferredby section 459 (small charities: accountant’s report in lieu of audit) this section,as it has effect in England and Wales and Northern Ireland, applies in relationto a person appointed as reporting accountant as it applies in relation to aperson appointed to act as auditor.

(4) Where a case to which subsection (1) applies is being tried by a judge with ajury, the judge, after hearing the evidence, may, if he is satisfied that thedefendant (in Scotland, the defender) ought in pursuance of that subsection tobe relieved either in whole or in part from the liability sought to be enforcedagainst him, withdraw the case from the jury and forthwith direct judgment tobe entered for the defendant or defender on such terms as to costs (in Scotland,expenses) or otherwise as the judge may think proper.

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PART 29

COMPANIES: INTERPRETATION

Meaning of "undertaking" and related expressions

760 Meaning of “undertaking” and related expressions

(1) In the Companies Acts “undertaking” means—(a) a body corporate or partnership, or(b) an unincorporated association carrying on a trade or business, with or

without a view to profit.

(2) In the Companies Acts references to shares—(a) in relation to an undertaking with a share capital, are to allotted shares;(b) in relation to an undertaking with capital but no share capital, are to

rights to share in the capital of the undertaking; and(c) in relation to an undertaking without capital, are to interests—

(i) conferring any right to share in the profits or liability tocontribute to the losses of the undertaking, or

(ii) giving rise to an obligation to contribute to the debts orexpenses of the undertaking in the event of a winding up.

(3) Other expressions appropriate to companies shall be construed, in relation toan undertaking which is not a company, as references to the correspondingpersons, officers, documents or organs, as the case may be, appropriate toundertakings of that description.This is subject to provision in any specific context providing for the translationof such expressions.

(4) References in the Companies Acts to “fellow subsidiary undertakings” are toundertakings which are subsidiary undertakings of the same parentundertaking but are not parent undertakings or subsidiary undertakings ofeach other.

(5) In the Companies Acts “group undertaking”, in relation to an undertaking,means an undertaking which is—

(a) a parent undertaking or subsidiary undertaking of that undertaking, or (b) a subsidiary undertaking of any parent undertaking of that

undertaking.

761 Parent and subsidiary undertakings

(1) This section (together with Schedule 8) defines “parent undertaking” and“subsidiary undertaking” for the purposes of the Companies Acts.

(2) An undertaking is a parent undertaking in relation to another undertaking, asubsidiary undertaking, if—

(a) it holds a majority of the voting rights in the undertaking, or(b) it is a member of the undertaking and has the right to appoint or

remove a majority of its board of directors, or(c) it has the right to exercise a dominant influence over the undertaking—

(i) by virtue of provisions contained in the undertaking’smemorandum or articles, or

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(ii) by virtue of a control contract, or (d) it is a member of the undertaking and controls alone, pursuant to an

agreement with other shareholders or members, a majority of thevoting rights in the undertaking.

(3) For the purposes of subsection (2) an undertaking shall be treated as a memberof another undertaking—

(a) if any of its subsidiary undertakings is a member of that undertaking,or

(b) if any shares in that other undertaking are held by a person acting onbehalf of the undertaking or any of its subsidiary undertakings.

(4) An undertaking is also a parent undertaking in relation to anotherundertaking, a subsidiary undertaking, if—

(a) it has the power to exercise, or actually exercises, dominant influence orcontrol over it, or

(b) it and the subsidiary undertaking are managed on a unified basis.

(5) A parent undertaking shall be treated as the parent undertaking ofundertakings in relation to which any of its subsidiary undertakings are, or areto be treated as, parent undertakings; and references to its subsidiaryundertakings shall be construed accordingly.

(6) Schedule 8 contains provisions explaining expressions used in this section andotherwise supplementing this section.

Other definitions

762 Classes of shares

(1) For the purpose of the Companies Acts shares are of one class if the rightsattached to them are in all respects uniform.

(2) For this purpose the rights attached to shares are not regarded as different fromthose attached to other shares by reason only that they do not carry the samerights to dividends in the twelve months immediately following theirallotment.

763 Dormant companies

(1) For the purposes of the Companies Acts a company is “dormant” during anyperiod in which it has no significant accounting transaction.

(2) A “significant accounting transaction” means a transaction that is required bysection 359 to be entered in the company’s accounting records.

(3) In determining whether or when a company is dormant, there shall bedisregarded—

(a) any transaction arising from the taking of shares in the company by asubscriber to the memorandum as a result of an undertaking of his inconnection with the formation of the company;

(b) any transaction consisting of the payment of—(i) a fee to the registrar on a change of the company’s name,

(ii) a fee to the registrar on the re-registration of the company,(iii) a penalty under 431 (penalty for failure to file accounts)], or

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(iv) a fee to the registrar for the registration of an annual returnunder Chapter 3 of Part 11 of the Companies Act 1985 (c. 6).

(4) Any reference in the Companies Acts to a body corporate other than acompany being dormant have a corresponding meaning.

764 Meaning of “EEA state” and related expressions

In the Companies Acts—“EEA state” means a State which is a Contracting Party to the Agreement

on the European Economic Area signed at Oporto on 2nd May 1992 (asit has effect from time to time);

““EEA company” and EEA undertaking” mean a company orundertaking governed by the law of an EEA state.

765 The former Companies Acts

In the Companies Acts—“the former Companies Acts” means—

(a) the Joint Stock Companies Acts, the Companies Act 1862, theCompanies (Consolidation) Act 1908, the Companies Act 1929,the Companies Act (Northern Ireland) 1932, the CompaniesActs 1948 to 1983, the Companies Act (Northern Ireland) 1960,the Companies (Northern Ireland) Order 1986 and theCompanies Consolidation (Consequential Provisions)(Northern Ireland) Order 1986, and

(b) the provisions of the Companies Act 1985 and the CompaniesConsolidation (Consequential Provisions) Act 1985 (c. 9) thatare no longer in force;

“the Joint Stock Companies Acts” means the Joint Stock Companies Act1856, the Joint Stock Companies Acts 1856, 1857, the Joint StockBanking Companies Act 1857, and the Act to enable Joint Stock BankingCompanies to be formed on the principle of limited liability, but doesnot include the Joint Stock Companies Act 1844.

General

766 Minor definitions: general

In the Companies Acts—“body corporate” and “corporation” include a body incorporated outside

the United Kingdom, but do not include(a) a corporation sole, or(b) a partnership that is not regarded as a legal person under the

law by which it is governed;“credit institution” means a credit institution as defined in article 1(1)(a)

of Directive 2000/12/EC of the European Parliament and of theCouncil of 20 March 2000 relating to the taking up and pursuit of thebusiness of credit institutions, that is to say an undertaking whosebusiness is to receive deposits or other repayable funds from the publicand to grant credits for its own account;

“financial institution” means a financial institution within the meaning ofArticle 1(1) of the Council Directive on the obligations of branches

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established in a Member State of credit and financial institutions havingtheir head offices outside that Member State regarding the publicationof annual accounting documents (the Bank Branches Directive, 89/117/EEC);

“firm” means any entity, whether or not a legal person, that is not anindividual and includes a body corporate, a corporation sole and apartnership or other unincorporated association;

“the Gazette” means—(a) as respects companies registered in England and Wales, the

London Gazette.(b) as respects companies registered in Scotland, the Edinburgh

Gazette, and(c) as respects companies registered in Northern Ireland, the

Belfast Gazette;“parent company” means a company that is a parent undertaking (see

section 761 and Schedule 8;“working day”, in relation to a company, means a day that is not a

Saturday or Sunday, Christmas Day, Good Friday or any day that is abank holiday in the part of the United Kingdom where the company isregistered.

767 Index of defined expressions

Schedule 9 contains an index of provisions defining or otherwise explainingexpressions used in the Companies Acts.

PART 30

COMPANIES: MINOR AMENDMENTS

768 Power of Secretary of State to bring civil proceedings on company’s behalf

(1) Section 438 of the Companies Act 1985 (c. 6) (power of Secretary of State tobring civil proceedings on company’s behalf) shall cease to have effect.

(2) In section 439 of that Act (expenses of investigating company’s affairs)—(a) in subsection (2) omit “, or is ordered to pay the whole or any part of the

costs of proceedings brought under section 438”;(b) omit subsections (3) and (7) (which relate to section 438);(c) in subsection (8)—

(i) for “subsections (2) and (3)” substitute “subsection (2)”, and(ii) omit “; and any such liability imposed by subsection (2) is

(subject as mentioned above) a liability also to indemnify allpersons against liability under subsection (3)”.

(3) In section 453(1A) of that Act (investigation of oversea companies: provisionsnot applicable), omit paragraph (b) (which relates to section 438).

(4) Nothing in this section affects proceedings brought under section 438 beforethe commencement of this section.

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769 Repeal of certain provisions about company directors

The following provisions of Part 10 of the Companies Act 1985 shall cease tohave effect—

section 311 (prohibition on tax-free payments to directors);section 323 and 327 ((prohibition on directors dealing in share options);sections 324 to 326 and 327 to 329, and Parts 2 to 4 of Schedule 13 (register

of directors’ interests);sections 343 and 344 (special procedure for disclosure by banks).

770 Repeal of requirement that certain companies publish periodical statement

The following provisions shall cease to have effect—section 720 of the Companies Act 1985 (c. 6) (certain companies to publish

periodical statement), andSchedule 23 to that Act (form of statement under section 720).

771 Repeal of requirement that Secretary of State prepare annual report

Section 729 of the Companies Act 1985 (annual report to Parliament bySecretary of State on matters within the Companies Acts) shall cease to haveeffect.

772 Repeal of certain provisions about company charges

Part 4 of the Companies Act 1989 (c. 40) (registration of company charges),which has not been brought into force, is repealed.

773 Access to constitutional documents of RTE and RTM companies

(1) The Secretary of State may by order—(a) amend Chapter 1 of Part 1 of the Leasehold Reform, Housing and

Urban Development Act 1993 (c. 28) for the purpose of facilitatingaccess to the provisions of the articles, memorandum or any otherconstitutional document of RTE companies;

(b) amend Chapter 1 of Part 2 of the Commonhold and Leasehold ReformAct 2002 (c. 15) (leasehold reform) for the purpose of facilitating accessto the provisions of the articles, memorandum or any otherconstitutional document of RTM companies.

(2) References in subsection (1) to provisions of a company’s articles,memorandum or any other constitutional document include any provisionsincluded in those documents by virtue of any enactment.


(4) In this section—“RTE companies” has the same meaning as in Chapter 1 of Part 1 of the

Leasehold Reform, Housing and Urban Development Act 1993;“RTM companies” has the same meaning as in Chapter 1 of Part 2 of the

Commonhold and Leasehold Reform Act 2002.

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Company Law Reform Bill [HL]Part 31 — Company law reform power

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PART 31

COMPANY LAW REFORM POWER

The power

774 Power to reform company law

(1) The Secretary of State may by order made in accordance with this Part (a“company law reform order”) make provision for the purpose of reforming thelaw relating to companies.

(2) A company law reform order may make provision—(a) amending the law relating to companies,(b) restating enactments relating to companies, or(c) codifying rules of law relating to companies,

and may make such consequential modifications, repeals and revocations inenactments as the Secretary of State considers appropriate.

(3) The provision that may be made under subsection (2) includes any suchprovision as might be made by Act of Parliament, subject to the followingprovisions of this Part.

(4) In this Part—“amend” includes making new provision and repealing or abolishing

existing enactments or rules of law;“codify”, in relation to a rule of law, means replace with enactments;“restate”, in relation to a enactment, means replace with alterations only

of form or arrangement;“subordinate legislation” means orders, rules, regulations, schemes,

warrants, byelaws and other subordinate instruments.

775 Definition of “company” and related expressions

(1) The following definitions apply for the purposes of this Part.

(2) “Company” includes any description of body (whether incorporated or not) towhich any provisions of the Companies Acts apply.

(3) The law relating to companies means the enactments and rules of law relatingto the creation, operation, regulation or dissolution of companies.

(4) “Enactments relating to companies”—(a) means any enactment to the extent that it relates to the creation,

operation, regulation or dissolution of companies, and(b) includes such enactments as they are applied to other persons or bodies

or for other purposes.

(5) The enactments relating to companies include company law reform orders, butdo not include the provisions of this Part of this Act.

(6) “Rule of law relating to companies” means any rule of law to the extent that itrelates to the creation, operation, regulation or dissolution of companies.

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Restrictions on the power

776 No power to impose taxation

(1) A company law reform order may not make provision imposing or increasingtaxation.

(2) Nothing in this section affects the power to restate enactments or codify rulesof law.

777 Restrictions on penalties for criminal offences

(1) A company law reform order may not create a new offence that is punishable,or increase the penalty for an existing offence so that it is punishable—

(a) on indictment, with imprisonment for a term exceeding two years, or(b) on summary conviction, with imprisonment for a term exceeding the

normal maximum term or a fine exceeding—(i) where the offence is a summary offence, level 5 on the standard

scale, or(ii) where the offence is triable either way, the statutory maximum.

(2) In subsection (2), “the normal maximum term” means—(a) in England and Wales—

(i) in the case of a summary offence, 51 weeks, and(ii) in the case of an offence triable either way, twelve months;

(b) in Scotland or Northern Ireland, six months.

(3) If a company law reform order creating an offence, or altering the penalty foran offence, is made before the date on which section 281(5) of the CriminalJustice Act 2003 (c. 44) comes into force, the order must provide that, in relationto a summary offence committed before that date, any reference to a term ofimprisonment of 51 weeks is to be read as a reference to six months.

(4) If a company law reform order creating an offence, or altering the penalty foran offence, is made before the date on which section 154(1) of the CriminalJustice Act 2003 comes into force, the order must provide that, in relation to anoffence triable either way committed before that date, any reference to a termof imprisonment of twelve months is to be read as a reference to six months.


778 Restrictions on provisions for forcible entry etc.

(1) A company law reform order must not contain any provision—(a) providing for forcible entry, seizure or search, or(b) compelling the giving of evidence.

(2) This does not prevent a company law reform order extending existingenactments or rules of law for purposes of the like nature as those to whichthey applied before the order was made.


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779 Restrictions on powers to legislate

(1) A company law reform order may not confer a power or duty to legislateexcept in accordance with this section.

(2) A company law reform order may confer power on the Secretary of State (a“new power”) to make subordinate legislation—

(a) imposing or making provision about the amount of fees or charges(other than charges in the nature of taxation),

(b) making procedural or other administrative provision, or(c) making provision about technical matters.

(3) The order must provide that the new power may only be exercised by statutoryinstrument.

(4) The order must provide that such a statutory instrument is subject either tonegative resolution procedure or affirmative resolution procedure.

(5) Nothing in this section affects the power to restate enactments.

(6) In particular, where—(a) a company law reform order restates a enactment, and(b) immediately prior to the restatement, there was a power to modify,

restate or apply that enactment by subordinate legislation,the order may provide for the restated enactment to be modified, restated orapplied by subordinate legislation in the same way.

(7) In this section “legislate” means legislate by orders, rules, regulations or othersubordinate instrument.

780 Restriction on exercise of powers in relation to Scotland

A company law reform order may make provision with respect to matterswithin the legislative competence of the Scottish Parliament only inconsequence of provision made with respect to matters not within thelegislative competence of that body.

781 Restrictions on delegation of legislative functions

(1) A company law reform order may not make provision enabling a person orbody on whom a legislative function is conferred to delegate the performanceof that function, except in accordance with this section.

(2) Where an existing enactment enables a person or body to delegate theperformance of a legislative function, a company law reform order may extendthe enactment so as to make it applicable in additional circumstances of the likenature as those in which it was exercisable before the order was made.

(3) Nothing in this section affects the power to restate enactments.

(4) Where— (a) a company law reform order restates a provision for the delegation of a

legislative function, and(b) immediately prior to the restatement, the delegation was required to be

done by statutory instrument,the order may not remove that requirement or alter the Parliamentaryprocedure specified.

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(5) In this section, “legislative function” means a power or duty to legislate byorders, rules, regulations or other subordinate instrument.

782 No power to make provision with retrospective effect

A company law reform order may not make provision taking effect from a dateearlier than that of the making of the instrument containing the provision.

Procedure

783 Procedure for making orders

(1) A company law reform order is subject to affirmative resolution procedure.

(2) The Secretary of State may not make a company law reform order unless—(a) he has consulted in accordance with section 784 on the proposal to

make the order,(b) following that consultation, he has laid a document containing a

proposed order before Parliament in accordance with section 785,(c) the period for Parliament to consider that document under section 788

has expired, and(d) on laying the order before Parliament, he has also laid the statement

required by that section.

784 Consultation

(1) If the Secretary of State proposes to make company law reform order, hemust—

(a) consult such organisations as appear to him to be representative ofinterests substantially affected by the proposals,

(b) in such cases as he considers appropriate, consult the Law Commissionthe Scottish Law Commission or the Northern Ireland LawCommission, and

(c) consult such other persons as he considers appropriate,except to the extent that subsection (2) applies.

(2) In relation to proposals, or parts of proposals, implementing arecommendation of the Law Commission, the Scottish Law Commission or theNorthern Ireland Law Commission without material changes, the Secretary ofState must carry out such consultation as he considers appropriate, havingregard to the consultation carried out by the Commission.

(3) If, as a result of the consultation, it appears to the Secretary of State that it isappropriate to vary the whole or any part of his proposals, he must undertakesuch further consultation with respect to the variations as appears to him to beappropriate.

(4) The requirements of this section may be satisfied by consultation undertakenbefore the day on which this Act is passed.

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785 Document to be laid before Parliament

(1) If, after the conclusion of the consultation required by section 784, the Secretaryof State considers it appropriate to proceed with the making of an order, hemust lay before Parliament a document containing—

(a) the proposed order, (b) the information required by this section, and(c) the explanation required under section 786 (reasons for order).

(2) The document must explain the manner in which the order is intended—(a) to amend the law relating to companies,(b) to restate enactments relating to companies, and(c) to codify rules of law relating to companies.

(3) Where the proposed order restates enactments, the document must explainwhich enactments it restates.

(4) The document must identify any new powers conferred by the order to makesubordinate legislation.

(5) If the order makes provisions implementing or responding torecommendations of the Law Commission, the Scottish Law Commission orthe Northern Ireland Law Commission, the document must—

(a) identify the recommendations and the report of the Commission inwhich they appeared,

(b) identify the manner in which the order is intended to implement orrespond to each of the recommendations, and

(c) give details of, and reasons for, any differences between therecommendations and the Secretary of State’s proposals.

(6) The document must give details of—(a) who was consulted about the proposals for the order,(b) any representations received as a result of that consultation (subject to

section 787 (confidential representations)), and(c) the changes (if any) that the Secretary of State has made to the

proposals in response to those representations.

786 Reasons for proposed order

(1) In relation to provisions of the order that amend the law, the document mustexplain the Secretary of State’s reasons for making the order, including (whereappropriate) the ways in which the Secretary of State considers that theamendment would—

(a) remove inconsistencies or anomalies in the existing law,(b) make companies (or particular types of company) a more effective

vehicle for conducting business, or(c) increase the effectiveness of the system of regulating companies in the

United Kingdom.

(2) In relation to provisions of the order that restate enactments or codify rules oflaw, the document must explain the ways in which the Secretary of Stateconsiders that the restatement or codification would make the law moreaccessible to, or more easily understood by, those affected by it.

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787 Representations made in confidence etc.

(1) This section applies where a person (“the respondent”) makes representationsin response to consultation on proposals for an order under this Part.

(2) If the respondent asks the Secretary of State not to disclose his representations,in the document laid before Parliament in accordance with section 785 inrespect of the order, the Secretary of State—

(a) must disclose the fact that the respondent has made representations,but

(b) must not disclose the representations if to do so would be a breach ofconfidence actionable by the person who made the representations orany other person.

(3) Subsection (2)(b) does not prevent the disclosure of representations—(a) with the consent both of the respondent and of any person to whom, or

who is carrying on a business to which, the information in therepresentations relates, or

(b) in such a manner that the representations cannot be identified with therespondent or with such a person or business.

(4) If information in the representations relates to a person other than therespondent, the Secretary of State is not obliged to disclose that information inthe document laid before Parliament in accordance with section 785 in respectof the order if, or to the extent that—

(a) it appears to the Secretary of State that the disclosure of thatinformation could adversely affect the interests of that person, and

(b) the Secretary of State has been unable to—(i) verify the information, or

(ii) obtain the consent of that person to the disclosure.

(5) This section does not affect any disclosure that, during the period forParliamentary consideration (as defined in section 788), is requested by, andmade to, a committee of either House of Parliament charged with reporting onthe draft order.

788 Parliamentary consideration of proposals

(1) Where a document has been laid before Parliament under section 785, a draftof an order to give effect (with or without variations) to proposals in thatdocument may not be laid before Parliament before the expiry of the period forParliamentary consideration.

(2) In this section—the “period for Parliamentary consideration”, in relation to a document,

means the period of sixty sitting days beginning on the day on which itwas laid before Parliament;

“sitting day” means any day other than a day during a time in whichParliament is dissolved or prorogued or in which either House isadjourned for more than four days.

(3) In preparing a draft order to give effect (with or without variations) toproposals in a document laid before Parliament under section 785, theSecretary of State must have regard—

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(a) to any representations made during the period for Parliamentaryconsideration with regard to the document, and

(b) in particular, to any resolution or report of, or of any committee of,either House of Parliament with regard to the document.

(4) When he lays the draft order before Parliament, the Secretary of State must alsolay a statement giving details of—

(a) any such representations, resolutions or reports (subject to subsection(5)), and

(b) the changes (if any) that he has made to his proposals in the light ofthose representations, resolutions or reports.

(5) Subsections (1) to (4) of section 787 (confidential representations) apply inrelation to representations made during the period for Parliamentaryconsideration as they apply in relation to representations made in response toconsultation on a proposal for a draft order.

PART 32

BUSINESS NAMES

CHAPTER 1

RESTRICTED OR PROHIBITED NAMES

Introductory

789 Application of this Chapter

(1) This Chapter applies to any person carrying on business in the UnitedKingdom.

(2) The provisions of this Chapter do not prevent—(a) an individual carrying on business under a name consisting of his

surname without any addition other than a permitted addition, or(b) individuals carrying on business in partnership under a name

consisting of the surnames of all the partners without any additionother than a permitted addition.

(3) The following are the permitted additions—(a) in the case of an individual, his forename or initial;(b) in the case of a partnership—

(i) the forenames of individual partners or the initials of thoseforenames, or

(ii) where two or more individual partners have the same surname,the addition of “s” at the end of that surname;

(c) in either case, an addition merely indicating that the business is carriedon in succession to a former owner of the business.

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Company Law Reform Bill [HL]Part 32 — Business names

Chapter 1 — Restricted or prohibited names

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Sensitive words or expressions

790 Name suggesting connection with government or public authority

(1) A person must not, without the approval of the Secretary of State, carry onbusiness in the United Kingdom under a name that would be likely to give theimpression that the business is connected with—

(a) Her Majesty’s Government, any part of the Scottish administration orHer Majesty’s Government in Northern Ireland,

(b) any local authority, or(c) any public authority specified for the purposes of this section by

regulations made by the Secretary of State.

(2) For the purposes of this section—“local authority” means—

(a) a local authority within the meaning of the Local GovernmentAct 1972 (c. 70), the Common Council of the City of London orthe Council of the Isles of Scilly,

(b) a council constituted under section 2 of the Local Governmentetc. (Scotland) Act 1994 (c. 39), or

(c) a district council in Northern Ireland;“public authority” includes any person or body having functions of a

public nature.


(4) A person who contravenes this section commits an offence.

(5) Where an offence under this section is committed by a body corporate, anoffence is also committed by every officer of the body who is in default.


791 Other sensitive words or expressions

(1) A person must not, without the approval of the Secretary of State, carry onbusiness in the United Kingdom under a name that includes a word orexpression for the time being specified in regulations made by the Secretary ofState under this section.

(2) Regulations under this section are subject to approval after being made.

(3) A person who contravenes this section commits an offence.



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792 Requirement to seek comments of government department or other relevant body

(1) The Secretary of State may by regulations under—(a) section 790 (name suggesting connection with government or public

authority), or(b) section 791 (other sensitive words or expressions),

require that, in connection with an application for the approval of the Secretaryof State under that section, the applicant must seek the view of a specifiedGovernment department or other body.

(2) Where such a requirement applies, the applicant must request the specifieddepartment or other body (in writing) to indicate whether (and if so why) it hasany objections to the proposed name.

(3) He must submit to the Secretary of State a statement that such a request hasbeen made and a copy of any response received from the specified body.

(4) If these requirements are not complied with, the Secretary of State may refuseto consider the application for approval.

793 Withdrawal of Secretary of State’s approval

(1) This section applies to approval given for the purposes of—section 790 (name suggesting connection with government or public

authority), or section 791 (other sensitive words or expressions).

(2) If it appears to the Secretary of State that there are overriding considerations ofpublic policy that require such approval to be withdrawn, the approval may bewithdrawn by notice to the person concerned.

(3) The notice must state the date as from which approval is withdrawn.

Misleading names

794 Name containing inappropriate indication of company type or legal form

(1) The Secretary of State may make provision by regulations prohibiting a personfrom carrying on business in the United Kingdom under a name consisting ofor containing specified words, expressions or other indications—

(a) that are associated with a particular type of company or form oforganisation, or

(b) that are similar to words, expressions or other indications associatedwith a particular type of company or form of organisation.

(2) The regulations may prohibit the use of words, expressions or otherindications—

(a) in a specified part, or otherwise than in a specified part, of a name;(b) in conjunction with, or otherwise than in conjunction with, such other

words, expressions or indications as may be specified.



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(5) A person who uses a name in contravention of regulations under this sectioncommits an offence.



795 Name giving misleading indication of activities

(1) A person must not carry on business in the United Kingdom under a name thatgives so misleading an indication of the nature of the activities of the businessas to be likely to cause harm to the public.

(2) A person who uses a name in contravention of this section commits an offence.



Supplementary

796 Savings for existing lawful business names

(1) This section has effect in relation to—sections 789 to 793 (sensitive words or expressions), andsection 794 (inappropriate indication of company type or legal form).

(2) Those sections do not apply to the carrying on of a business by a person who—(a) carried on the business immediately before the date on which this

Chapter came into force, and(b) continues to carry it on under the name that immediately before that

date was its lawful business name.

(3) Where—(a) a business is transferred to a person on or after the date on which this

Chapter came into force, and(b) that person carries on the business under the name that was its lawful

business name immediately before the transfer,those sections do not apply in relation to the carrying on of the business underthat name during the period of twelve months beginning with the date of thetransfer.

(4) In this section “lawful business name”, in relation to a business, means a nameunder which the business was carried on without contravening—

(a) section 2(1) of the Business Names Act 1985 (c. 7) or Article 4(1) of theBusiness Names (Northern Ireland) Order 1986, or

(b) after this Chapter has come into force, the provisions of this Chapter.

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CHAPTER 2

DISCLOSURE REQUIRED IN CASE OF INDIVIDUAL OR PARTNERSHIP

Introductory

797 Application of this Chapter

(1) This Chapter applies to an individual or partnership carrying on business inthe United Kingdom under a business name.

(2) For the purposes of this Chapter a “business name” means a name other than—(a) in the case of an individual, his surname without any addition other

than a permitted addition;(b) in the case of a partnership—

(i) the surnames of all partners who are individuals, and(ii) the corporate names of all partners who are bodies corporate,

without any addition other than a permitted addition.

(3) The following are the permitted additions—(a) in the case of an individual, his forename or initial;(b) in the case of a partnership—

(i) the forenames of individual partners or the initials of thoseforenames, or

(ii) where two or more individual partners have the same surname,the addition of “s” at the end of that surname;

(c) in either case, an addition merely indicating that the business is carriedon in succession to a former owner of the business.

798 Information required to be disclosed

The “information required by this Chapter” is—(a) in the case of an individual, his name;(b) in the case of a partnership, the name of each member of the

partnership;and in relation to each person so named, an address in the United Kingdom atwhich service of any document relating in any way to the business will beeffective.

Disclosure requirements

799 Disclosure required: business documents etc

(1) A person carrying on business in the United Kingdom under a business namemust state the information required by this Chapter, in legible characters, onall—

(a) business letters,(b) written orders for goods or services to be supplied to the business,(c) invoices and receipts issued in the course of the business, and(d) written demands for payment of debts arising in the course of the

business.

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This subsection has effect subject to section 800 (exemption for largepartnerships if certain conditions met).

(2) A person carrying on business in the United Kingdom under a business namemust secure that the information required by this Chapter is immediatelygiven, by written notice, to any person with whom anything is done ordiscussed in the course of the business and who asks for that information.

(3) The Secretary of State may by regulations require that such notices be given ina specified form.


800 Exemption for large partnerships if certain conditions met

(1) Section 799(1) (disclosure required in business documents) does not apply inrelation to a document issued by a partnership of more than 20 persons if thefollowing conditions are met.

(2) The conditions are that—(a) the partnership maintains at its principal place of business a list of the

names of all the partners,(b) no partner’s name appears in the document, except in the text or as a

signatory, and(c) the document states in legible characters the address of the

partnership’s principal place of business and that the list of thepartners’ names is open to inspection there.

(3) Where a partnership maintains a list of the partners’ names for the purposes ofthis section, any person may inspect the list during office hours.

(4) Where an inspection required by a person in accordance with this section isrefused, an offence is committed by any member of the partnership concernedwho without reasonable excuse refused the inspection or permitted it to berefused.


801 Disclosure required: business premises

(1) A person carrying on business in the United Kingdom under a business namemust, in any premises—

(a) where the business is carried on, and(b) to which customers of the business or suppliers of goods or services to

the business have access,display in a prominent position, so that it may easily be read by such customersor suppliers, a notice containing the information required by this Part.

(2) The Secretary of State may by regulations require that such notices bedisplayed in a specified form.


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Consequences of failure to make required disclosure

802 Criminal consequences of failure to make required disclosure

(1) A person who without reasonable excuse fails to comply with the requirementsof—

section 799 (disclosure required: business documents etc), orsection 801 (disclosure required: business premises),

commits an offence.



(4) References in this section to the requirements of section 799 or 801 include therequirements of regulations under that section.

803 Civil consequences of failure to make required disclosure

(1) This section applies to any legal proceedings brought by a person to whom thisChapter applies to enforce a right arising out of a contract made in the courseof a business in respect of which he was, at the time the contract was made, inbreach of section 799(1) or (2) (disclosure in business documents etc) or section801(1) (disclosure at business premises).

(2) The proceedings shall be dismissed if the defendant (in Scotland, the defender)to the proceedings shows—

(a) that he has a claim against the claimant (pursuer) arising out of thecontract that he has been unable to pursue by reason of the latter’sbreach of the requirements of this Chapter, or

(b) that he has suffered some financial loss in connection with the contractby reason of the claimant’s (pursuer’s) breach of those requirements,

unless the court before which the proceedings are brought is satisfied that it isjust and equitable to permit the proceedings to continue.

(3) References in this section to the requirements of this Chapter include therequirements of regulations under this Chapter.

(4) This section does not affect the right of any person to enforce such rights as hemay have against another person in any proceedings brought by that person.

CHAPTER 3

SUPPLEMENTARY

804 Application of general provisions about offences

The provisions of sections 734 to 740 (general provisions about offences) applyin relation to offences under this Part as in relation to offences under theCompanies Acts.

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805 Interpretation

In this Part—“business” includes a profession;“initial” includes any recognised abbreviation of a name;“partnership” means—

(a) a partnership within the Partnership Act 1890 (c. 39), or(b) a limited partnership registered under the Limited Partnerships

Act 1907 (c. 24),or a firm or entity of a similar character formed under the law of acountry or territory outside the United Kingdom;

“surname”, in relation to a peer or person usually known by the Britishtitle different from his surname, means the title by which he is known.

PART 33

STATUTORY AUDITORS

CHAPTER 1

INTRODUCTORY

806 Main purposes of Part

The main purposes of this Part are—(a) to secure that only persons who are properly supervised and

appropriately qualified are appointed as statutory auditors, and(b) to secure that audits by persons so appointed are carried out properly,

with integrity and with a proper degree of independence.

807 Meaning of “statutory auditor” etc

(1) In this Part “statutory auditor” means—(a) a person appointed as auditor under Part 16 of this Act,(b) a person appointed as auditor under section 77 of or Schedule 11 to the

Building Societies Act 1986 (c. 53),(c) a person appointed as auditor of an insurer that is a friendly society

under section 72 of or Schedule 14 to the Friendly Societies Act 1992(c. 40),

(d) a person appointed as auditor of an insurer that is an industrial andprovident society under section 4 of the Friendly and Industrial andProvident Societies Act 1968 (c. 55) or under section 38 of the Industrialand Provident Societies Act (Northern Ireland) 1969,

(e) a person appointed as auditor for the purposes of regulation 3 of theInsurance Accounts Directive (Lloyd’s Syndicate and AggregateAccounts) Regulations 2004 (S.I. 2004/3219) or appointed to report onthe “aggregate accounts” within the meaning of those Regulations,

(f) a person appointed as auditor of an insurer for the purposes ofregulation 3 of the Insurance Accounts Directive (MiscellaneousInsurance Undertakings) Regulations 1993 (S.I. 1993/3245),

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(g) a person appointed as auditor of a bank for the purposes of regulation4 of the Bank Accounts Directive (Miscellaneous Banks) Regulations1991 (S.I. 1991/2704), and

(h) a person appointed as auditor of a prescribed person under aprescribed enactment authorising or requiring the appointment;

and the expressions “statutory audit” and “statutory audit work” are to beconstrued accordingly.

(2) In this Part “audited person” means the person in respect of whom a statutoryaudit is conducted.

(3) In subsection (1)—“bank” means a person who—

(a) is a credit institution within the meaning given by Article 1.1 ofDirective 2000/12/EC of the European Parliament and of theCouncil relating to the taking up and pursuit of the business ofcredit institutions, and

(b) is a company or a firm as defined in Article 48 of the Treatyestablishing the European Community;

“friendly society” means a friendly society within the meaning of theFriendly Societies Act 1992 (c. 40);

“industrial and provident society” means—(a) a society registered under the Industrial and Provident Societies

Act 1965 (c. 12) or a society deemed by virtue of section 4 of thatAct to be so registered, or

(b) a society registered under the Industrial and Provident SocietiesAct (Northern Ireland) 1969 or a society deemed by virtue ofsection 4 of that Act to be so registered;

“insurer” means a person who is an insurance undertaking within themeaning given by Article 2.1 of Council Directive 1991/674/EEC onthe annual accounts and consolidated accounts of insuranceundertakings;

“prescribed” means prescribed, or of a description prescribed, by ordermade by the Secretary of State for the purposes of subsection (1)(h).


808 Eligibility for appointment as a statutory auditor: overview

A person is eligible for appointment as a statutory auditor only if the person isso eligible—

(a) by virtue of Chapter 2 (individuals and firms), or(b) by virtue of Chapter 3 (Comptroller and Auditor General, etc).

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CHAPTER 2

INDIVIDUALS AND FIRMS

Eligibility for appointment

809 Individuals and firms: eligibility for appointment as a statutory auditor

(1) An individual or firm is eligible for appointment as a statutory auditor if theindividual or firm—

(a) is a member of a recognised supervisory body, and(b) is eligible for appointment under the rules of that body.

(2) In the cases to which section 819 applies (individuals retaining only 1967 Actauthorisation) a person’s eligibility for appointment as a statutory auditor isrestricted as mentioned in that section.

810 Effect of ineligibility

(1) No person may act as statutory auditor of an audited person if he is ineligiblefor appointment as a statutory auditor.

(2) If at any time during his term of office a statutory auditor becomes ineligiblefor appointment as a statutory auditor, he must immediately—

(a) resign his office (with immediate effect), and(b) give notice in writing to the audited person that he has resigned by

reason of his becoming ineligible for appointment.

(3) A person is guilty of an offence if—(a) he acts as a statutory auditor in contravention of subsection (1), or(b) he fails to give the notice mentioned in paragraph (b) of subsection (2)

in accordance with that subsection.

(4) A person guilty of an offence under subsection (3) is liable—(a) on conviction on indictment, to a fine, and(b) on summary conviction, to a fine not exceeding the statutory

maximum.

(5) A person is guilty of an offence if—(a) he has been convicted of an offence under subsection (3)(a) or this

subsection, and(b) he continues to act as a statutory auditor in contravention of subsection

(1) after the conviction.

(6) A person is guilty of an offence if—(a) he has been convicted of an offence under subsection (3)(b) or this

subsection, and(b) he continues, after the conviction, to fail to give the notice mentioned in

subsection (2)(b).

(7) A person guilty of an offence under subsection (5) or (6) is liable—(a) on conviction on indictment, to a fine, and

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(b) on summary conviction, to a fine not exceeding one-tenth of thestatutory maximum for each day on which the act or the failurecontinues.

(8) In proceedings against a person for an offence under this section it is a defencefor him to show that he did not know and had no reason to believe that he was,or had become, ineligible for appointment as a statutory auditor.

Independence requirement


(1) A person may not act as statutory auditor of an audited person if one or moreof subsections (2), (3) and (4) apply to him.

(2) This subsection applies if the person is—(a) an officer or employee of the audited person, or(b) a partner or employee of such a person, or a partnership of which such

a person is a partner.

(3) This subsection applies if the person is—(a) an officer or employee of an associated undertaking of the audited

person, or(b) a partner or employee of such a person, or a partnership of which such

a person is a partner.

(4) This subsection applies if there exists, between—(a) the person or an associate of his, and(b) the audited person or an associated undertaking of the audited person,

a connection of any such description as may be specified by regulations madeby the Secretary of State.

(5) An auditor of an audited person is not to be regarded as an officer or employeeof the person for the purposes of subsections (2) and (3).

(6) In this section “associated undertaking”, in relation to an audited person,means—

(a) a parent undertaking or subsidiary undertaking of the audited person,or

(b) a subsidiary undertaking of a parent undertaking of the auditedperson.


812 Effect of lack of independence

(1) If at any time during his term of office a statutory auditor becomes prohibitedfrom acting by section 811(1), he must immediately—


reason of his lack of independence.

(2) A person is guilty of an offence if—(a) he acts as a statutory auditor in contravention of section 811(1), or

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(b) he fails to give the notice mentioned in paragraph (b) of subsection (1)in accordance with that subsection.

(3) A person guilty of an offence under subsection (2) is liable—(a) on conviction on indictment, to a fine, and(b) on summary conviction, to a fine not exceeding the statutory

maximum.

(4) A person is guilty of an offence if—(a) he has been convicted of an offence under subsection (2)(a) or this

subsection, and(b) he continues to act as a statutory auditor in contravention of section

811(1) after the conviction.

(5) A person is guilty of an offence if—(a) he has been convicted of an offence under subsection (2)(b) or this

subsection, and(b) after the conviction, he continues to fail to give the notice mentioned in

subsection (1)(b).

(6) A person guilty of an offence under subsection (4) or (5) is liable—(a) on conviction on indictment, to a fine, and(b) on summary conviction, to a fine not exceeding one-tenth of the

statutory maximum for each day on which the act or the failurecontinues.

(7) In proceedings against a person for an offence under this section it is a defencefor him to show that he did not know and had no reason to believe that he was,or had become, prohibited from acting as statutory auditor of the auditedperson by section 811(1).

Effect of appointment of a partnership


(1) This section applies where a partnership constituted under the law of—(a) England and Wales,(b) Northern Ireland, or(c) any other country or territory in which a partnership is not a legal

person,is by virtue of this Chapter appointed as statutory auditor of an auditedperson.

(2) Unless a contrary intention appears, the appointment is an appointment of thepartnership as such and not of the partners.


(a) any appropriate partnership which succeeds to the practice of thatpartnership, or

(b) any other appropriate person who succeeds to that practice havingpreviously carried it on in partnership.

(4) For the purposes of subsection (3)—

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(a) a partnership is to be regarded as succeeding to the practice of anotherpartnership only if the members of the successor partnership aresubstantially the same as those of the former partnership, and

(b) a partnership or other person is to be regarded as succeeding to thepractice of a partnership only if it or he succeeds to the whole orsubstantially the whole of the business of the former partnership.

(5) Where the partnership ceases and the appointment is not treated undersubsection (3) as extending to any partnership or other person, theappointment may with the consent of the audited person be treated asextending to an appropriate partnership, or other appropriate person, whosucceeds to—

(a) the business of the former partnership, or(b) such part of it as is agreed by the audited person is to be treated as

comprising the appointment.

(6) For the purposes of this section, a partnership or other person is “appropriate”if it or he—

(a) is eligible for appointment as a statutory auditor by virtue of thisChapter, and

(b) is not prohibited by section 811(1) from acting as statutory auditor ofthe audited person.

Supervisory bodies

814 Supervisory bodies

(1) In this Part a “supervisory body” means a body established in the UnitedKingdom (whether a body corporate or an unincorporated association) whichmaintains and enforces rules as to—

(a) the eligibility of persons for appointment as a statutory auditor, and(b) the conduct of statutory audit work,

which are binding on persons seeking appointment or acting as a statutoryauditor either because they are members of that body or because they areotherwise subject to its control.

(2) In this Part references to the members of a supervisory body are to the personswho, whether or not members of the body, are subject to its rules in seekingappointment or acting as a statutory auditor.

(3) In this Part references to the rules of a supervisory body are to the rules(whether or not laid down by the body itself) which the body has power toenforce and which are relevant for the purposes of this Part.This includes rules relating to the admission or expulsion of members of thebody, so far as relevant for the purposes of this Part.

(4) Schedule 10 has effect with respect to the recognition of supervisory bodies forthe purposes of this Part.

815 Exemption from liability for damages

(1) No person within subsection (2) is to be liable in damages for anything done oromitted in the discharge or purported discharge of functions to which thissubsection applies.

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(2) The persons within this subsection are—(a) any recognised supervisory body,(b) any officer or employee of a recognised supervisory body, and(c) any member of the governing body of a recognised supervisory body.

(3) Subsection (1) applies to the functions of a recognised supervisory body so faras relating to, or to matters arising out of, any of the following—

(a) rules, practices, powers and arrangements of the body to which therequirements of Part 2 of Schedule 10 apply;

(b) the obligations with which paragraph 20 of that Schedule requires thebody to comply;

(c) any guidance issued by the body;(d) the obligations imposed on the body by or by virtue of this Part.

(4) The reference in subsection (3)(c) to guidance issued by a recognisedsupervisory body is a reference to any guidance or recommendation which is—

(a) issued or made by it to all or any class of its members or personsseeking to become members, and

(b) relevant for the purposes of this Part,including any guidance or recommendation relating to the admission orexpulsion of members of the body, so far as relevant for the purposes of thisPart.

(5) Subsection (1) does not apply—(a) if the act or omission is shown to have been in bad faith, or(b) so as to prevent an award of damages in respect of the act or omission

on the ground that it was unlawful as a result of section 6(1) of theHuman Rights Act 1998 (c. 42) (acts of public authorities incompatiblewith Convention rights).

Professional qualifications

816 Appropriate qualifications

(1) A person holds an appropriate qualification for the purposes of this Chapter ifand only if—

(a) he holds a recognised professional qualification obtained in the UnitedKingdom,

(b) immediately before the commencement of this Chapter, he—(i) held an appropriate qualification for the purposes of Part 2 of

the Companies Act 1989 (c. 40) (eligibility for appointment ascompany auditor) by virtue of section 31(1)(a) or (c) of that Act,or

(ii) was treated as holding an appropriate qualification for thosepurposes by virtue of section 31(2), (3) or (4) of that Act,

(c) immediately before the commencement of this Chapter, he—(i) held an appropriate qualification for the purposes of Part III of

the Companies (Northern Ireland) Order 1990 (S.I. 1990/593(N.I. 5)) by virtue of Article 34(1)(a) or (c) of that Order, or

(ii) was treated as holding an appropriate qualification for thosepurposes by virtue of Article 34(2), (3) or (4) of that Order,

(d) he is within subsection (2),

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(e) he has been authorised to practise the profession of statutory auditorpursuant to the European Communities (Recognition of ProfessionalQualifications) (First General System) Regulations 2005 (S.I. 2005/18)and has fulfilled any requirements imposed pursuant to regulation 6 ofthose Regulations, or

(f) subject to any direction under section 818(5), he is regarded for thepurposes of this Chapter as holding an approved overseasqualification.

(2) A person is within this subsection if—(a) before 1st January 1990, he began a course of study or practical training

leading to a professional qualification in accountancy offered by a bodyestablished in the United Kingdom,

(b) he obtained that qualification on or after 1st January 1990 and before 1stJanuary 1996, and

(c) the Secretary of State approves his qualification as an appropriatequalification for the purposes of this Chapter.

(3) The Secretary of State may approve a qualification under subsection (2)(c) onlyif he is satisfied that, at the time the qualification was awarded, the bodyconcerned had adequate arrangements to ensure that the qualification wasawarded only to persons educated and trained to a standard equivalent to thatrequired, at that time, in the case of a recognised professional qualificationunder Part 2 of the Companies Act 1989 (c. 40) (eligibility for appointment ascompany auditor).

817 Qualifying bodies and recognised professional qualifications

(1) In this Part a “qualifying body” means a body established in the UnitedKingdom (whether a body corporate or an unincorporated association) whichoffers a professional qualification in accountancy.

(2) In this Part references to the rules of a qualifying body are to the rules (whetheror not laid down by the body itself) which the body has power to enforce andwhich are relevant for the purposes of this Part.This includes, so far as so relevant, rules relating to—

(a) admission to or expulsion from a course of study leading to aqualification,

(b) the award or deprivation of a qualification, or(c) the approval of a person for the purposes of giving practical training or

the withdrawal of such approval.

(3) Schedule 11 has effect with respect to the recognition for the purposes of thisPart of a professional qualification offered by a qualifying body.

818 Approval of overseas qualifications

(1) The Secretary of State may declare that the following are to be regarded for thepurposes of this Chapter as holding an approved overseas qualification—

(a) persons who are qualified to audit accounts under the law of a specifiedforeign country, or

(b) persons who hold a specified professional qualification in accountancyobtained in a specified foreign country.

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(2) A declaration under subsection (1)(b) may be expressed to be subject to thesatisfaction of any specified requirement or requirements.

(3) The Secretary of State may make a declaration under subsection (1) only if heis satisfied that—

(a) in the case of a declaration under subsection (1)(a), the fact that thepersons in question are qualified to audit accounts under the law of thespecified foreign country, or

(b) in the case of a declaration under subsection (1)(b), the specifiedprofessional qualification taken with any requirement or requirementsto be specified under subsection (2),

affords an assurance of professional competence equivalent to that afforded bya recognised professional qualification.

(4) The Secretary of State may make a declaration under subsection (1) only if heis satisfied that the treatment that the persons who are the subject of thedeclaration will receive as a result of it is comparable to the treatment which is,or is likely to be, afforded in the specified foreign country or a part of it to—

(a) in the case of a declaration under subsection (1)(a), some or all personswho are eligible to be appointed as a statutory auditor, and

(b) in the case of a declaration under subsection (1)(b), some or all personswho hold a corresponding recognised professional qualification.

(5) The Secretary of State may direct that persons holding an approved overseasqualification are not to be treated as holding an appropriate qualification forthe purposes of this Chapter unless they hold such additional educationalqualifications as the Secretary of State may specify for the purpose of ensuringthat such persons have an adequate knowledge of the law and practice in theUnited Kingdom relevant to the audit of accounts.

(6) The Secretary of State may give different directions in relation to differentapproved overseas qualifications.

(7) The Secretary of State may, if he thinks fit, having regard to the considerationsmentioned in subsections (3) and (4), withdraw a declaration under subsection(1) in relation to—

(a) persons becoming qualified to audit accounts under the law of thespecified foreign country after such date as he may specify, or

(b) persons obtaining the specified professional qualification after suchdate as he may specify.

(8) The Secretary of State may, if he thinks fit, having regard to the considerationsmentioned in subsections (3) and (4), vary or revoke a requirement specifiedunder subsection (2) from such date as he may specify.

(9) In this section “foreign country”, in relation to any time, means a country orterritory that, at that time, is not a “relevant State” within the meaning of theEuropean Communities (Recognition of Professional Qualifications) (FirstGeneral System) Regulations 2005 (S.I. 2005/18) or part of such a State.

819 Eligibility of individuals retaining only 1967 Act authorisation

(1) A person whose only appropriate qualification is based on his retention of anauthorisation originally granted by the Board of Trade or the Secretary of Stateunder section 13(1) of the Companies Act 1967 (c. 81) is eligible only forappointment as auditor of an unquoted company.

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(2) A company is “unquoted” if, at the time of the person’s appointment, neitherthe company, nor any parent undertaking of which it is a subsidiaryundertaking, is a quoted company within the meaning of section 358(2).

(3) References to a person eligible for appointment as a statutory auditor by virtueof this Part in enactments relating to eligibility for appointment as auditor of aperson other than a company do not include a person to whom this sectionapplies.

Information

820 Matters to be notified to the Secretary of State

(1) The Secretary of State may require a recognised supervisory body or arecognised qualifying body—

(a) to notify him immediately of the occurrence of such events as he mayspecify in writing and to give him such information in respect of thoseevents as is so specified;

(b) to give him, at such times or in respect of such periods as he mayspecify in writing, such information as is so specified.

(2) The notices and information required to be given must be such as the Secretaryof State may reasonably require for the exercise of his functions under this Part.

(3) The Secretary of State may require information given under this section to begiven in a specified form or verified in a specified manner.

(4) Any notice or information required to be given under this section must begiven in writing unless the Secretary of State specifies or approves some othermanner.

821 The Secretary of State’s power to call for information

(1) The Secretary of State may by notice in writing require a person withinsubsection (2) to give him such information as he may reasonably require forthe exercise of his functions under this Part.

(2) The persons within this subsection are—(a) any recognised supervisory body,(b) any recognised qualifying body, and(c) any person eligible for appointment as a statutory auditor by virtue of

this Chapter.

(3) The Secretary of State may require that any information which he requiresunder this section is to be given within such reasonable time and verified insuch manner as he may specify.

Enforcement

822 Compliance orders

(1) If at any time it appears to the Secretary of State—(a) in the case of a recognised supervisory body, that any requirement of

Schedule 10 is not satisfied,

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(b) in the case of a recognised professional qualification, that anyrequirement of Schedule 11 is not satisfied, or

(c) that a recognised supervisory body or a recognised qualifying body hasfailed to comply with an obligation to which it is subject under or byvirtue of this Part,

he may, instead of revoking the relevant recognition order, make anapplication to the court under this section.

(2) If on an application under this section the court decides that the requirementin question is not satisfied or, as the case may be, that the body has failed tocomply with the obligation in question, it may order the body to take suchsteps as the court directs for securing that the requirement is satisfied or thatthe obligation is complied with.

(3) In this section “the court” means the High Court or, in Scotland, the Court ofSession.

CHAPTER 3

AUDITORS GENERAL

Eligibility for appointment

823 Auditors General: eligibility for appointment as a statutory auditor

(1) In this Part “Auditor General” means—(a) the Comptroller and Auditor General,(b) the Auditor General for Scotland,(c) the Auditor General for Wales, or(d) the Comptroller and Auditor General for Northern Ireland.

(2) An Auditor General is eligible for appointment as a statutory auditor.

(3) Subsection (2) is subject to any suspension notice having effect under section831 (notices suspending eligibility for appointment as a statutory auditor).

Conduct of audits

824 Individuals responsible for audit work on behalf of Auditors General

An Auditor General must secure that each individual responsible for statutoryaudit work on behalf of that Auditor General is eligible for appointment as astatutory auditor by virtue of Chapter 2.

The Independent Supervisor

825 Appointment of the Independent Supervisor

(1) The Secretary of State must appoint a body (“the Independent Supervisor”) todischarge the function mentioned in section 826(1) (“the supervisionfunction”).

(2) An appointment under this section must be made by order.

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(3) A body may be appointed under this section only if it is a body corporate or anunincorporated association which appears to the Secretary of State—

(a) to be willing and able to discharge the supervision function, and(b) to have arrangements in place relating to the discharge of that function

which are such as to be likely to ensure that the conditions in subsection(4) are met.

(4) The conditions are—(a) that the supervision function will be exercised effectively, and(b) where the order is to contain any requirements or other provisions

specified under subsection (5), that that function will be exercised inaccordance with any such requirements or provisions.

(5) An order under this section may contain such requirements or other provisionsrelating to the exercise of the supervision function by the IndependentSupervisor as appear to the Secretary of State to be appropriate.


Supervision of Auditors General

826 Supervision of Auditors General by the Independent Supervisor

(1) The Independent Supervisor must supervise the performance by each AuditorGeneral of his functions as a statutory auditor.

(2) The Independent Supervisor must discharge that duty by—(a) entering into supervision arrangements with one or more bodies, and(b) overseeing the effective operation of any supervision arrangements

entered into by it.

(3) For this purpose “supervision arrangements” are arrangements entered into bythe Independent Supervisor with a body, for the purposes of this section, inaccordance with which the body does one or more of the following—

(a) determines standards relating to professional integrity andindependence which must be applied by an Auditor General instatutory audit work;

(b) determines technical standards which must be applied by an AuditorGeneral in statutory audit work and the manner in which thosestandards are to be applied in practice;

(c) monitors the performance of statutory audits carried out by an AuditorGeneral;

(d) investigates any matter arising from the performance by an AuditorGeneral of a statutory audit;

(e) holds disciplinary hearings in respect of an Auditor General whichappear to be desirable following the conclusion of such investigations;

(f) decides whether (and, if so, what) disciplinary action should be takenagainst an Auditor General to whom such a hearing related.

(4) The Independent Supervisor may enter into supervision arrangements with abody despite any relationship that may exist between the IndependentSupervisor and that body.

(5) The Independent Supervisor must notify each Auditor General in writing ofany supervision arrangements that it enters into under this section.

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(6) Supervision arrangements within subsection (3)(f) may, in particular, providefor the payment by an Auditor General of a fine to any person.

(7) Any fine received by the Independent Supervisor under supervisionarrangements is to be paid into the Consolidated Fund.

827 Duties of Auditors General in relation to supervision arrangements

(1) Each Auditor General must—(a) comply with any standards of the kind mentioned in subsection (3)(a)

or (b) of section 826 determined under the supervision arrangements,(b) take such steps as may be reasonably required of that Auditor General

to enable his performance of statutory audits to be monitored by meansof inspections carried out under the supervision arrangements, and

(c) comply with any decision of the kind mentioned in subsection (3)(f) ofthat section made under the supervision arrangements.

(2) Each Auditor General must pay to the body or bodies with which theIndependent Supervisor enters into the supervision arrangements suchproportion of the costs incurred by the body or bodies for the purposes of thearrangements as the Independent Supervisor may notify to him in writing.

(3) Expenditure under subsection (2) is—(a) in the case of expenditure of the Comptroller and Auditor General, to

be regarded as expenditure of the National Audit Office for thepurposes of section 4(1) of the National Audit Act 1983 (c. 44);

(b) in the case of expenditure of the Comptroller and Auditor General forNorthern Ireland, to be regarded as expenditure of the NorthernIreland Audit Office for the purposes of Article 6(1) of the Audit(Northern Ireland) Order 1987 (S.I. 1987/460 (N.I. 5)).

(4) In this section “the supervision arrangements” means the arrangementsentered under section 826.

Reporting requirement

828 Reports by the Independent Supervisor

(1) The Independent Supervisor must, at least once in each calendar year, preparea report on the discharge of its functions.

(2) The Independent Supervisor must give a copy of each report prepared undersubsection (1) to—

(a) the Secretary of State;(b) the First Minister in Scotland;(c) the First Minister and the deputy First Minister in Northern Ireland;(d) the Assembly First Secretary in Wales.

(3) The Secretary of State must lay before each House of Parliament a copy of eachreport received by him under subsection (2)(a).

(4) In relation to a calendar year during which an appointment of a body as theIndependent Supervisor is made or revoked by an order under section 825, thissection applies with such modifications as may be specified in the order.

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Information

829 Matters to be notified to the Independent Supervisor

(1) The Independent Supervisor may require an Auditor General—(a) to notify the Independent Supervisor immediately of the occurrence of

such events as it may specify in writing and to give it such informationin respect of those events as is so specified;

(b) to give the Independent Supervisor, at such times or in respect of suchperiods as it may specify in writing, such information as is so specified.

(2) The notices and information required to be given must be such as theIndependent Supervisor may reasonably require for the exercise of thefunctions conferred on it by or by virtue of this Part.

(3) The Independent Supervisor may require information given under this sectionto be given in a specified form or verified in a specified manner.

(4) Any notice or information required to be given under this section must begiven in writing unless the Independent Supervisor specifies or approves someother manner.

830 The Independent Supervisor’s power to call for information

(1) The Independent Supervisor may by notice in writing require an AuditorGeneral to give it such information as it may reasonably require for the exerciseof the functions conferred on it by or by virtue of this Part.

(2) The Independent Supervisor may require that any information which itrequires under this section is to be given within such reasonable time andverified in such manner as it may specify.

Enforcement

831 Suspension notices

(1) The Independent Supervisor may issue —(a) a notice (a “suspension notice”) suspending an Auditor General’s

eligibility for appointment as a statutory auditor in relation to allpersons, or any specified person or persons, indefinitely or until a datespecified in the notice;

(b) a notice amending or revoking a suspension notice previously issued toan Auditor General.

(2) In determining whether it is appropriate to issue a notice under subsection (1),the Independent Supervisor must have regard to—

(a) the Auditor General’s performance of the obligations imposed on himby or by virtue of this Part, and

(b) the Auditor General’s performance of his functions as a statutoryauditor.

(3) A notice under subsection (1) must—(a) be in writing, and(b) state the date on which it takes effect (which must be after the period of

three months beginning with the date on which it is issued).

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(4) Before issuing a notice under subsection (1), the Independent Supervisormust—

(a) give written notice of its intention to do so to the Auditor General, and(b) publish the notice mentioned in paragraph (a) in such manner as it

thinks appropriate for bringing it to the attention of any other personswho are likely to be affected.

(5) A notice under subsection (4) must—(a) state the reasons for which the Independent Supervisor proposes to act,

and(b) give particulars of the rights conferred by subsection (6).

(6) A person within subsection (7) may, within the period of three monthsbeginning with the date of service or publication of the notice under subsection(4) or such longer period as the Independent Supervisor may allow, makewritten representations to the Independent Supervisor and, if desired, oralrepresentations to a person appointed for that purpose by the IndependentSupervisor.

(7) The persons within this subsection are—(a) the Auditor General, and(b) any other person who appears to the Independent Supervisor to be

affected.

(8) The Independent Supervisor must have regard to any representations made inaccordance with subsection (6) in determining—

(a) whether to issue a notice under subsection (1), and(b) the terms of any such notice.

(9) If in any case the Independent Supervisor considers it appropriate to do so inthe public interest it may issue a notice under subsection (1), without regard tothe restriction in subsection (3)(b), even if—

(a) no notice has been given or published under subsection (4), or(b) the period of time for making representations in pursuance of such a

notice has not expired.

(10) On issuing a notice under subsection (1), the Independent Supervisor must—(a) give a copy of the notice to the Auditor General, and(b) publish the notice in such manner as it thinks appropriate for bringing

it to the attention of persons likely to be affected.

(11) In this section “specified” means specified in, or of a description specified in,the suspension notice in question.

832 Effect of suspension notices

(1) An Auditor General must not act as a statutory auditor at any time when asuspension notice issued to him in respect of the audited person has effect.

(2) If at any time during an Auditor General’s term of office as a statutory auditora suspension notice issued to him in respect of the audited person takes effect,he must immediately—


reason of his becoming ineligible for appointment.

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(3) A suspension notice does not make an Auditor General ineligible forappointment as a statutory auditor for the purposes of section 810 (effect ofineligibility: criminal offences).


(1) If at any time it appears to the Independent Supervisor that an Auditor Generalhas failed to comply with an obligation imposed on him by or by virtue of thisPart, the Independent Supervisor may make an application to the court underthis section.

(2) If on an application under this section the court decides that the AuditorGeneral has failed to comply with the obligation in question, it may order theAuditor to take such steps as the court directs for securing that the obligationis complied with.


Proceedings

834 Proceedings involving the Independent Supervisor

(1) If the Independent Supervisor is an unincorporated association, any relevantproceedings may be brought by or against it in the name of any body corporatewhose constitution provides for the establishment of the body.

(2) For this purpose “relevant proceedings” means proceedings brought in or inconnection with the exercise of any function by the body as the IndependentSupervisor.

(3) Where an appointment under section 825 is revoked, the revoking order maymake such provision as the Secretary of State thinks fit with respect to pendingproceedings.

Grants

835 Grants to the Independent Supervisor

In section 16 of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004 (c. 27) (grants to bodies concerned with accountingstandards etc), after subsection (2)(k) insert—

“(ka) exercising functions of the Independent Supervisor appointedunder Chapter 3 of Part 33 of the Company Law Reform Act2006;”.

CHAPTER 4

THE REGISTER OF AUDITORS ETC

836 The register of auditors

(1) The Secretary of State must make regulations requiring the keeping of aregister of—

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(a) the persons eligible for appointment as a statutory auditor, and(b) third country auditors (see Chapter 5) who apply to be registered in the

specified manner and in relation to whom specified requirements aremet.

(2) The regulations must require each person’s entry in the register to contain—(a) his name and address,(b) in the case of an individual eligible for appointment as a statutory

auditor, the specified information relating to any firm on whose behalfhe is responsible for statutory audit work,

(c) in the case of a firm eligible for appointment as a statutory auditor, thespecified information relating to the individuals responsible forstatutory audit work on its behalf,

(d) in the case of an individual or firm eligible for appointment as astatutory auditor by virtue of Chapter 2, the name of the relevantsupervisory body, and

(e) in the case of a firm eligible for appointment as a statutory auditor byvirtue of Chapter 2 or a third country auditor, the informationmentioned in subsection (3),

and may require each person’s entry to contain other specified information.

(3) The information referred to in subsection (2)(e) is—(a) in relation to a body corporate, except where paragraph (b) applies, the

name and address of each person who is a director of the body or holdsany shares in it;

(b) in relation to a limited liability partnership, the name and address ofeach member of the partnership;

(c) in relation to a corporation sole, the name and address of the individualfor the time being holding the office by the name of which he is thecorporation sole;

(d) in relation to a partnership, the name and address of each partner.

(4) The regulations may provide that different parts of the register are to be keptby different persons.

(5) The regulations may impose such obligations as the Secretary of State thinks fiton—

(a) recognised supervisory bodies,(b) any body designated by order under section 848 (delegation of

Secretary of State’s functions),(c) persons eligible for appointment as a statutory auditor,(d) third country auditors,(e) any person with whom arrangements are made by one or more

recognised supervisory bodies, or by any body designated by orderunder section 848, with respect to the keeping of the register, or

(f) the Independent Supervisor appointed under section 825.

(6) The regulations may include—(a) provision requiring that specified entries in the register be open to

inspection at times and places specified or determined in accordancewith the regulations;

(b) provision enabling a person to require a certified copy of specifiedentries in the register;

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(c) provision authorising the charging of fees for inspection, or theprovision of copies, of such reasonable amount as may be specified ordetermined in accordance with the regulations.

(7) The obligations imposed by regulations under this section on such persons asare mentioned in subsection (5)(b) or (e) are enforceable on the application ofthe Secretary of State by injunction or, in Scotland, by an order under section45 of the Court of Session Act 1988 (c. 36).

(8) In this section “specified” means specified by regulations under this section.


837 Information to be made available to public

(1) The Secretary of State may make regulations requiring a person eligible forappointment as a statutory auditor, or a member of a specified class of suchpersons, to keep and make available to the public specified information,including information regarding—

(a) the person’s ownership and governance,(b) the person’s internal controls with respect to the quality and

independence of its audit work,(c) the person’s turnover, and(d) the audited persons of whom the person has acted as statutory auditor.

(2) Regulations under this section may—(a) impose such obligations as the Secretary of State thinks fit on persons

eligible for appointment as a statutory auditor;(b) require the information to be made available to the public in a specified

manner.

(3) In this section “specified” means specified by regulations under this section.


CHAPTER 5

REGISTERED THIRD COUNTRY AUDITORS

Introductory

838 Meaning of “third country auditor”, “registered third country auditor” etc

(1) In this Part—“third country auditor” means the auditor of the accounts of a traded non-

Community company, and the expressions “third country audit” and“third country audit work” are to be construed accordingly;

“registered third country auditor” means a third country auditor who isentered in the register kept in accordance with regulations undersection 836(1).

(2) In subsection (1) “traded non-Community company” means a bodycorporate—

(a) which is incorporated or formed under the law of a country or territorywhich is not a member State or part of a member State,

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(b) whose transferable securities are admitted to trading on a regulatedmarket situated or operating in the United Kingdom, and

(c) which has not been excluded, or is not of a description of bodiescorporate which has been excluded, from this definition by an ordermade by the Secretary of State.

(3) For this purpose—“regulated market” has the meaning given by Article 4.1(14) of Directive


“transferable securities” has the meaning given by Article 4.1(18) of thatDirective.


Duties

839 Duties of registered third country auditors

(1) A registered third country auditor must participate in—(a) arrangements within paragraph 1 of Schedule 12 (arrangements for

independent monitoring of audits of traded non-Communitycompanies), and

(b) arrangements within paragraph 2 of that Schedule (arrangements forindependent investigation for disciplinary purposes of public interestcases).

(2) A registered third country auditor must—(a) take such steps as may be reasonably required of it to enable its

performance of third country audits to be monitored by means ofinspections carried out under the arrangements mentioned insubsection (1)(a), and

(b) comply with any decision as to disciplinary action to be taken againstit made under the arrangements mentioned in subsection (1)(b).

(3) Schedule 12 makes further provision with respect to the arrangements inwhich registered third country auditors are required to participate.

(4) The Secretary of State may direct in writing that subsections (1) to (3) are not toapply, in whole or in part, in relation to a particular registered third countryauditor or class of registered third country auditors.

Information

840 Matters to be notified to the Secretary of State

(1) The Secretary of State may require a registered third country auditor—(a) to notify him immediately of the occurrence of such events as he may

specify in writing and to give him such information in respect of thoseevents as is so specified;

(b) to give him, at such times or in respect of such periods as he mayspecify in writing, such information as is so specified.

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(2) The notices and information required to be given must be such as the Secretaryof State may reasonably require for the exercise of his functions under this Part.

(3) The Secretary of State may require information given under this section to begiven in a specified form or verified in a specified manner.

(4) Any notice or information required to be given under this section must begiven in writing unless the Secretary of State specifies or approves some othermanner.

841 The Secretary of State’s power to call for information

(1) The Secretary of State may by notice in writing require a registered thirdcountry auditor to give him such information as he may reasonably require forthe exercise of his functions under this Part.

(2) The Secretary of State may require that any information which he requiresunder this section is to be given within such reasonable time and verified insuch manner as he may specify.

Enforcement


(1) If at any time it appears to the Secretary of State that a registered third countryauditor has failed to comply with an obligation imposed on him by or by virtueof this Part, the Secretary of State may make an application to the court underthis section.

(2) If on an application under this section the court decides that the auditor hasfailed to comply with the obligation in question, it may order the auditor totake such steps as the court directs for securing that the obligation is compliedwith.


843 Removal of third country auditors from the register of auditors

(1) The Secretary of State may, by regulations, confer on the person keeping theregister in accordance with regulations under section 836(1) power to removea third country auditor from the register.

(2) Regulations under this section must require the person keeping the register, indetermining whether to remove a third country auditor from the register, tohave regard to the auditor’s compliance with obligations imposed on him byor by virtue of this Part.

(3) Where provision is made under section 836(4) (different parts of the register tobe kept by different persons), references in this section to the person keepingthe register are to the person keeping that part of the register which relates tothird country auditors.


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CHAPTER 6

SUPPLEMENTARY AND GENERAL

Power to require second company audit

844 Secretary of State’s power to require second audit of a company

(1) This section applies where a person appointed as statutory auditor of acompany was not an appropriate person for any part of the period duringwhich the audit was conducted.

(2) The Secretary of State may direct the company concerned to retain anappropriate person—

(a) to conduct a second audit of the relevant accounts, or(b) to review the first audit and to report (giving his reasons) whether a

second audit is needed.

(3) For the purposes of subsections (1) and (2) a person is “appropriate” if he—(a) is eligible for appointment as a statutory auditor or, if the person is an

Auditor General, for appointment as statutory auditor of the company,and

(b) is not prohibited by section 811(1) from acting as statutory auditor ofthe company.

(4) The Secretary of State must send a copy of a direction under subsection (2) tothe registrar of companies.

(5) The company is guilty of an offence if—(a) it fails to comply with a direction under subsection (2) within the period

of 21 days beginning with the date on which it is given, or(b) it has been convicted of a previous offence under this subsection and

the failure to comply with the direction which led to the convictioncontinues after the conviction.

(6) The company must—(a) send a copy of a report under subsection (2)(b) to the registrar of

companies, and(b) if the report states that a second audit is needed, take such steps as are

necessary for the carrying out of that audit.

(7) The company is guilty of an offence if—(a) it fails to send a copy of a report under subsection (2)(b) to the registrar

within the period of 21 days beginning with the date on which itreceives it,

(b) in a case within subsection (6)(b), it fails to take the steps mentionedimmediately it receives the report, or

(c) it has been convicted of a previous offence under this subsection andthe failure to send a copy of the report, or take the steps, which led tothe conviction continues after the conviction.

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(8) A company guilty of an offence under this section is liable on summaryconviction—

(a) in a case within subsection (5)(a) or (7)(a) or (b), to a fine not exceedinglevel 5 on the standard scale, and

(b) in a case within subsection (5)(b) or (7)(c), to a fine not exceeding one-tenth of level 5 on the standard scale for each day on which the failurecontinues.

(9) In this section “registrar of companies” has the meaning given by section 671.

845 Supplementary provision about second audits

(1) If a person accepts an appointment, or continues to act, as statutory auditor ofa company at a time when he knows he is not an appropriate person, thecompany may recover from him any costs incurred by it in complying with therequirements of section 844.For this purpose “appropriate” is to be construed in accordance withsubsection (3) of that section.

(2) Where a second audit is carried out under section 844, any statutory or otherprovision applying in relation to the first audit applies also, in so far aspracticable, in relation to the second audit.

(3) A direction under section 844(2) is, on the application of the Secretary of State,enforceable by injunction or, in Scotland, by an order under section 45 of theCourt of Session Act 1988 (c. 36).

False and misleading statements

846 Misleading, false and deceptive statements

(1) A person is guilty of an offence if—(a) for the purposes of or in connection with any application under this

Part, or(b) in purported compliance with any requirement imposed on him by or

by virtue of this Part,he knowingly or recklessly furnishes information which is misleading, false ordeceptive in a material particular.

(2) It is an offence for a person whose name does not appear on the register ofauditors kept under regulations under section 836 in an entry made undersubsection (1)(a) of that section to describe himself as a registered auditor or soto hold himself out as to indicate, or be reasonably understood to indicate, thathe is a registered auditor.

(3) It is an offence for a person whose name does not appear on the register ofauditors kept under regulations under that section in an entry made undersubsection (1)(b) of that section to describe himself as a registered third countryauditor or so to hold himself out as to indicate, or be reasonably understood toindicate, that he is a registered third country auditor.

(4) It is an offence for a body which is not a recognised supervisory body or arecognised qualifying body to describe itself as so recognised or so to describeitself or hold itself out as to indicate, or be reasonably understood to indicate,that it is so recognised.

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two years or to a fine (or both);(b) on summary conviction—

(i) in England and Wales, to imprisonment for a term notexceeding twelve months or to a fine not exceeding thestatutory maximum (or both),

(ii) in Scotland or Northern Ireland, to imprisonment for a term notexceeding six months or to a fine not exceeding the statutorymaximum (or both).

In relation to an offence committed before the commencement of section 154(1)of the Criminal Justice Act 2003 (c. 44), for “twelve months” in paragraph (b)(i)substitute “six months”.

(6) Subject to subsection (7), a person guilty of an offence under subsection (2), (3)or (4) is liable on summary conviction—

(a) in England and Wales, to imprisonment for a term not exceeding 51weeks or to a fine not exceeding level 5 on the standard scale (or both),

(b) in Scotland or Northern Ireland, to imprisonment for a term notexceeding six months or to a fine not exceeding level 5 on the standardscale (or both).

In relation to an offence committed before the commencement of section 281(5)of the Criminal Justice Act 2003, for “51 weeks” in paragraph (a) substitute “sixmonths”.

(7) Where a contravention of subsection (2), (3) or (4) involves a public display ofthe offending description, the maximum fine that may be imposed is anamount equal to level 5 on the standard scale multiplied by the number of daysfor which the display has continued.

(8) It is a defence for a person charged with an offence under subsection (2), (3) or(4) to show that he took all reasonable precautions and exercised all duediligence to avoid the commission of the offence.

Fees

847 Fees

(1) An applicant for a recognition order under this Part must pay such fee inrespect of his application as the Secretary of State may by regulations prescribe;and no application is to be regarded as duly made unless this subsection iscomplied with.

(2) The Secretary of State may by regulations prescribe periodical fees to be paidby—

(a) every recognised supervisory body,(b) every recognised qualifying body, (c) every Auditor General, and(d) every registered third country auditor.

(3) Fees received by the Secretary of State by virtue of this Part are to be paid intothe Consolidated Fund.


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Delegation of Secretary of State’s functions

848 Delegation of the Secretary of State’s functions

(1) The Secretary of State may make an order under this section (a “delegationorder”) for the purpose of enabling functions of the Secretary of State underthis Part to be exercised by a body designated by the order.

(2) The body designated by a delegation order may be either—(a) a body corporate which is established by the order, or(b) subject to section 849, a body (whether a body corporate or an

unincorporated association) which is already in existence (“an existingbody”).

(3) A delegation order has the effect of transferring to the body designated by it allfunctions of the Secretary of State under this Part—

(a) subject to such exceptions and reservations as may be specified in theorder, and

(b) except—(i) his functions in relation to the body itself, and

(ii) his functions under section 825 (appointment of IndependentSupervisor).

(4) A delegation order may confer on the body designated by it such otherfunctions supplementary or incidental to those transferred as appear to theSecretary of State to be appropriate.

(5) Any transfer of functions under the following provisions must be subject to thereservation that the functions remain exercisable concurrently by the Secretaryof State—

(a) section 821 (power to call for information from recognised bodies etc);(b) section 841 (power to call for information from registered third country

auditors);(c) section 850 (directions to comply with international obligations).

(6) Any transfer of—(a) the function of refusing to make a declaration under section 818(1) on

the grounds referred to in section 818(4) (lack of comparable treatment),or

(b) the function of withdrawing such a declaration under section 818(7) onthose grounds,

must be subject to the reservation that the function is exercisable only with theconsent of the Secretary of State.

(7) A delegation order may be amended or, if it appears to the Secretary of Statethat it is no longer in the public interest that the order should remain in force,revoked by a further order under this section.

(8) Where functions are transferred or resumed, the Secretary of State may byorder confer or, as the case may be, take away such other functionssupplementary or incidental to those transferred or resumed as appear to himto be appropriate.

(9) Where a delegation order is made, Schedule 13 has effect with respect to—

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(a) the status of the body designated by the order in exercising functions ofthe Secretary of State under this Part,

(b) the constitution and proceedings of the body where it is established bythe order,

(c) the exercise by the body of certain functions transferred to it, and(d) other supplementary matters.

(10) An order under this section which has the effect of transferring or resumingany functions is subject to affirmative resolution procedure.

(11) Any other order under this section is subject to negative resolution procedure.

849 Delegation of functions to an existing body

(1) The Secretary of State’s power to make a delegation order under section 848which designates an existing body is exercisable in accordance with thissection.

(2) The Secretary of State may make such a delegation order if it appears to himthat—

(a) the body is able and willing to exercise the functions that would betransferred by the order, and

(b) the body has arrangements in place relating to the exercise of thosefunctions which are such as to be likely to ensure that the conditions insubsection (3) are met.

(3) The conditions are—(a) that the functions in question will be exercised effectively, and(b) where the delegation order is to contain any requirements or other

provisions specified under subsection (4), that those functions will beexercised in accordance with any such requirements or provisions.

(4) The delegation order may contain such requirements or other provisionrelating to the exercise of the functions by the designated body as appear to theSecretary of State to be appropriate.

(5) An existing body—(a) may be designated by a delegation order under section 848, and(b) may accordingly exercise functions of the Secretary of State in

pursuance of the order,despite any involvement of the body in the exercise of any functions underarrangements within paragraph 21, 22, 23(1) or 24(1) of Schedule 10 orparagraph 1 or 2 of Schedule 12.

International obligations

850 Directions to comply with international obligations

(1) If it appears to the Secretary of State—(a) that any action proposed to be taken by a recognised supervisory body

or a recognised qualifying body, or a body designated by order undersection 848, would be incompatible with Community obligations orany other international obligations of the United Kingdom, or

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(b) that any action which that body has power to take is required for thepurpose of implementing any such obligations,

he may direct the body not to take or, as the case may be, to take the action inquestion.

(2) A direction may include such supplementary or incidental requirements as theSecretary of State thinks necessary or expedient.

(3) A direction under this section given to a body designated by order undersection 848 is enforceable on the application of the Secretary of State byinjunction or, in Scotland, by an order under section 45 of the Court of SessionAct 1988 (c. 36).

General provision relating to offences

851 Offences by bodies corporate, partnerships and unincorporated associations

(1) Where an offence under this Part committed by a body corporate is proved tohave been committed with the consent or connivance of, or to be attributableto any neglect on the part of, an officer of the body, or a person purporting toact in any such capacity, he as well as the body corporate is guilty of the offenceand liable to be proceeded against and punished accordingly.

(2) Where an offence under this Part committed by a partnership is proved to havebeen committed with the consent or connivance of, or to be attributable to anyneglect on the part of, a partner, he as well as the partnership is guilty of theoffence and liable to be proceeded against and punished accordingly.

(3) Where an offence under this Part committed by an unincorporated association(other than a partnership) is proved to have been committed with the consentor connivance of, or to be attributable to any neglect on the part of, any officerof the association or any member of its governing body, he as well as theassociation is guilty of the offence and liable to be proceeded against andpunished accordingly.

852 Time limits for prosecution of offences

(1) An information relating to an offence under this Part which is triable by amagistrates’ court in England and Wales may be so tried if it is laid at any timewithin the period of twelve months beginning with the date on which evidencesufficient in the opinion of the Director of Public Prosecutions or the Secretaryof State to justify the proceedings comes to his knowledge.

(2) Proceedings in Scotland for an offence under this Part may be commenced atany time within the period of twelve months beginning with the date on whichevidence sufficient in the Lord Advocate’s opinion to justify proceedings cameto his knowledge or, where such evidence was reported to him by the Secretaryof State, within the period of twelve months beginning with the date on whichit came to the knowledge of the Secretary of State.

(3) For the purposes of subsection (2) proceedings are to be deemed to becommenced on the date on which a warrant to apprehend or cite the accusedis granted, if the warrant is executed without undue delay.

(4) A complaint charging an offence under this Part which is triable by amagistrates’ court in Northern Ireland may be so tried if it is made at any time

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within the period of twelve months beginning with the date on which evidencesufficient in the opinion of the Director of Public Prosecutions for NorthernIreland or the Secretary of State to justify the proceedings comes to hisknowledge.

(5) This section does not authorise—(a) in the case of proceedings in England and Wales, the trial of an

information laid,(b) in the case of proceedings in Scotland, the commencement of

proceedings, or(c) in the case of proceedings in Northern Ireland, the trial of a complaint

made,more than three years after the commission of the offence.

(6) For the purposes of this section a certificate of the Director of PublicProsecutions, the Lord Advocate, the Director of Public Prosecutions forNorthern Ireland or the Secretary of State as to the date on which such evidenceas is referred to above came to his knowledge is conclusive evidence.

(7) Nothing in this section affects proceedings within the time limits prescribed bysection 127(1) of the Magistrates’ Courts Act 1980 (c. 43), section 331 of theCriminal Procedure (Scotland) Act 1975 or Article 19 of the Magistrates’ Courts(Northern Ireland) Order 1981 (S.I. 1981/1675 (N.I. 26)) (the usual time limitsfor criminal proceedings).

853 Jurisdiction and procedure in respect of offences

(1) Summary proceedings for an offence under this Part may, without prejudice toany jurisdiction exercisable apart from this section, be taken—

(a) against a body corporate or unincorporated association at any place atwhich it has a place of business, and

(b) against an individual at any place where he is for the time being.

(2) Proceedings for an offence alleged to have been committed under this Part byan unincorporated association must be brought in the name of the association(and not in that of any of its members), and for the purposes of any suchproceedings any rules of court relating to the service of documents apply as inrelation to a body corporate.

(3) Section 33 of the Criminal Justice Act 1925 (c. 86) and Schedule 3 to theMagistrates’ Courts Act 1980 (procedure on charge of offence against acorporation) apply in a case in which an unincorporated association is chargedin England and Wales with an offence under this Part as they apply in the caseof a corporation.

(4) Section 18 of the Criminal Justice Act (Northern Ireland) 1945 and Article 166and Schedule 4 to the Magistrates’ Courts (Northern Ireland) Order 1981(procedure on charge of offence against a corporation) apply in a case in whichan unincorporated association is charged in Northern Ireland with an offenceunder this Part as they apply in the case of a corporation.

(5) In relation to proceedings on indictment in Scotland for an offence alleged tohave been committed under this Part by an unincorporated association, section70 of the Criminal Procedure (Scotland) Act 1995 (proceedings on indictmentagainst bodies corporate) applies as if the association were a body corporate.

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(6) A fine imposed on an unincorporated association on its conviction of such anoffence must be paid out of the funds of the association.

Notices etc

854 Service of notices

(1) This section has effect in relation to any notice, direction or other documentrequired or authorised by or by virtue of this Part to be given to or served onany person other than the Secretary of State.

(2) Any such document may be given to or served on the person in question—(a) by delivering it to him,(b) by leaving it at his proper address, or(c) by sending it by post to him at that address.

(3) Any such document may—(a) in the case of a body corporate, be given to or served on an officer of

that body;(b) in the case of a partnership, be given to or served on any partner;(c) in the case of an unincorporated association other than a partnership,

be given to or served on any member of the governing body of thatassociation.

(4) For the purposes of this section and section 7 of the Interpretation Act 1978(c. 30) (service of documents by post) in its application to this section, theproper address of any person is his last known address (whether of hisresidence or of a place where he carries on business or is employed) and also—

(a) in the case of a person who is eligible under the rules of a recognisedsupervisory body for appointment as a statutory auditor and who doesnot have a place of business in the United Kingdom, the address of thatbody;

(b) in the case of a body corporate or an officer of that body, the address ofthe registered or principal office of that body in the United Kingdom;

(c) in the case of an unincorporated association other than a partnership ora member of its governing body, its principal office in the UnitedKingdom.

855 Documents in electronic form

(1) This section applies where—(a) section 854 authorises the giving or sending of a notice, direction or

other document by its delivery to a particular person (“the recipient”),and

(b) the notice, direction or other document is transmitted to the recipient—(i) by means of an electronic communications network, or

(ii) by other means but in a form that requires the use of apparatusby the recipient to render it intelligible.

(2) The transmission has effect for the purposes of this Part as a delivery of thenotice, direction or other document to the recipient, but only if the recipient hasindicated to the person making the transmission his willingness to receive thenotice, direction or other document in the form and manner used.

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(3) An indication to a person for the purposes of subsection (2)—(a) must be given to the person in such manner as he may require,(b) may be a general indication or an indication that is limited to notices,

directions or other documents of a particular description,(c) must state the address to be used,(d) must be accompanied by such other information as the person requires

for the making of the transmission, and(e) may be modified or withdrawn at any time by a notice given to the

person in such manner as he may require.

(4) In this section “electronic communications network” has the same meaning asin the Communications Act 2003 (c. 21).

Interpretation


(1) In this Part “associate”, in relation to a person, is to be construed as follows.

(2) In relation to an individual, “associate” means—(a) that individual’s spouse, civil partner or minor child or step-child,(b) any body corporate of which that individual is a director, and(c) any employee or partner of that individual.

(3) In relation to a body corporate, “associate” means—(a) any body corporate of which that body is a director,(b) any body corporate in the same group as that body, and(c) any employee or partner of that body or of any body corporate in the

same group.

(4) In relation to a partnership constituted under the law of Scotland, or any othercountry or territory in which a partnership is a legal person, “associate”means—


(5) In relation to a partnership constituted under the law of England and Wales orNorthern Ireland, or the law of any other country or territory in which apartnership is not a legal person, “associate” means any person who is anassociate of any of the partners.

(6) In subsection (2)(b), (3)(a) and (4)(a), in the case of a body corporate which is alimited liability partnership, “director” is to be read as “member”.


(1) In this Part, unless a contrary intention appears—“address” means—

(a) in relation to an individual, his usual residential or businessaddress;

(b) in relation to a firm, its registered or principal office in theUnited Kingdom;

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“company” means any company or other body the accounts of whichmust be audited in accordance with Part 16;

“director”, in relation to a body corporate, includes any person occupyingin relation to it the position of a director (by whatever name called) andany person in accordance with whose directions or instructions (notbeing advice given in a professional capacity) the directors of the bodyare accustomed to act;

“firm” means any entity, whether or not a legal person, which is not anindividual and includes a body corporate, a corporation sole and apartnership or other unincorporated association;

“group”, in relation to a body corporate, means the body corporate, anyother body corporate which is its holding company or subsidiary andany other body corporate which is a subsidiary of that holdingcompany;

“holding company” and “subsidiary” are to be read in accordance withsection 736 of the Companies Act 1985 (c. 6);

“officer”, in relation to a body corporate, includes a director, a manager, asecretary or, where the affairs of the body are managed by its members,a member;

“parent undertaking” and “subsidiary undertaking” are to be read inaccordance with section 761 and Schedule 8.

(2) For the purposes of this Part a body is to be regarded as “established in theUnited Kingdom” if and only if—

(a) it is incorporated or formed under the law of the United Kingdom or apart of the United Kingdom, or

(b) its central management and control are exercised in the UnitedKingdom;

and any reference to a qualification “obtained in the United Kingdom” is to aqualification obtained from such a body.

(3) The Secretary of State may by regulations make such modifications of this Partas appear to him to be necessary or appropriate for the purposes of itsapplication in relation to any firm, or description of firm, which is not a bodycorporate or a partnership.


858 Index of defined expressions

The following Table shows provisions defining or otherwise explainingexpressions used in this Part (other than provisions defining or explaining anexpression used only in the same section)—

Expression Provision

address section 857(1)

appropriate qualification section 816

associate section 856

audited person section 807(2)

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Auditor General section 823(1)

company section 857(1)

delegation order section 848(1)

director (of a body corporate) section 857(1)

enactment section 879

established in the United Kingdom section 857(2)

firm section 857(1)

group (in relation to a body corporate) section 857(1)

holding company section 857(1)

main purposes of this Part section 806

member (of a supervisory body) section 814(2)

obtained in the United Kingdom section 857(2)

officer section 857(1)

parent undertaking section 857(1)

qualifying body section 817(1)

recognised, in relation to aprofessional qualification

section 817(3) andSchedule 11

recognised, in relation to a qualifyingbody

paragraph 1(2) of Schedule11

recognised, in relation to asupervisory body

section 814(4) andSchedule 10

registered third country auditor section 838(1)

rules of a qualifying body section 817(2)

rules of a supervisory body section 814(3)

statutory auditor, statutory audit andstatutory audit work

section 807(1)

subsidiary section 857(1)

supervisory body section 814(1)

subsidiary undertaking section 857(1)

third country auditor, third countryaudit and third country audit work

section 838(1)

Expression Provision

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Miscellaneous and general

859 Power to make provision in consequence of changes affecting accountancy bodies

(1) The Secretary of State may by regulations make such amendments ofenactments as appear to him to be necessary or expedient in consequence ofany change of name, merger or transfer of engagements affecting—

(a) a recognised supervisory body or recognised qualifying body, or(b) a body of accountants referred to in, or approved, authorised or

otherwise recognised for the purposes of, any other enactment.


860 Consequential amendments

Schedule 14 contains consequential amendments relating to this Part.

PART 34

MISCELLANEOUS PROVISIONS

Transparency and corporate governance rules

861 Transparency and corporate governance rules

In Part 6 of the Financial Services and Markets Act 2000 (c. 8) (which makesprovision about official listing, prospectus requirements for transferablesecurities etc), after section 90 insert—

“Transparency obligations

90A Transparency rules

(1) The competent authority may make—(a) rules (including voteholder notification rules and issuer

notification rules) for the purposes of the transparencyobligations directive;

(b) voteholder notification rules and issuer notification rules for thepurpose of ensuring that voteholder information in respect ofvoting shares traded on a UK market, other than a regulatedmarket, is made public or notified to the competent authority;

(c) rules (“extension rules”) extending voteholder notification rulesor issuer notification rules under paragraph (a) or (b) so as toprovide for persons who hold comparable instruments inrespect of voting shares to be treated for the purposes of thoserules, in the circumstances specified in the extension rules, asholding some or all of the voting rights in respect of thoseshares.

(2) The rules which may be made under subsection (1)(a) include rules forthe purpose of dealing with matters arising out of or related to anyprovision of the transparency obligations directive.

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(3) “Voteholder notification rules” are rules which make provision forvoteholder information in respect of voting shares to be notified, in thecircumstances specified in the rules, to the issuer or any other personspecified in the rules (or both).

(4) “Issuer notification rules” are rules which make provision requiring theissuer of voting shares in the circumstances specified in the rules to doone or both of the following—

(a) to make public any relevant information;(b) to notify the competent authority of any relevant information.

(5) For the purposes of this section—“voteholder information”, in respect of any voting shares, is

information relating to voting rights held by persons in respectthe shares;

“relevant information”, in relation to an issuer, is—(a) information which is notified to the issuer in accordance

with voteholder notification rules (including anyextension of such rules under subsection (1)(c));

(b) information relating to the issuer’s capital;(c) information relating to the rights attached to the shares

or other securities issued by the issuer (including thetotal number of voting rights in respect of shares or ofshares of a particular class); and

(d) information relating to the voting rights held by theissuer in respect of those shares.

(6) The competent authority may make public any information notified tothe authority in accordance with rules under this section.

(7) For the purposes of this section and section 90B—(a) the voting rights in respect of any voting shares are the voting

rights attached to those shares, and(b) a person is to be regarded as holding the voting rights in respect

of the shares—(i) if, by virtue of those shares, he is a shareholder within

the meaning of Article 2.1(e) of the transparencyobligations directive;

(ii) if, and to the extent that, he is entitled to acquire, disposeof or exercise those voting rights in one or more of thecases mentioned in Article 10(a) to (h) of thetransparency obligations directive;

(iii) if he holds, directly or indirectly, a financial instrumentwhich results in an entitlement to acquire the shares andis an Article 13 instrument.

(8) For the purposes of this section a person holds a “comparableinstrument” in respect of voting shares if he holds, directly orindirectly, a financial instrument in relation to the shares which hassimilar economic effects to an Article 13 instrument (whether or not thefinancial instrument results in an entitlement to acquire the shares).

(9) For the purposes of this section two or more persons may, at the sametime, each be regarded as holding the same voting rights.

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(10) In this section and section 90B—“Article 13 instrument” means a financial instrument of a type

determined by the European Commission under Article 13(2)(a)of the transparency obligations directive;

“the transparency obligations directive” means Directive 2004/109/EC of the European Parliament and of the Council relatingto the harmonisation of transparency requirements in relationto information about issuers whose securities are admitted totrading on a regulated market;

“UK market” means a market which is situated or operating in theUnited Kingdom;

“voting shares” means shares—(a) to which voting rights are attached, and(b) which have been admitted to trading on a market

(whether a regulated market or not).

90B Further provision about transparency rules

(1) Voteholder notification rules under section 90A may only requireinformation relating to the voting rights held by a person, in respect ofvoting shares in an issuer, to be notified as mentioned in subsection (3)of that section where there is a notifiable change in the proportion of—

(a) the total voting rights in respect of shares in the issuer, or(b) the total voting rights in respect of a particular class of share in

the issuer,held by the person.

(2) Issuer notification rules under section 90A may only requireinformation relating to the voting rights held by an issuer, in respect ofvoting shares in the issuer, to be made public where there is a notifiablechange in the proportion of—

(a) the total voting rights in respect of shares in the issuer, or(b) the total voting rights in respect of a particular class of share in

the issuer,held by the issuer.

(3) For the purposes of subsections (1) and (2), there is a “notifiablechange” in the proportion of voting rights held by a person when theproportion changes—

(a) from being a proportion less than a designated proportion to aproportion equal to or greater than that designated proportion,

(b) from being a proportion equal to a designated proportion to aproportion greater or less than that designated proportion, or

(c) from being a proportion greater than a designated proportion toa proportion equal to or less than that designated proportion.

(4) In subsection (3) “designated proportion”—(a) in relation to subsection (1) means a proportion designated by

voteholder notification rules under section 90A, and(b) in relation to subsection (2) means a proportion designated by

issuer notification rules under that section.

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(5) Without prejudice to subsection (1)(a) of section 90A, rules undersubsection (1)(b) or (c) of that section may, in particular, makeprovision—

(a) specifying how the proportion of—(i) the total voting rights in respect of shares in an issuer, or

(ii) the total voting rights in respect of a particular class ofshares in an issuer,

held by a person is to be determined;(b) specifying the circumstances in which, for the purposes of any

determination of the voting rights held by a person (“P”) inrespect of voting shares in an issuer, any voting rights held, ortreated by virtue of section 90A(1)(c) as held, by another personin respect of voting shares in the issuer are to be regarded asheld by P;

(c) specifying the nature of the information which must beincluded in any notification;

(d) about the form of any notification;(e) requiring any notification to be given within a specified period;(f) specifying the manner in which any information is to be made

public and the period within which it must be made public;(g) specifying circumstances in which any of the requirements

imposed by rules under section 90A(1)(b) or (c) does not apply.

(6) Rules under section 90A which require a person to make informationpublic may include provision authorising the competent authority tomake the information public in the event that the person fails to do so.

(7) Rules under that section may make provision by reference to anyprovision of any rules made by the Panel on Takeovers and Mergersunder Part 22 of the Company Law Reform Act 2006.

(8) Section 90A and this section are without prejudice to any other powerconferred by this Part to make Part 6 rules.

90C Competent authority’s power to call for information

(1) The competent authority may by notice in writing given to a personwithin subsection (2) require him—

(a) to provide specified information or information of a specifieddescription, or

(b) to produce specified documents or documents of a specifieddescription.

(2) The persons within this subsection are—(a) an issuer of securities in respect of whom rules under section

90A have effect (“a relevant issuer”);(b) a voteholder;(c) an auditor of a relevant issuer or of a voteholder;(d) a person who controls a voteholder;(e) a person controlled by a voteholder;(f) a director or other similar officer of a relevant issuer;(g) a director or other similar officer of a voteholder or, where the

affairs of a voteholder are managed by its members, a memberof the voteholder.

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(3) The information or documents must be provided or produced—(a) before the end of such reasonable period as may be specified,

and(b) at such place as may be specified.

(4) This section applies only to information and documents reasonablyrequired in connection with the exercise by the competent authority offunctions conferred on it by or under section 90A.

(5) The competent authority may require any information provided underthis section to be provided in such form as it may reasonably require.

(6) The competent authority may require—(a) any information provided, whether in a document or otherwise,

to be verified in such manner as it may reasonably require;(b) any document produced to be authenticated in such manner as

it may reasonably require.

(7) If a document is produced in response to a requirement imposed underthis section, the competent authority may—

(a) take copies of or extracts from the document; or(b) require the person producing the document, or any relevant

person, to provide an explanation of the document.

(8) If a person claims a lien on a document, its production under thissection does not affect the lien.

(9) If a person who is required under this section to produce a documentfails to do so, the competent authority may require him to state, to thebest of his knowledge and belief, where the document is.

(10) In this section—“relevant person”, in relation to a person who is required to

produce a document, means a person who—(a) has been or is a director or controller of that person;(b) has been or is an auditor of that person;(c) has been or is an actuary, accountant or lawyer

appointed or instructed by that person; or(d) has been or is an employee of that person;

“specified” means specified in the notice;“voteholder” means a person who holds voting rights in respect of

any voting shares for the purposes of section 90A (transparencyrules) or is treated as holding such rights by virtue of rulesunder subsection (1)(c) of that section.

(11) A person (“A”) controls another person (“B”) if—(a) A holds a majority of the voting rights in B,(b) A is a member of B and has the right to appoint or remove a

majority of the members of the board of directors (or, if there isno such board, the equivalent management body) of B,

(c) A is a member of B and controls alone, pursuant to anagreement with other shareholders or members, a majority ofthe voting rights in B, or

(d) A has the right to exercise, or actually exercises, dominantinfluence or control over B.

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Corporate governance

90D Corporate governance rules

(1) The competent authority may make rules—(a) for the purpose of implementing, enabling the implementation

of or dealing with matters arising out of or related to, anyCommunity obligation relating to the corporate governance ofissuers who have requested or approved admission of theirsecurities to trading on a regulated market;

(b) about corporate governance in relation to such issuers for thepurpose of implementing, or dealing with matters arising out ofor related to, any Community obligation.

(2) “Corporate governance”, in relation to an issuer, includes—(a) the nature, constitution or functions of the organs of the issuer;(b) the manner in which organs of the issuer conduct themselves;(c) the requirements imposed on organs of the issuer;(d) the relationship between the different organs of the issuer;(e) the relationship between the organs of the issuer and the

members of the issuer or holders of the issuer’s securities.

(3) The burdens and restrictions imposed by rules under this section onforeign-traded issuers must not be greater than the burdens andrestrictions imposed on UK-traded issuers by—

(a) rules under this section, and(b) listing rules.

(4) For this purpose—“foreign-traded issuer” means an issuer who has requested or

approved admission of the issuer’s securities to trading on aregulated market situated or operating outside the UnitedKingdom;

“UK-traded issuer” means an issuer who has requested orapproved admission of the issuer’s securities to trading on aregulated market situated or operating in the United Kingdom.

(5) This section is without prejudice to any other power conferred by thisPart to make Part 6 rules.”.

862 Consequential amendments of the Financial Services and Markets Act 2000

(1) The Financial Services and Markets Act 2000 (c. 8) is amended as follows.

(2) In section 73 (general duty of competent authority), after subsection (1) insert—

“(1A) To the extent that those general functions are functions under orrelating to section 90A or 90B (transparency rules), subsection (1)(c) and(f) have effect as if the references to a regulated market were referencesto a market.”

(3) In section 73A (Part 6 Rules), after subsection (5) insert—

“(6) Rules made under section 90A (transparency rules) or 90D (corporategovernance rules) are not listing rules, disclosure rules or prospectusrules, but are Part 6 rules.”

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(4) In section 91 (penalties for breach of Part 6 rules)—(a) after subsection (1A) insert—

“(1B) If the competent authority considers that any person hascontravened—

(a) a provision of rules made under section 90A(transparency rules),

(b) a provision otherwise made in accordance with thetransparency obligations directive, or

(c) a provision of rules made under section 90D (corporategovernance),

it may impose on the person a penalty of such amount as itconsiders appropriate.”,

(b) in subsection (2) for “or (1A)” substitute “, (1A) or (1B)”, and(c) after subsection (7) insert—

“(8) In this section “the transparency obligations directive” meansDirective 2004/109/EC of the European Parliament and of theCouncil relating to the harmonisation of transparencyrequirements in relation to information about issuers whosesecurities are admitted to trading on a regulated market.”

(5) In section 97 (appointment by the competent authority of persons to carry outinvestigations), in subsection (1)—

(a) for paragraphs (a) and (b) substitute—“(a) there may have been a contravention of—

(i) a provision of this Part or of Part 6 rules, or(ii) a provision otherwise made in accordance with

the prospectus directive or the transparencyobligations directive;

(b) a person who was at the material time a director of aperson mentioned in section 91(1), (1A) or (1B) has beenknowingly concerned in a contravention by that personof—

(i) a provision of this Part or of Part 6 rules, or(ii) a provision otherwise made in accordance with

the prospectus directive or the transparencyobligations directive;”, and

(b) after subsection (3) insert—

“(4) In this section “the transparency obligations directive” has themeaning given in section 91(8).”

(6) In section 99 (fees) after subsection (1B) insert—

“(1C) Rules under section 90A (transparency rules) may require the paymentof fees to the competent authority in respect of the continued admissionof financial instruments to trading on a regulated market.”

(7) In section 102A(3) (meaning of “transferable securities”) for “the investmentservices directive” substitute “Directive 2004/39/EC of the EuropeanParliament and of the Council on markets in financial instruments”.

(8) In section 103(1) (interpretation of Part 6) in the definition of “regulatedmarket” for “Article 1.13 of the investment services directive” substitute

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“Article 4.1(14) of Directive 2004/39/EC of the European Parliament and of theCouncil on markets in financial instruments”.

Regulation of actuaries etc

863 Grants to bodies concerned with actuarial standards etc

(1) Section 16 of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004 (c. 27) (grants to bodies concerned with accountingstandards etc) is amended as follows.

(2) In subsection (2) (matters carried on by bodies eligible for grants) forparagraph (l) substitute—

“(l) issuing standards to be applied in actuarial work;(m) issuing standards in respect of matters to be contained in

reports or other communications required to be produced ormade by actuaries or in accordance with standards withinparagraph (l);

(n) investigating departures from standards within paragraph (l)or (m);

(o) taking steps to secure compliance with standards withinparagraph (l) or (m);

(p) carrying out investigations into public interest cases arising inconnection with the performance of actuarial functions bymembers of professional actuarial bodies;

(q) holding disciplinary hearings relating to members ofprofessional actuarial bodies following the conclusion ofinvestigations within paragraph (p);

(r) deciding whether (and, if so, what) disciplinary action shouldbe taken against members of professional actuarial bodies towhom hearings within paragraph (q) related;

(s) supervising the exercise by professional actuarial bodies ofregulatory functions in relation to their members;

(t) overseeing or directing any of the matters mentioned above.”.

(3) In subsection (5) (definitions) at the appropriate places insert—““professional actuarial body” means—

(a) the Institute of Actuaries, or(b) the Faculty of Actuaries in Scotland,

and the “members” of a professional actuarial body includepersons who, although not members of the body, are subject toits rules in performing actuarial functions;”

““regulatory functions”, in relation to professional actuarialbodies, means any of the following—

(a) investigatory or disciplinary functions exercised bysuch bodies in relation to the performance by theirmembers of actuarial functions,

(b) the setting by such bodies of standards in relation to theperformance by their members of actuarial functions,and

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(c) the determining by such bodies of requirements inrelation to the education and training of theirmembers;”.

864 Levy to pay expenses of bodies concerned with actuarial standards etc

(1) Section 17 of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004 (c. 27) (levy to pay expenses of bodies concerned withaccounting standards etc) is amended in accordance with subsections (2) to (5).

(2) In subsection (3)(a) after “to which” insert “, or persons within subsection (3A)to whom,”.


“(3A) The following persons are within this subsection—(a) the administrators of a public service pension scheme (within

the meaning of section 1 of the Pension Schemes Act 1993);(b) the trustees or managers of an occupational or personal pension

scheme (within the meaning of that section).”.

(4) After subsection (4)(b) insert—“(c) make different provision for different cases.”.


“(13) If a draft of any regulations to which subsection (10) applies would,apart from this subsection, be treated for the purposes of the standingorders of either House of Parliament as a hybrid instrument, it is toproceed in that House as if it were not such an instrument.”.

(6) The above amendments have effect in relation to any exercise of the power tomake regulations under section 17 of the Companies (Audit, Investigationsand Community Enterprise) Act 2004 after this section comes into force,regardless of when the expenses to be met by the levy in respect of which theregulations are made were incurred.

(7) In Schedule 3 to the Pensions Act 2004 (c. 35) (disclosure of information heldby the Pensions Regulator), in the entry relating to the Secretary of State, in thesecond column, for “or” at the end of paragraph (g) substitute—

“(ga) Section 17 of the Companies (Audit, Investigations andCommunity Enterprise) Act 2004 (levy to pay expenses ofbodies concerned with accounting standards, actuarialstandards etc), or”.

865 Application of provisions to Scotland and Northern Ireland

(1) Section 16 of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004 (grants to bodies concerned with accounting standardsetc) is amended as follows.

(2) For subsection (6) (application of section to Scotland) substitute—

“(6) In their application to Scotland, subsection (2)(a) to (t) are to be read asreferring only to matters provision relating to which would be outsidethe legislative competence of the Scottish Parliament.”.

(3) In subsection (2) in paragraph (c), after “1985 (c. 6)” insert “or the 1986 Order”.

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(4) In subsection (5)—(a) in the definition of “company” after “1985 (c. 6)” insert “or the 1986

Order”,(b) in the definition of “subsidiary” after “1985” insert “or Article 4 of the

1986 Order”, and(c) after that definition insert—

““the 1986 Order” means the Companies (NorthernIreland) Order 1986 (S.I. 1986/1032 (N.I. 6)).”.

(5) In section 66 of that Act (extent), in subsection (2) (provisions extending toNorthern Ireland, as well as England and Wales and Scotland) for “17”substitute “16 to 18”.

Exercise of voting rights by institutional investors

866 Institutional investors: information about exercise of voting rights

(1) The Treasury or the Secretary of State may make provision by regulationsrequiring institutions to which this section applies to provide specifiedinformation about the exercise of voting rights attached to shares to which thissection applies.In this section “specified” means specified in the regulations.

(2) This section applies to—(a) unit trust schemes within the meaning of the Financial Services and

Markets Act 2000 (c. 8) in respect of which an order is in force undersection 243 of that Act;

(b) open-ended investment companies incorporated by virtue ofregulations under section 262 of that Act;

(c) companies approved for the purposes of section 842 of the Income andCorporation Taxes Act 1988 (c. 1) (investment trusts);

(d) pension schemes as defined in section 1(5) of the Pension Schemes Act1993 (c. 48) or the Pension Schemes (Northern Ireland) Act 1993 (c. 49);

(e) undertakings authorised under the Financial Services and Markets Act2000 to carry on long-term insurance business (that is, the activity ofeffecting or carrying out contracts of long term insurance within themeaning of the Financial Services and Markets (Regulated Activities)Order 2001);

(f) collective investment schemes that are recognised by virtue of section270 of that Act (schemes authorised in designated countries orterritories).

(3) Regulations under this section may—(a) provide that this section applies to other descriptions of institution;(b) provide that this section does not apply to a specified description of

institution.

(4) The regulations must specify by whom, in the case of any description ofinstitution, the duty imposed by the regulations is to be fulfilled.

(5) The shares to which this section applies are shares—(a) of a description traded on a specified market, and(b) in which the institution has, or is taken to have, an interest.

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Regulations under this section may provide that this section does not apply toshares of a specified description.

(6) For the purposes of this section an institution has an interest in shares if theshares, or a depositary certificate in respect of them, are held by it, or on itsbehalf.A “depositary certificate” means an instrument conferring rights (other thanoptions)—

(a) in respect of shares held by another person (“the depositary”), and(b) the transfer of which may be effected without the consent of that

person.

(7) Where an institution has an interest—(a) in a specified description of collective investment scheme (within the

meaning of the Financial Services and Markets Act 2000 (c. 8)), or(b) in any other specified description of scheme or collective investment

vehicle,it is taken to have an interest in any shares in which that scheme or vehicle hasor is taken to have an interest.For this purpose a scheme or vehicle is taken to have an interest in shares if itwould be regarded as having such an interest in accordance with subsection (6)if it were an institution to which this section applies.

(8) The information required is such information as may be specified about theexercise or non-exercise of voting rights on specified occasions duringspecified periods.

(9) The regulations may require the information to be provided, in such manneras may be specified, to such persons as may be specified, or to the public, orboth.

(10) The duty obligation imposed by regulations under this section is enforceableby civil proceedings brought by—

(a) any person to whom the information should have been provided, or(b) a specified regulatory authority.

(11) Regulations under this section—(a) may make different provision for different descriptions of institution,

different descriptions of shares and for other different circumstances;and

(b) are subject to affirmative resolution procedure.

Disclosure of information under the Enterprise Act 2002

867 Disclosure of information under the Enterprise Act 2002

In Part 9 of the Enterprise Act 2002 (c. 40) (information), after section 241insert—

“241ACivil proceedings

(1) A public authority which holds prescribed information to whichsection 237 applies may disclose that information to any person—

(a) for the purposes of prescribed civil proceedings in the UnitedKingdom;

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(b) for the purpose of any decision whether to bring suchproceedings.

(2) Subsection (1) does not apply to—(a) information which comes to a public authority in connection

with an investigation under Part 4, 5 or 6 of the 1973 Act orunder section 11 of the Competition Act 1980;

(b) competition information within the meaning of section 351 ofthe Financial Services and Markets Act 2000;

(c) information which comes to a public authority in connectionwith an investigation under Part 3 or 4 or section 174 of this Act;

(d) information which comes to a public authority in connectionwith an investigation under the Competition Act 1998 (c. 41).

(3) In subsection (1) “prescribed” means prescribed by order of theSecretary of State.

(4) An order under this section—(a) may prescribe information, or civil proceedings, for the

purposes of this section by reference to such factors as appear tothe Secretary of State to be appropriate;

(b) may prescribe for the purposes of this section all information, orcivil proceedings, or all information or civil proceedings notfalling within one or more specified exceptions;

(c) must be made by statutory instrument subject to annulment inpursuance of a resolution of either House of Parliament.

(5) Information disclosed under this section must not be used by theperson to whom it is disclosed for any purpose other than that forwhich it is disclosed.”.

Expenses of winding up

868 Expenses of winding up

(1) In Part 4 of the Insolvency Act 1986 (c. 45) (winding up of companies registeredunder the Companies Acts), at the beginning of Chapter 8 (provisions ofgeneral application) insert—

“Expenses of winding up

174A Expenses of winding up (England and Wales)

(1) The expenses of a winding up in England and Wales shall be paid outof the assets of the company and have priority—

(a) to unsecured debts of the company, and(b) subject to subsection (2), to the claims of holders of debentures

secured by, or holders of, a floating charge created by thecompany.

(2) Provision may be made by rules restricting the application ofsubsection (1)(b), in such circumstances as may be prescribed, toexpenses whose amount has been approved—

(a) by the holders of debentures secured by, or the holders of, thefloating charge, or

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(b) by the court.”.

(2) In Part 5 of the Insolvency (Northern Ireland) Order 1989 (SI 1989/2405 (NI 19))(winding up of companies registered under the Companies Orders), at thebeginning of Chapter 8 (provisions of general application) insert—

“Expenses of winding up

148A Expenses of winding up

(1) The expenses of a winding up shall be paid out of the assets of thecompany and have priority—

(a) to unsecured debts of the company, and(b) subject to paragraph (2), to the claims of holders of debentures

secured by, or holders of, a floating charge created by thecompany.

(2) Provision may be made by rules restricting the application ofparagraph (1)(b), in such circumstances as may be prescribed, toexpenses whose amount has been approved—

(a) by the holders of debentures secured by, or the holders of, thefloating charge, or

(b) by the court.”.

Commonhold associations

869 Amendment of memorandum or articles in pre-commonhold period

In paragraph 3(1) of Schedule 3 to the Commonhold and Leasehold Reform Act2002 (c. 15) (alteration of memorandum or articles by commonhold associationto be of no effect until altered version registered with Land Registry) for “Analteration of the memorandum or articles of association” substitute “Where acommonhold association alters its memorandum or articles after the landspecified in its memorandum has become commonhold land, the alteration”.

PART 35

NORTHERN IRELAND

870 Extension of Companies Acts to Northern Ireland

(1) The Companies Acts as defined by this Act (see section 2) extend to NorthernIreland.

(2) The Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), theCompanies Consolidation (Northern Ireland) (Consequential Provisions)Order 1986 (S.I. 1986/1035 (N.I. 9)) and Part 3 of the Companies (Audit,Investigations and Community Enterprise) Order 2005 (S.I. 2005/1967(N.I. 17)) shall cease to have effect accordingly.

871 Extension of GB enactments relating to SEs

(1) The enactments in force in Great Britain relating to SEs extend to NorthernIreland.

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(2) The following enactments shall cease to have effect accordingly—(a) the European Public Limited-Liability Company Regulations

(Northern Ireland) 2004 (SR 2004/417), and(b) the European Public Limited-Liability Company (Fees) Regulations

(Northern Ireland) 2004 (SR 2004/418).

(3) In this section “SE” means a European Public Limited-Liability Company (orSocietas Europaea) within the meaning of Council Regulation 2157/2001/ECof 8 October 2001 on the Statute for a European Company.

872 Extension of GB enactments relating to certain other forms of business organisation

(1) The enactments in force in Great Britain relating to—(a) limited liability partnerships,(b) limited partnerships,(c) open-ended investment companies, and(d) European Economic Interest Groupings,

extend to Northern Ireland.

(2) The following enactments shall cease to have effect accordingly—(a) the Limited Liability Partnerships Act (Northern Ireland) 2002 (c. 12 (N.

I.);(b) the Limited Partnerships Act 1907 (c. 24) as it formerly had effect in

Northern Ireland;(c) the Open-Ended Investment Companies Regulations (Northern

Ireland) 2004 (SR 2004/335);(d) the European Economic Interest Groupings Regulations (Northern

Ireland) 1989 (SR 1989/216).

873 Extension of enactments relating to business names

(1) The provisions of Part 32 of this Act (business names) extend to NorthernIreland.

(2) The Business Names (Northern Ireland) Order 1986 (S.I. 1986/1033 (N.I. 7))shall cease to have effect accordingly.

PART 36

GENERAL SUPPLEMENTARY PROVISIONS

Regulations and orders

874 Regulations and orders: statutory instrument

Except as otherwise provided, regulations and orders under this Act shall bemade by statutory instrument.

875 Regulations and orders: negative resolution procedure

Where regulations or orders under this Act are subject to “negative resolutionprocedure” the statutory instrument containing the regulations or order shall

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be subject to annulment in pursuance of a resolution of either House ofParliament.

876 Regulations and orders: affirmative resolution procedure

Where regulations or orders under this Act are subject to “affirmativeresolution procedure” the regulations or order must not be made unless a draftof the statutory instrument containing them has been laid before Parliamentand approved by a resolution of each House of Parliament.

877 Regulations and orders: approval after being made

(1) Regulations or orders under this Act that are subject to “approval after beingmade”—

(a) must be laid before Parliament after being made, and(b) cease to have effect at the end of 28 days beginning with the day on

which they were made unless during that period they are approved byresolution of each House.

(2) In reckoning the period of 28 days no account shall be taken on any time duringwhich Parliament is dissolved or prorogued or during which both Houses areadjourned for more than four days.

(3) The regulations ceasing to have effect does not affect—(a) anything previously done under them, or(b) the making of new regulations.

878 Regulations and orders: supplementary

(1) Regulations or orders under this Act may—(a) make different provision for different cases or circumstances,(b) include supplementary, incidental and consequential provision, and(c) make transitional provision and savings.

(2) Any provision that may be made by regulations under this Act may be madeby order; and any provision that may be made by order under this Act may bemade by regulations.

(3) Any provision that may be made by regulations or order under this Act forwhich no Parliamentary procedure is prescribed may be made by regulationsor order subject to negative or affirmative resolution procedure.

(4) Any provision that may be made by regulations or order under this Act subjectto negative resolution procedure may be made by regulations or order subjectto affirmative resolution procedure.

Meaning of "enactment"

879 Meaning of “enactment”

In this Act, unless the context otherwise requires, “enactment” includes—(a) an enactment contained in subordinate legislation within the meaning

of the Interpretation Act 1978 (c. 30),

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(b) an enactment contained in, or in an instrument made under, an Act ofthe Scottish Parliament, and

(c) an enactment contained in, or in an instrument made under, NorthernIreland legislation within the meaning of the Interpretation Act 1978(c. 30).

Consequential and transitional provisions

880 Power to make consequential amendments etc

(1) The Secretary of State or the Treasury may by order make such provisionamending, repealing or revoking any enactment to which this section appliesas they consider necessary or expedient in connection with the commencementof any provision made by or under this Act.

(2) This section applies to—(a) any enactment passed or made before the passing of this Act,(b) any enactment contained in this Act or in subordinate legislation made

under it, and(c) any enactment passed or made before the end of the session after that

in which this Act is passed.

(3) Without prejudice to the generality of the power conferred by subsection (1),orders under this section may—

(a) make provision extending to other forms of organisation any provisionmade by or under this Act in relation to companies, or

(b) make provision corresponding to that made by or under this Act inrelation to companies,

in either case with such adaptations or other modifications as appear to theSecretary of State or the Treasury to be necessary or expedient.

(4) The references in subsection (3) to provisions made by this Act includeprovision conferring power to make provision by regulations, orders or othersubordinate legislation.

(5) Amendments and repeals made under this section are additional, and withoutprejudice, to those made by or under any other provision of this Act.

(6) Orders under this section are subject to negative resolution procedure.

881 Repeals

The enactments specified in Schedule 15, which include enactments that are nolonger of practical utility, are repealed to the extent specified.

882 Power to make transitional provision and savings

(1) The Secretary of State or the Treasury may by order make such transitionalprovision and savings as they consider necessary or expedient in connectionwith the commencement of any provision made by or under this Act.

(2) An order may, in particular, make such adaptations of provisions brought intoforce as appear to be necessary or expedient in consequence of other provisionsof this Act not yet having come into force.

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(3) Transitional provision and savings made under this section are additional, andwithout prejudice, to those made by or under any other provision of this Act.

(4) Orders under this section are subject to negative resolution procedure.

PART 37

FINAL PROVISIONS

883 Short title

The short title of this Act is the Company Law Reform Act 2006.

884 Extent

Except as otherwise provided (or the context otherwise requires), theprovisions of this Act extend to the whole of the United Kingdom.

885 Commencement

(1) The following provisions come into force on the day this Act is passed—(a) in Part 34 (miscellaneous amendments)—

section 863 (bodies concerned with actuarial standards),section 865 (application of provisions in Scotland and Northern

Ireland);(b) Part 36 (general supplementary provisions), and(c) this Part.

(2) The provisions of Part 31 (company law reform power), and the otherprovisions of this Act so far as relating to that Part (and not already in force byvirtue of subsection (1)), come into force at the end of the period of two monthsstarting with the date on which this Act is passed.

(3) Subject to subsections (1) and (2), the provisions of this Act come into force onsuch day as may be appointed by order of the Secretary of State or theTreasury.

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S C H E D U L E S

SCHEDULE 1 Sections 233 and 234

CONNECTED PERSONS: REFERENCES TO AN INTEREST IN SHARES OR DEBENTURES

Introduction

1 (1) The provisions of this Schedule have effect for the interpretation ofreferences in sections 233 and 234 (directors connected with or controlling abody corporate) to an interest in shares or debentures.

(2) The provisions are expressed in relation to shares but apply to debentures asthey apply to shares.

General provisions

2 (1) A reference to an interest in shares includes any interest of any kindwhatsoever in shares.

(2) Any restraints or restrictions to which the exercise of any right attached tothe interest is or may be subject shall be disregarded.

(3) It is immaterial that the shares in which a person has an interest are notidentifiable.

(4) Persons having a joint interest in shares are deemed each of them to havethat interest.

Rights to acquire shares

3 (1) A person is taken to have an interest in shares if he enters into a contract toacquire them.

(2) A person is taken to have an interest in shares if—(a) he has a right to call for delivery of the shares to himself or to his

order, or(b) he has a right to acquire an interest in shares or is under an obligation

to take an interest in shares,whether the right or obligation is conditional or absolute.

(3) Rights or obligations to subscribe for shares are not to be taken for thepurposes of sub-paragraph (2) to be rights to acquire or obligations to takean interest in shares.

(4) A person ceases to have an interest in shares by virtue of this paragraph—(a) on the shares being delivered to another person at his order—

(i) in fulfilment of a contract for their acquisition by him, or(ii) in satisfaction of a right of his to call for their delivery;

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(b) on a failure to deliver the shares in accordance with the terms of sucha contract or on which such a right falls to be satisfied;

(c) on the lapse of his right to call for the delivery of shares.

Right to exercise or control exercise of rights

4 (1) A person is taken to have an interest in shares if he is entitled—(a) to exercise any right conferred by the holding of the shares, or (b) to control the exercise of any such right.

(2) For this purpose a person is taken to be entitled to exercise or control theexercise of a right conferred by the holding of shares if he—

(a) has a right (whether subject to conditions or not) the exercise ofwhich would make him so entitled, or

(b) is under an obligation (whether or not so subject) the fulfilment ofwhich would make him so entitled.

(3) A person is not by virtue of this paragraph taken to be interested in sharesby reason only that—

(a) he has been appointed a proxy to exercise any of the rights attachedto the shares, or

(b) he has been appointed by a body corporate to act as its representativeat any meeting of a company or of any class of its members.

Bodies corporate

5 (1) A person is taken to be interested in shares if a body corporate is interestedin them and—

(a) the body corporate or its directors are accustomed to act inaccordance with his directions or instructions, or

(b) he is entitled to exercise or control the exercise of more than one-halfof the voting power at general meetings of the body corporate.

(2) For the purposes of sub-paragraph (1)(b) where—(a) a person is entitled to exercise or control the exercise of the relevant

proportion of the voting power at general meetings of a bodycorporate, and

(b) that body corporate is entitled to exercise or control the exercise ofany of the voting power at general meetings of another bodycorporate,

the voting power mentioned in paragraph (b) above is taken to beexercisable by that person.

Trusts

6 (1) Where an interest in shares is comprised in property held on trust, everybeneficiary of the trust is taken to have an interest in shares, subject asfollows.

(2) So long as a person is entitled to receive, during the lifetime of himself oranother, income from trust property comprising shares, an interest in theshares in reversion or remainder or (as regards Scotland) in fee, shall bedisregarded.

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(3) A person is treated as not interested in shares if and so long as he holdsthem—

(a) under the law in force in any part of the United Kingdom, as a baretrustee or as a custodian trustee, or

(b) under the law in force in Scotland, as a simple trustee.

(4) There shall be disregarded any interest of a person subsisting by virtue of—(a) an authorised unit trust scheme (within the meaning of section 237

of the Financial Services and Markets Act 2000 (c. 8));(b) a scheme made under section 22 or 22A of the Charities Act 1960

(c. 58), section 25 of the Charities (Northern Ireland) Act 1964 orsection 24 or 25 of the Charities Act 1993 (c. 10), section 11 of theTrustee Investments Act 1961 (c. 62) or section 1 of theAdministration of Justice Act 1965 (c. 2); or

(c) the scheme set out in the Schedule to the Church Funds InvestmentsMeasure 1958.

(5) There shall be disregarded any interest—(a) of the Church of Scotland General Trustees or of the Church of

Scotland Trust in shares held by them;(b) of any other person in shares held by those Trustees or that Trust

otherwise than as simple trustees.“The Church of Scotland General Trustees” are the body incorporated by theorder confirmed by the Church of Scotland (General Trustees) OrderConfirmation Act 1921, and “the Church of Scotland Trust” is the bodyincorporated by the order confirmed by the Church of Scotland Trust OrderConfirmation Act 1932.

SCHEDULE 2 Section 623

SPECIFIED PERSONS, DESCRIPTIONS OF DISCLOSURES ETC FOR THE PURPOSES OF SECTION 623

PART 1

SPECIFIED PERSONS

1 The Secretary of State.

2 The Department of Enterprise, Trade and Investment for Northern Ireland.

3 The Treasury.

4 The Bank of England.

5 The Financial Services Authority.

6 The Commissioners for Her Majesty’s Revenue and Customs.

7 The Lord Advocate.

8 The Director of Public Prosecutions.

9 The Director of Public Prosecutions for Northern Ireland.

10 A constable.

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11 A procurator fiscal.

12 The Scottish Ministers.

PART 2

SPECIFIED DESCRIPTIONS OF DISCLOSURES

13 A disclosure for the purpose of enabling or assisting a person authorisedunder section 435 of this Act (persons authorised to apply to court) toexercise his functions.Until the coming into force of section 435, the reference to that section is tobe read as a reference to section 245C of the Companies Act 1985 (c. 6).

14 A disclosure for the purpose of enabling or assisting an inspector appointedunder Part 14 of the Companies Act 1985 (investigation of companies andtheir affairs, etc) to exercise his functions.

15 A disclosure for the purpose of enabling or assisting a person authorisedunder section 447 of the Companies Act 1985 (power to require productionof documents) or section 84 of the Companies Act 1989 (c. 40) (exercise ofpowers by officer etc) to exercise his functions.

16 A disclosure for the purpose of enabling or assisting a person appointedunder section 167 of the Financial Services and Markets Act 2000 (c. 8)(general investigations) to conduct an investigation to exercise his functions.

17 A disclosure for the purpose of enabling or assisting a person appointedunder section 168 of the Financial Services and Markets Act 2000(investigations in particular cases) to conduct an investigation to exercise hisfunctions.

18 A disclosure for the purpose of enabling or assisting a person appointedunder section 169(1)(b) of the Financial Services and Markets Act 2000(investigation in support of overseas regulator) to conduct an investigationto exercise his functions.

19 A disclosure for the purpose of enabling or assisting the body corporateresponsible for administering the scheme referred to in section 225 of theFinancial Services and Markets Act 2000 (the ombudsman scheme) toexercise its functions.

20 A disclosure for the purpose of enabling or assisting a person appointedunder paragraph 4 (the panel of ombudsmen) or 5 (the Chief Ombudsman)of Schedule 17 to the Financial Services and Markets Act 2000 to exercise hisfunctions.

21 A disclosure for the purpose of enabling or assisting a person appointedunder regulations made under section 262(1) and (2)(k) of the FinancialServices and Markets Act 2000 (investigations into open-ended investmentcompanies) to conduct an investigation to exercise his functions.

22 A disclosure for the purpose of enabling or assisting a person appointedunder section 284 of the Financial Services and Markets Act 2000(investigations into affairs of certain collective investment schemes) toconduct an investigation to exercise his functions.

23 A disclosure for the purpose of enabling or assisting the investigatorappointed under paragraph 7 of Schedule 1 to the Financial Services and

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Markets Act 2000 (arrangements for investigation of complaints) to exercisehis functions.

24 A disclosure for the purpose of enabling or assisting a person appointed bythe Treasury to hold an inquiry into matters relating to financial services(including an inquiry under section 15 of the Financial Services and MarketsAct 2000 (c. 8)) to exercise his functions.

25 A disclosure for the purpose of enabling or assisting the Secretary of State orthe Treasury to exercise any of their functions under any of the following—

(a) the Companies Acts;(b) Part 5 of the Criminal Justice Act 1993 (c. 36) (insider dealing);(c) the Insolvency Act 1986 (c. 45);(d) the Company Directors Disqualification Act 1986 (c. 46);(e) Part 33 of this Act (statutory auditors);(f) Part 3 (investigations and powers to obtain information) or 7

(financial markets and insolvency) of the Companies Act 1989 (c. 40);(g) the Financial Services and Markets Act 2000.

Until the coming into force of Part 34 of this Act, the reference to it inparagraph (e) is to be read as a reference to Part 2 of the Companies Act 1989.

26 A disclosure for the purpose of enabling or assisting the Scottish Ministersto exercise their functions under the enactments relating to insolvency.

27 A disclosure for the purpose of enabling or assisting the Department ofEnterprise, Trade and Investment for Northern Ireland to exercise anypowers conferred on it by the enactments relating to companies orinsolvency.

28 A disclosure for the purpose of enabling or assisting a person appointed orauthorised by the Department of Enterprise, Trade and Investment forNorthern Ireland under the enactments relating to companies or insolvencyto exercise his functions.

29 A disclosure for the purpose of enabling or assisting the Pensions Regulatorto exercise the functions conferred on it by or by virtue of any of thefollowing—

(a) the Pension Schemes Act 1993 (c. 48);(b) the Pensions Act 1995 (c. 26);(c) the Welfare Reform and Pensions Act 1999 (c. 30);(d) the Pensions Act 2004 (c. 35);(e) any enactment in force in Northern Ireland corresponding to any of

those enactments.

30 A disclosure for the purpose of enabling or assisting the Board of thePension Protection Fund to exercise the functions conferred on it by or byvirtue of Part 2 of the Pensions Act 2004 or any enactment in force inNorthern Ireland corresponding to that Part.

31 A disclosure for the purpose of enabling or assisting—(a) the Bank of England,(b) the European Central Bank, or(c) the central bank of any country or territory outside the United

Kingdom,to exercise its functions.

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32 A disclosure for the purpose of enabling or assisting the Commissioners forHer Majesty’s Revenue and Customs to exercise their functions.

33 A disclosure for the purpose of enabling or assisting organs of the Society ofLloyd’s (being organs constituted by or under the Lloyd’s Act 1982 (c. xiv))to exercise their functions under or by virtue of the Lloyd’s Acts 1871 to1982.

34 A disclosure for the purpose of enabling or assisting the Office of FairTrading to exercise its functions under any of the following—

(a) the Fair Trading Act 1973 (c. 41);(b) the Consumer Credit Act 1974 (c. 39);(c) the Estate Agents Act 1979 (c. 38);(d) the Competition Act 1980 (c. 21);(e) the Competition Act 1998 (c. 41);(f) the Financial Services and Markets Act 2000 (c. 8); (g) the Enterprise Act 2002 (c. 40); (h) the Control of Misleading Advertisements Regulations 1988

(S.I. 1988/915); (i) the Unfair Terms in Consumer Contracts Regulations 1999

(S.I. 1999/2083).

35 A disclosure for the purpose of enabling or assisting the CompetitionCommission to exercise its functions under any of the following—

(a) the Fair Trading Act 1973;(b) the Competition Act 1980;(c) the Competition Act 1998;(d) the Enterprise Act 2002.

36 A disclosure with a view to the institution of, or otherwise for the purposesof, proceedings before the Competition Appeal Tribunal.

37 A disclosure for the purpose of enabling or assisting an enforcer under Part8 of the Enterprise Act 2002 (enforcement of consumer legislation) toexercise its functions under that Part.

38 A disclosure for the purpose of enabling or assisting the CharityCommissioners to exercise their functions.

39 A disclosure for the purpose of enabling or assisting the Attorney General toexercise his functions in connection with charities.

40 A disclosure for the purpose of enabling or assisting the National LotteryCommission to exercise its functions under sections 5 to 10 (licensing) and15 (power of Secretary of State to require information) of the NationalLottery etc. Act 1993 (c. 39).

41 A disclosure by the National Lottery Commission to the National AuditOffice for the purpose of enabling or assisting the Comptroller and AuditorGeneral to carry out an examination under Part 2 of the National Audit Act1983 (c. 44) into the economy, effectiveness and efficiency with which theNational Lottery Commission has used its resources in discharging itsfunctions under sections 5 to 10 of the National Lottery etc. Act 1993.

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42 A disclosure for the purpose of enabling or assisting a qualifying bodyunder the Unfair Terms in Consumer Contracts Regulations 1999 (S.I. 1999/2083) to exercise its functions under those Regulations.

43 A disclosure for the purpose of enabling or assisting an enforcementauthority under the Consumer Protection (Distance Selling) Regulations2000 (S.I. 2000/2334) to exercise its functions under those Regulations.

44 A disclosure for the purpose of enabling or assisting a local weights andmeasures authority in England and Wales to exercise its functions undersection 230(2) of the Enterprise Act 2002 (c. 40) (notice of intention toprosecute, etc).

45 A disclosure for the purpose of enabling or assisting the Financial ServicesAuthority to exercise its functions under any of the following—

(a) the legislation relating to friendly societies or to industrial andprovident societies;

(b) the Building Societies Act 1986 (c. 53);(c) Part 7 of the Companies Act 1989 (c. 40) (financial markets and

insolvency);(d) the Financial Services and Markets Act 2000 (c. 8).

46 A disclosure for the purpose of enabling or assisting the competent authorityfor the purposes of Part 6 of the Financial Services and Markets Act 2000(official listing) to exercise its functions under that Part.

47 A disclosure for the purpose of enabling or assisting a body corporateestablished in accordance with section 212(1) of the Financial Services andMarkets Act 2000 (compensation scheme manager) to exercise its functions.

48 A disclosure for the purpose of enabling or assisting a recognisedinvestment exchange or a recognised clearing house to exercise its functionsas such.“Recognised investment exchange” and “recognised clearing house” havethe same meaning as in section 285 of the Financial Services and Markets Act2000.

49 A disclosure for the purpose of enabling or assisting a person approvedunder the Uncertificated Securities Regulations 1995 (S.I. 1995/3272) as anoperator of a relevant system (within the meaning of those regulations) toexercise his functions.

50 A disclosure for the purpose of enabling or assisting a body designatedunder section 326(1) of the Financial Services and Markets Act 2000(designated professional bodies) to exercise its functions in its capacity as abody designated under that section.

51 A disclosure with a view to the institution of, or otherwise for the purposesof, civil proceedings arising under or by virtue of the Financial Services andMarkets Act 2000.

52 A disclosure for the purpose of enabling or assisting a body designated byorder under section 848 of this Act (delegation of functions of Secretary ofState) to exercise its functions under Part 34 of this Act (statutory auditors).Until the coming into force of that Part, the references to section 848 and Part34 are to be read as references to section 46 of the Companies Act 1989 andPart 2 of that Act respectively.

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53 A disclosure for the purpose of enabling or assisting a recognisedsupervisory or qualifying body, within the meaning of Part 34 of this Act, toexercise its functions as such.Until the coming into force of that Part, the reference to it is to be read as areference to Part 2 of the Companies Act 1989 (c. 40).

54 A disclosure for the purpose of enabling or assisting an official receiver(including the Accountant in Bankruptcy in Scotland and the OfficialAssignee in Northern Ireland) to exercise his functions under the enactmentsrelating to insolvency.

55 A disclosure for the purpose of enabling or assisting the InsolvencyPractitioners Tribunal to exercise its functions under the Insolvency Act 1986(c. 45).

56 A disclosure for the purpose of enabling or assisting a body that is for thetime being a recognised professional body for the purposes of section 391 ofthe Insolvency Act 1986 (recognised professional bodies) to exercise itsfunctions as such.

57 A disclosure for the purpose of enabling or assisting an overseas regulatoryauthority to exercise its regulatory functions.“Overseas regulatory authority” and “regulatory functions” have the samemeaning as in section 82 of the Companies Act 1989.

58 A disclosure for the purpose of enabling or assisting the Regulator ofCommunity Interest Companies to exercise functions under the Companies(Audit, Investigations and Community Enterprise) Act 2004 (c. 27).

59 A disclosure with a view to the institution of, or otherwise for the purposesof, criminal proceedings.

60 A disclosure for the purpose of enabling or assisting a person authorised bythe Secretary of State under Part 2, 3 or 4 of the Proceeds of Crime Act 2002(c. 29) to exercise his functions.

61 A disclosure with a view to the institution of, or otherwise for the purposesof, proceedings on an application under section 6, 7 or 8 of the CompanyDirectors Disqualification Act 1986 (c. 46) (disqualification for unfitness).

62 A disclosure with a view to the institution of, or otherwise for the purposesof, proceedings before the Financial Services and Markets Tribunal.

63 A disclosure for the purposes of proceedings before the Financial ServicesTribunal by virtue of the Financial Services and Markets Act 2000(Transitional Provisions) (Partly Completed Procedures) Order 2001(S.I. 2001/3592).

64 A disclosure for the purposes of proceedings before the Pensions RegulatorTribunal.

65 A disclosure for the purpose of enabling or assisting a body appointed undersection 14 of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004 (supervision of periodic accounts and reports of issuersof listed securities) to exercise functions mentioned in subsection (2) of thatsection.

66 A disclosure with a view to the institution of, or otherwise for the purposesof, disciplinary proceedings relating to the performance by a solicitor,

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barrister, advocate, auditor, accountant, valuer or actuary of his professionalduties.

67 A disclosure with a view to the institution of, or otherwise for the purposesof, disciplinary proceedings relating to the performance by a public servantof his duties.“Public servant” means an officer or employee of the Crown or of any publicor other authority for the time being designated for the purposes of thisparagraph by the Secretary of State by order subject to negative resolutionprocedure.

68 A disclosure for the purpose of the provision of a summary or collection ofinformation framed in such a way as not to enable the identity of any personto whom the information relates to be ascertained.

69 A disclosure in pursuance of any Community obligation.

PART 3

OVERSEAS REGULATORY BODIES

70 A disclosure is made in accordance with this Part of this Schedule if—(a) it is made to a person or body within paragraph 71, and(b) it is made for the purpose of enabling or assisting that person or body

to exercise the functions mentioned in that paragraph.

71 The persons or bodies that are within this paragraph are those exercisingfunctions of a public nature, under legislation in any country or territoryoutside the United Kingdom, that appear to the Panel to be similar to its ownfunctions or those of the Financial Services Authority.

72 In determining whether to disclose information to a person or body inaccordance with this Part of this Schedule, the Panel must have regard to thefollowing considerations—

(a) whether the use that the person or body is likely to make of theinformation is sufficiently important to justify making thedisclosure;

(b) whether the person or body has adequate arrangements to preventthe information from being used or further disclosed otherwise thanfor the purposes of carrying out the functions mentioned inparagraph 71 or any other purposes substantially similar to those forwhich information disclosed to the Panel could be used or furtherdisclosed.


AMENDMENTS TO PART 13A OF THE COMPANIES ACT 1985

Section 428: meaning of “takeover offer”

1 (1) Section 428 of the Companies Act 1985 (c. 6) is amended as follows.

(2) In subsection (3) (certain differences in terms of offer to be disregarded), for

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“notwithstanding any” substitute “notwithstanding—(a) any difference permitted by subsection (3A), or(b) any”.


“(3A) A difference is permitted by this subsection where—(a) shares carry an entitlement to a particular dividend which

other shares of the same class, by reason of being allottedlater, do not carry; and

(b) the difference is in the value of consideration offered for theshares allotted earlier as against that offered for those allottedlater, and merely reflects the difference in entitlement to thedividend.”.


“(4A) Where there are holders of shares in a company to whom an offer toacquire shares in the company is not communicated, that does notprevent the offer from being a takeover offer for the purposes of thisPart if—

(a) those shareholders have no registered address in the UnitedKingdom;

(b) the offer was not communicated to those shareholders inorder not to contravene the law of a country or territoryoutside the United Kingdom; and

(c) either—(i) the offer is published in the Gazette, or

(ii) the offer can be inspected, or a copy of it obtained, ata place in an EEA State or on a website, and a notice ispublished in the Gazette specifying the address ofthat place or website.

(4B) Where an offer is made to acquire shares in a company and there arepersons for whom, by reason of the law of a country or territoryoutside the United Kingdom, it is impossible to accept the offer, ormore difficult to do so, that does not prevent the offer from being atakeover offer for the purposes of this Part.

(4C) It is not to be inferred—(a) that an offer which is not communicated to every holder of

shares in the company cannot be a takeover offer for thepurposes of this Part unless the requirements of paragraphs(a) to (c) of subsection (4A) are met; or

(b) that an offer which is impossible, or more difficult, for certainpersons to accept cannot be a takeover offer for thosepurposes unless the reason for the impossibility or difficultyis the one mentioned in subsection (4B).”.

(5) In subsection (5) (shares already held by the offeror)—(a) after “contracted to acquire” insert “(whether unconditionally or

subject to conditions being met)”;(b) for the words after “the subject of a contract” substitute “intended to

secure that the holder will accept the offer when it is made, being a

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contract entered into—(a) by deed and for no consideration;(b) for consideration of negligible value; or(c) for consideration consisting of a promise by the

offeror to make the offer”.

(6) In subsection (6) (adaptation for Scotland), for ““and under seal”” substitute““by deed and””.


“(6A) In this Part “date of the offer” means—(a) where the offer is published, the date of publication;(b) where the offer is not published, or where any notices of the

offer are given before the date of publication, the date whennotices of the offer (or the first such notices) are given.”.

(8) In subsection (7) (revised offers), for the words from “and references” to theend substitute “and references in subsection (6A) to the offer shallaccordingly be construed as references to the original offer”.

Section 429: right of offeror to buy out minority shareholders


(2) For subsections (1) and (2) (which determine when the right to buy outarises) substitute—

“(1) Subsection (1A) applies in a case where a takeover offer does notrelate to shares of different classes.

(1A) If the offeror has, by virtue of acceptances of the offer, acquired orunconditionally contracted to acquire—

(a) not less than nine-tenths in value of the shares to which theoffer relates, and

(b) in a case where the shares to which the offer relates are votingshares, not less than nine-tenths of the voting rights carriedby those shares,

he may give notice to the holder of any shares to which the offerrelates which the offeror has not acquired or unconditionallycontracted to acquire that he desires to acquire those shares.

(2) Subsection (2A) applies in a case where a takeover offer relates toshares of different classes.

(2A) If the offeror has, by virtue of acceptances of the offer, acquired orunconditionally contracted to acquire—

(a) not less than nine-tenths in value of the shares of any class towhich the offer relates, and

(b) in a case where the shares of that class are voting shares, notless than nine-tenths of the voting rights carried by thoseshares,

he may give notice to the holder of any shares of that class to whichthe offer relates which the offeror has not acquired orunconditionally contracted to acquire that he desires to acquire thoseshares.”.

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(3) After subsection (2A) (substituted by sub-paragraph (2) above) insert—

“(2B) In the case of a takeover offer which includes among the shares towhich it relates—

(a) shares that are allotted after the date of the offer, or(b) relevant treasury shares (within the meaning of section 428)

that cease to be held as treasury shares after the date of theoffer,

the offeror’s entitlement to give a notice under subsection (1A) or(2A) on any particular date shall be determined as if the shares towhich the offer relates did not include any allotted, or ceasing to beheld as treasury shares, on or after that date.”.

(4) For subsection (3) (when notice to be given) substitute—

“(3) No notice shall be given under subsection (1A) or (2A) after the endof—

(a) the period of three months beginning with the day after thelast day on which the offer can be accepted; or

(b) the period of six months beginning with the date of the offer,where that period ends earlier and the offer is one to whichsubsection (3A) applies.

(3A) This subsection applies to an offer if the time allowed for acceptanceof the offer is not governed by rules under section 618(1) of theCompany Law Reform Act 2006 that give effect to Article 7 of theTakeovers Directive.In this subsection “the Takeovers Directive” has the same meaning asin section 618 of that Act.”.

(5) After subsection (3A) (inserted by sub-paragraph (4) above) insert—

“(3B) Subsection (3C) applies where—(a) the requirements for the giving of a notice under subsection

(1A) or (2A) are satisfied; and(b) there are shares in the company which the offeror has

contracted to acquire subject to conditions being met, and inrelation to which the contract has not become unconditional.

(3C) The offeror’s entitlement to give a notice under subsection (1A) or(2A) shall be determined as if—

(a) the shares to which the offer relates included shares fallingwithin paragraph (b) of subsection (3B); and

(b) in relation to shares falling within that paragraph, the words“by virtue of acceptances of the offer” in subsection (1A) or(2A) were omitted.”.

(6) For the words before paragraph (a) of subsection (8) substitute—

“(8) Subsection (8A) applies where a takeover offer is made and, duringthe period beginning with the date of the offer and ending when theoffer can no longer be accepted, the offeror acquires orunconditionally contracts to acquire any of the shares to which theoffer relates but otherwise than by virtue of acceptances of the offer.

(8A) If—”.

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(7) In subsection (8A) (formed by sub-paragraph (6) above), in paragraph (a),for “they” substitute “the shares”.

Section 430: effect of notice under section 429


(2) After subsection (3) (choice of consideration) insert—

“(3A) Subsection (3) applies whether or not any time-limit or otherconditions applicable to the choice under the terms of the offer canstill be complied with.”.

(3) In subsection (4) (consideration taken to be cash equivalent)— (a) for the words before paragraph (a) substitute “If the consideration

offered to or (as the case may be) chosen by the holder of the shares”;(b) for “the chosen consideration” substitute “the consideration offered

or (as the case may be) chosen”.

Section 430A: right of minority shareholder to be bought out by offeror

4 (1) Section 430A of the Companies Act 1985 is amended as follows.

(2) For subsections (1) to (2) (which determine when the right to be bought outarises) substitute—

“(1A) Subsections (1B) and (1C) apply in a case where a takeover offerrelates to all the shares in a company.For this purpose a takeover offer relates to all the shares in acompany if it is an offer to acquire all the shares in the companywithin the meaning of section 428.

(1B) The holder of any voting shares to which the offer relates who hasnot accepted the offer may require the offeror to acquire those sharesif, at any time before the end of the period within which the offer canbe accepted—

(a) the offeror has by virtue of acceptances of the offer acquiredor unconditionally contracted to acquire some (but not all) ofthe shares to which the offer relates; and

(b) those shares, with or without any other shares in thecompany which he has acquired or contracted to acquire(whether unconditionally or subject to conditions beingmet)—

(i) amount to not less than nine-tenths in value of all thevoting shares in the company (or would do so but forsection 430G(1)), and

(ii) carry not less than nine-tenths of the voting rights inthe company (or would do so but for section 430G(1)).

(1C) The holder of any non-voting shares to which the offer relates whohas not accepted the offer may require the offeror to acquire thoseshares if, at any time before the end of the period within which theoffer can be accepted—

(a) the offeror has by virtue of acceptances of the offer acquiredor unconditionally contracted to acquire some (but not all) ofthe shares to which the offer relates; and

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(b) those shares, with or without any other shares in thecompany which he has acquired or contracted to acquire(whether unconditionally or subject to conditions being met),amount to not less than nine-tenths in value of all the sharesin the company (or would do so but for section 430G(1)).

(2) If a takeover offer relates to shares of any class or classes and at anytime before the end of the period within which the offer can beaccepted—

(a) the offeror has by virtue of acceptances of the offer acquiredor unconditionally contracted to acquire some (but not all) ofthe shares of any class to which the offer relates, and

(b) those shares, with or without any other shares of that classwhich he has acquired or contracted to acquire (whetherunconditionally or subject to conditions being met)—

(i) amount to not less than nine-tenths in value of all theshares of that class, and

(ii) in a case where the shares of that class are votingshares, carry not less than nine-tenths of the votingrights carried by the shares of that class,

the holder of any shares of that class to which the offer relates whohas not accepted the offer may require the offeror to acquire thoseshares.”.

(3) In subsection (2A) (calculation of nine-tenths of value of shares), for “(1) and(2)” substitute “(1B), (1C) and (2)”.


“(2B) Rights conferred on the holder of shares by subsection (1B), (1C) or(2) are exercisable by a written communication addressed to theofferor.

(2C) Rights conferred on the holder of shares by subsection (1B), (1C) or(2) are not exercisable after the end of the period of three monthsfrom—

(a) the end of the period within which the offer can be accepted;or

(b) if later, the date of the notice that must be given undersubsection (3).”.

(5) For subsection (3) (notice of shareholder’s rights to be given by offeror)substitute—

“(3) Within one month of the time specified in subsection (1B), (1C) or (2),as the case may be, the offeror shall give any shareholder who hasnot accepted the offer notice in the prescribed manner of—

(a) the rights that are exercisable by the shareholder under thatsubsection, and

(b) the period within which the rights are exercisable;and if the notice is given before the end of the period within whichthe offer can be accepted, it shall state that the offer is still open foracceptance.”.

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“(3A) Subsection (3B) applies where—(a) a shareholder exercises rights conferred on him by subsection

(1B), (1C) or (2);(b) at the time when he does so, there are shares in the company

which the offeror has contracted to acquire subject toconditions being met, and in relation to which the contracthas not become unconditional; and

(c) the requirement imposed by subsection (1B)(b), (1C)(b) or(2)(b) (as the case may be) would not be satisfied if thoseshares were not taken into account.

(3B) The shareholder shall be treated for the purposes of section 430B asnot having exercised his rights under this section unless therequirement imposed by paragraph (b) of subsection (1B), (1C) or (2)(as the case may be) would be satisfied if—

(a) the reference in that paragraph to other shares in thecompany which the offeror has contracted to acquireunconditionally or subject to conditions being met were areference to such shares which he has unconditionallycontracted to acquire; and

(b) the reference in that subsection to the period within whichthe offer can be accepted were a reference to the periodreferred to in subsection (2C).”.

(7) Subsection (4) (period during which shareholder’s rights exercisable) isomitted.

Section 430B: effect of notice under section 430A

5 (1) Section 430B of the Companies Act 1985 (c. 6) is amended as follows.

(2) After subsection (3) (choice of consideration) insert—

“(3A) Subsection (3) applies whether or not any time-limit or otherconditions applicable to the choice under the terms of the offer canstill be complied with.”.

(3) In subsection (4) (consideration taken to be cash equivalent)— (a) for the words before paragraph (a) substitute “If the consideration

offered to or (as the case may be) chosen by the holder of the shares”;(b) for “the chosen consideration” substitute “the consideration offered

or (as the case may be) chosen”.

Section 430C: applications to the court

6 (1) Section 430C of the Companies Act 1985 is amended as follows.


“(3A) On an application under subsection (1) or (3)—(a) the court shall not require consideration of a higher value

than that specified in the terms of the offer (“the offer value”)to be given for the shares to which the application relates

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unless the holder of the shares shows that the offer valuewould be unfair;

(b) the court shall not require consideration of a lower value thanthe offer value to be given for the shares.”.

(3) In subsection (5) (power of court to authorise notice under section 429 whereoffer not accepted to necessary extent because shareholders untraceable)—

(a) for “subsection (1) or (2)” substitute “subsection (1A) or (2A)”;(b) for paragraph (b) substitute—

“(b) that the requirements of that subsection would havebeen met if the person, or all the persons, mentionedin paragraph (a) above had accepted the offer; and”.


“(6) A holder of shares who has made an application under subsection (1)or (3) shall give notice of the application to the offeror.

(7) An offeror who is given notice of an application under subsection (1)or (3) shall give a copy of the notice to—

(a) any person (other than the applicant) to whom a notice hasbeen given under section 429;

(b) any person who has exercised his rights under section 430A.

(8) An offeror who makes an application under subsection (3) shall givenotice of the application to—

(a) any person to whom a notice has been given under section429;

(b) any person who has exercised his rights under section430A.”.

Section 430D: joint offers

7 (1) Section 430D of the Companies Act 1985 (c. 6) is amended as follows.


“(2) The conditions for the exercise of the rights conferred by section 429shall be satisfied by the joint offerors acquiring or unconditionallycontracting to acquire the necessary shares jointly (as respectsacquisitions by virtue of acceptances of the offer) and either jointly orseparately (in other cases).

(2A) The conditions for the exercise of the rights conferred by section430A shall be satisfied—

(a) as respects acquisitions by virtue of acceptances of the offer,by the joint offerors acquiring or unconditionally contractingto acquire the necessary shares jointly;

(b) in other cases, by the joint offerors acquiring or contracting(whether conditionally or subject to conditions being met) toacquire the necessary shares either jointly or separately.

(2B) Subject to the following provisions, the rights and obligations of theofferor under sections 429 to 430B shall be respectively joint rightsand joint and several obligations of the joint offerors.”.

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(3) In subsection (3) (notices etc may be given by or to any one of joint offerors),for “those sections” substitute “sections 429 to 430C”.

Section 430E: associates

8 (1) Section 430E of the Companies Act 1985 (c. 6) is amended as follows.

(2) In subsection (1) (takeover offer need not include associates’ shares), for “thetime when the offer is made” substitute “the date of the offer”.


“(1A) In subsection (1) “contracted” means contracted unconditionally orsubject to conditions being met.”.

(4) In subsection (2) (shares acquired etc by associates of offeror: section429(8))—

(a) for “the period within which a takeover offer can be accepted”substitute “the period mentioned in subsection (8) of section 429”;

(b) before “contracts” insert “unconditionally”;(c) for “subsection (8)(a) or (b) of section 429” substitute “paragraph (a)

or (b) of subsection (8A) of that section”.

(5) In subsection (3) (shares acquired etc by associates of offeror: section 430A),for “In section 430A(1)(b) and (2)(b) the reference” substitute “A reference insection 429(3B) or section 430A(1B)(b), (1C)(b), (2)(b), (3A) or (3B)”.

Interpretation etc

9 After section 430F of the Companies Act 1985 insert—

“430G Debentures carrying voting rights

(1) For the purposes of this Part of this Act debentures issued by acompany to which subsection (2) applies shall be treated as shares inthe company if they carry voting rights.

(2) This subsection applies to a company that has voting shares, ordebentures carrying voting rights, which are admitted to trading ona regulated market.

(3) In this Part of this Act, in relation to debentures treated as shares byvirtue of subsection (1)—

(a) references to the holder of shares or a shareholder shall beconstrued accordingly;

(b) references to shares being allotted shall be construed asreferences to debentures being issued.

430H Interpretation

(1) In this Part of this Act—“date of the offer” has the meaning given by section 428(6A);“non-voting shares” means shares that are not voting shares;“regulated market” has the meaning given by Article 4.1(14) of

Directive 2004/39/EC of the European Parliament and of theCouncil on markets in financial instruments;

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“voting rights” means rights to vote at general meetings of thecompany, including rights that arise only in certaincircumstances;

“voting shares” means shares carrying voting rights.

(2) For the purposes of this Part of this Act a person contractsunconditionally to acquire shares if his entitlement under thecontract to acquire them is not (or is no longer) subject to conditionsor if all conditions to which it was subject have been met.A reference to a contract becoming unconditional is to be construedaccordingly.”.


AMENDMENTS OF REMAINING PROVISIONS OF THE COMPANIES ACT 1985 RELATING TO OFFENCES

Failure to deliver to registrar statement under section 97(3)(a)

1 (1) In subsection (4) of section 97 of the Companies Act 1985 (offence of failureto deliver statement of commission payable on certain shares offered forsubscription) for the words “the company and” to the end substitute “anoffence is committed by—

(a) the company, and(b) every officer of the company who is in default.”.


“(5) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale.”.

Misleading, false or deceptive statement in connection with valuation of non-cash consideration etc

2 In section 110 of the Companies Act 1985 (entitlement of valuer to fulldisclosure), for subsections (2) and (3) substitute—

“(2) A person who knowingly or recklessly makes a statement to whichthis subsection applies that is misleading, false or deceptive in amaterial particular commits an offence.

(3) Subsection (2) applies to a statement—(a) made (whether orally or in writing) to a person carrying out

a valuation or making a report under section 108 or 109, and(b) conveying or purporting to convey any information or

explanation which that person requires, or is entitled torequire, under subsection (1) above.



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(i) in England and Wales, to imprisonment for a term notexceeding twelve months or to a fine not exceedingthe statutory maximum (or both);

(ii) in Scotland or Northern Ireland, to imprisonment fora term not exceeding six months, or to a fine notexceeding the statutory maximum (or both).”.

Valuation procedures: matters to be communicated to registrar

3 For section 111 of the Companies Act 1985 (matters to be communicated tothe registrar) substitute—

“111ZAMatters to be communicated to registrar: asset valuation report

(1) A company to which a report is made under section 108 as to thevalue of any consideration for which, or partly for which, it proposesto allot shares must deliver a copy of the report to the registrar forregistration.

(2) The copy must be delivered at the same time that the company filesthe return of the allotment of those shares under section 539 of theCompany Law Reform Act 2006 (return of allotment by limitedcompany).

(3) If default is made in complying with subsection (1) or (2), an offenceis committed by every officer of the company who is in default.


maximum and, for continued contravention, a daily defaultfine not exceeding one-tenth of the statutory maximum.

(5) In the case of default in delivering to the registrar any document asrequired by this section, the company, or any person liable for thedefault, may apply to the court for relief.

(6) The court, if satisfied—(a) that the omission to deliver the document was accidental or

due to inadvertence, or(b) that it is just and equitable to grant relief,

may make an order extending the time for delivery of the documentfor such period as the court thinks proper.

111ZBMatters to be communicated to registrar: copy of resolution as to transfer of asset etc

(1) A company that has passed a resolution under section 104 withrespect to the transfer of an asset must, within 15 days of doing so,deliver to the registrar a copy of the resolution together with thevaluer’s report required by that section.

(2) If a company fails to comply with subsection (1), an offence iscommitted by—


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(3) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and,for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.”.

Contravention of certain provisions relating to the amount to be paid for shares and means of payment

4 For section 114 of the Companies Act 1985 substitute—

“114 Penalty for contravention of ss.99 to 104 and 106

(1) If a company contravenes any of the provisions of sections 99 to 104and 106, an offence is committed by—



maximum.”.

Failure to give notice to registrar of reorganisation of share capital

5 For section 122(2) (failure to give notice to registrar of reorganisation ofshare capital) of the Companies Act 1985 substitute—

“(2) If default is made in complying with subsection (1), an offence iscommitted by—



Failure to forward to registrar copy of court order when application made to cancel resolution varying shareholders’ rights

6 (1) In section 127(5) of the Companies Act 1985 (c. 6) (requirement to send toregistrar copy of court order cancelling or confirming variation ofshareholders’ rights) omit the words “; and, if default is made” to the end.

(2) After that provision insert—

“(5A) If default is made in complying with subsection (5), an offence iscommitted by—


(5B) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and,for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.”.

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Failure to send registrar statement or notice of particulars of shares carrying special rights

7 For section 128(5) of the Companies Act 1985 (c. 6) (failure to registerallotment etc of shares carrying special rights)—

“(5) If a company fails to comply with this section, an offence iscommitted by—



Failure to deliver to registrar statement or notice of newly created class rights

8 For section 129(4) of the Companies Act 1985 (failure to register newlycreated class rights) substitute—

“(4) If a company fails to comply with this section, an offence iscommitted by—



Concealment of name of creditor entitled to object to reduction of capital, or wilful misrepresentation of nature or amount of claim, etc

9 (1) Section 141 of the Companies Act 1985 (penalty for concealment ormisrepresentation of details of creditor in connection with reduction ofcapital) is amended as follows.

(2) Make the existing provision subsection (1).

(3) Omit “and liable to a fine.”.

(4) At the end add—

“(2) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum.”.

Director authorising or permitting non-compliance with requirement to convene company meeting to consider serious loss of capital

10 (1) In section 142(2) of the Companies Act 1985 (failure to convene meeting toconsider serious loss of capital) for “is liable to a fine” substitute “commitsan offence”.

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“(2A) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum.”.

Unlawful acquisition by company of its own shares

11 (1) In subsection (2) of section 143 of the Companies Act 1985 (c. 6) (prohibitionagainst acquisition by company of its own shares) omit “the company isliable to a fine, and every officer of the company who is in default is liable toimprisonment or a fine, or both; and,”.


“(4) If a company purports to act in contravention of this section anoffence is committed by—






Failure to cancel own shares acquired by company or to apply for re-registration as private company

12 (1) In subsection (2) of section 149 of the Companies Act 1985 (penalty forfailure to cancel own shares or to re-register as private company whenrequired to do so) for the words “the company” to the end substitute “anoffence is committed by—



“(3) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and,for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.”.

Contravention of provisions dealing with treasury shares

13 For section 162G of the Companies Act 1985 (failure to comply with

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requirements in relation to treasury shares) substitute—

“162GTreasury shares: penalty for contravention

(1) If a company contravenes any of the provisions of sections 162A to162F, an offence is committed by—



maximum.”.

Failure to comply with disclosure obligations in connection with purchase of own shares

14 For section 169(6) of the Companies Act 1985 (c. 6) (failure to comply withdisclosure requirements in connection with purchase of own shares)substitute—

“(6) If default is made in delivering to the registrar any return orstatement required by this section, an offence is committed by everyofficer of the company who is in default.

(6A) A person guilty of an offence under subsection (6) is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum and, for continued contravention, a daily defaultfine not exceeding one-tenth of the statutory maximum.”.

Failure to deliver to registrar return of cancellation or disposal of treasury shares)

15 For section 169A(4) of the Companies Act 1985 (failure to deliver to registrarreturn in connection with cancellation or disposal of treasury shares)substitute—

“(4) If default is made in delivering to the registrar any return orstatement required by this section, an offence is committed by everyofficer of the company who is in default.



Failure to make ready certificates following allotment or transfer of shares

16 For section 185(5) of the Companies Act 1985 (failure to prepare sharecertificates, etc.) substitute—

“(5) If default is made in complying with subsection (1), an offence iscommitted by every officer of the company who is in default.

(5A) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and,

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for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.”.

Offences in connection with share warrants (Scotland)

17 (1) Section 189 of the Companies Act 1985 (c. 6) (offences in connection withshare warrants (Scotland)) is amended as follows.

(2) In subsection (1), for the words “he is on conviction thereof” to the endsubstitute “he commits an offence.”.

(3) In subsection (2), for the words “he is on conviction thereof” to the endsubstitute “he commits an offence.”.


“(3) A person guilty of an offence under subsection (1) is liable onsummary conviction to imprisonment for a term not exceeding sixmonths or to a fine not exceeding level 5 on the standard scale (orboth).


exceeding seven years or a fine (or both);(b) on summary conviction, to imprisonment for a term not

exceeding six months or a fine not exceeding the statutorymaximum (or both).”.

Failure to send to registrar particulars of charge or of issue of debentures (England and Wales)

18 (1) In subsection (3) of section 399 of the Companies Act 1985 (failure to send toregistrar particulars of charge or of issue of debentures) for the words “thecompany” to the end substitute “an offence is committed by—





Failure to send to registrar particulars of charge on property acquired (England and Wales)

19 For section 400(4) of the Companies Act 1985 (failure to send to registrarparticulars of charge on property acquired) substitute—

“(4) If default is made in complying with this section, an offence iscommitted by—



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(b) on summary conviction, to a fine not exceeding the statutorymaximum and, for continued contravention, a daily defaultfine not exceeding one-tenth of the statutory maximum.”.

Delivery of debenture etc without endorsement of certificate of registration of charge (England and Wales)

20 (1) In subsection (3) of section 402 of the Companies Act 1985 (c. 6) (delivery ofdebenture without required endorsement) for the words “he is liable” to theend substitute “he commits an offence.”.


“(4) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale.”.

Failure to give notice of appointment of receiver or manager, or of his ceasing to act (England and Wales)

21 For section 405(4) of the Companies Act 1985 (notice to registrar ofenforcement of security) substitute—

“(4) A person who makes default in complying with the requirements ofthis section commits an offence.


Omission of entry from company’s register of charges (England and Wales)

22 (1) In subsection (3) of section 407 of the Companies Act 1985 (failure of officerto make required entry in company’s register of charges) for “he is liable toa fine” substitute “he commits an offence.”.



maximum.”.

Refusal of inspection of charging instrument or of register of charges (England and Wales)

23 For section 408(3) of the Companies Act 1985 (refusal of inspection ofcharging instrument or register of charges) substitute—

“(3) If inspection of copies, or of the register, is refused, an offence iscommitted by—


(3A) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale and,for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.”.

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Failure to send to registrar particulars of charge or issue of debentures (Scotland)

24 (1) In subsection (3) of section 415 of the Companies Act 1985 (c. 6) (Scotland:failure to send registrar particulars of charge or issue of debenture) for thewords “the company and every officer of it” to the end substitute “an offenceis committed by—





Failure to send to registrar particulars of charge on property acquired (Scotland)

25 (1) In subsection (3) of section 416 of the Companies Act 1985 (Scotland: failureto send registrar particulars of charge or issue of debenture) for the words“the company and every officer of it” to the end substitute “an offence iscommitted by—





Omission of entry from company’s register of charges (Scotland)

26 (1) In subsection (3) of section 422 of the Companies Act 1985 (Scotland: failureto make entry in company’s register of charges) for “he is liable to a fine”substitute “he commits an offence”.



maximum.”.

Refusal of inspection of charging instrument or of register of charges (Scotland)

27 For section 423(3) of the Companies Act 1985 (Scotland: refusal of inspectionof charging instrument or register of charges) substitute—

“(3) If inspection of the copies or register is refused, an offence iscommitted by—

(a) the company, and

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(b) every officer of the company who is in default.


Failure to annex to memorandum court order sanctioning compromise or arrangement with creditors

28 For section 425(4) of the Companies Act 1985 (c. 6) (failure to annex tocompany’s constitutional documents copy of court order sanctioningcompromise or arrangement with creditors) substitute—

“(4) If a company makes default in complying with subsection (3), anoffence is committed by—


(4A) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale.”.

Failure to comply with requirements to inform members and creditors about compromise or arrangement

29 For subsection (6) of section 426 of the Companies Act 1985 (failure to informmembers or creditors in advance of meeting about compromise orarrangement) substitute—

“(6) If a company makes default in complying with any requirement ofthis section, an offence is committed by—


(6A) For the purposes of subsection (6) the following are treated asofficers of the company—

(a) a liquidator or administrator of the company, and(b) a trustee of a deed for securing the issue of debentures of the

company.

(6B) A person is not guilty of an offence under subsection (6) if he showsthat the default was due to the refusal of a director or trustee fordebenture holders to supply the necessary particulars of hisinterests.

(6C) A person guilty of an offence under subsection (6) is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum.”.

Failure by director or trustee for debenture holders to give information to company

30 (1) In subsection (7) of that section (failure by director or trustee for debentureholders to give information to company) omit “; and any person who makesdefault in complying with this subsection is liable to a fine”.

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“(8) A person who makes default in complying with subsection (7)commits an offence.

(9) A person guilty of an offence under subsection (8) is liable onsummary conviction to a fine not exceeding level 3 on the standardscale.”.

Failure to deliver to registrar copy of order for company reconstruction or amalgamation)

31 (1) In section 427(5) of the Companies Act 1985 (c. 6) (failure to deliver toregistrar copy of order for company reconstruction or amalgamation) omitthe words “; and if default is made” to the end.


“(5A) If default is made in complying with subsection (5) an offence iscommitted by—


(5B) A person guilty of an offence under this section is liable on summaryconviction to a fine not exceeding level 3 on the standard scale.”.

Failure to send notice etc relating to buy-out of minority shareholders

32 (1) In subsection (6) of section 429 of the Companies Act 1985 (failure to sendnotice etc relating to buy-out of minority shareholders) for the words from“shall be liable to imprisonment” to the end substitute “commits an offence.”

(2) After subsection (7) of that section insert—

“(7A) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to imprisonment for a term not


(i) in England and Wales, to imprisonment for a term notexceeding twelve months or to a fine not exceedingthe statutory maximum (or both) and, for continuedcontravention, a daily default fine not exceeding one-fiftieth of the statutory maximum;

(ii) in Scotland or Northern Ireland, to imprisonment fora term not exceeding six months, or to a fine notexceeding the statutory maximum (or both) and, forcontinued contravention, a daily default fine notexceeding one-fiftieth of the statutory maximum.”.

Failure to give notice of rights to minority shareholder

33 (1) In subsection (6) of section 430A of the Companies Act 1985 (takeovers:failure to give notice of rights to minority shareholder) for the words “shallbe liable” to the end substitute “commits an offence.”


“(8) A person guilty of an offence under this section is liable—

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maximum and, for continued contravention, a daily defaultfine not exceeding one-fiftieth of the statutory maximum.”.

Failure to give information about interests in shares etc

34 (1) In subsection (3) of section 444 of the Companies Act 1985 (c. 6) (failure togive information requested by Secretary of State relating to interests inshares etc) for “is liable to imprisonment or a fine, or both” substitute“commits an offence”.


“(4) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to imprisonment for a term not


(i) in England and Wales, to imprisonment for a term notexceeding twelve months or to a fine not exceedingthe statutory maximum (or both) and, for continuedcontravention, a daily default fine not exceeding one-fiftieth of the statutory maximum;

(ii) in Scotland or Northern Ireland, to imprisonment fora term not exceeding six months, or to a fine notexceeding the statutory maximum (or both) and, forcontinued contravention, a daily default fine notexceeding one-fiftieth of the statutory maximum.”.

Obstruction of rights conferred by a warrant or failure to comply with requirement under section 448

35 (1) In section 448(7) of the Companies Act 1985 (obstruction of rights conferredby or by virtue of warrant for entry and search of premises) omit the words“and liable to a fine.” to the end.



maximum.”.

Wrongful disclosure of information to which section 449 applies

36 (1) Section 449 of the Companies Act 1985 (wrongful disclosure of informationobtained in course of company investigation) is amended as follows.

(2) For subsection (6)(a) and (b) substitute “is guilty of an offence.”


“(6A) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to imprisonment for a term not


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(4) Omit subsection (7).

Destruction, mutilation etc of company documents

37 (1) For subsection (3) of section 450 of the Companies Act 1985 (offence ofdestroying, etc company documents) substitute—


exceeding seven years or a fine (or both);(b) on summary conviction—



(2) Omit subsection (4) of that section.

Provision of false information in purported compliance with section 447

38 (1) For subsection (2) of section 451 of the Companies Act 1985 (c. 6) (provisionof false information in response to requirement under section 447)substitute—





(2) Omit subsection (3) of that section.

Obstruction of inspector, etc exercising power to enter and remain on premises

39 (1) Section 453A of the Companies Act 1985 (obstruction of inspector etcexercising power to enter and remain on premises) is amended as follows.

(2) For subsection (5)(a) and (b) substitute “is guilty of an offence.”


“(5A) A person guilty of an offence under this section is liable—

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maximum.”.

(4) Omit subsection (6).

Attempted evasion of restrictions under Part 15

40 (1) In subsection (1) of section 455 of the Companies Act 1985 (attemptedevasion of restrictions under Part 15) for “is liable to a fine if he” substitute“commits an offence if he”.

(2) In subsection (2) of that section for the words “the company” to the endsubstitute “an offence is committed by—

(a) the company, and(b) every officer of the company who is in default.”



maximum.”.

Fraudulent trading

41 (1) Section 458 of the Companies Act 1985 (fraudulent trading) is amended asfollows.

(2) Make the existing provision subsection (1).

(3) For “is liable to imprisonment or a fine, or both” substitute “commits anoffence”.



exceeding ten years or a fine (or both);(b) on summary conviction—



Failure to register court order in case of unfair prejudice to company members

42 (1) In section 461(5) of the Companies Act 1985 (c. 6) (failure to register courtorder in case of unfair prejudice to company members) omit the words “;and if a company makes default” to the end.


“(5A) If a company makes default in complying with subsection (5), anoffence is committed by—

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Failure to register court order declaring company’s dissolution void

43 (1) In section 651(3) of the Companies Act 1985 (c. 6) (failure to register courtorder declaring void company’s dissolution) omit the second sentence.


“(3A) If a person fails to comply with subsection (3) he commits an offence.


Breach of duty etc in connection with application to strike company off register

44 (1) In subsection (1) of section 652E of the Companies Act 1985 (enforcement ofduties in connection with application to strike company off register) omit“and liable to a fine”.

(2) In subsection (2) of that section omit “and liable to imprisonment or a fine,or both”.


“(6) A person guilty of an offence under subsection (1) is liable—(a) on conviction on indictment, to a fine;(b) on summary conviction, to a fine not exceeding the statutory

maximum.


exceeding seven years or a fine (or both);(b) on summary conviction—



Making unauthorised application to strike off company

45 (1) In subsection (2) of section 652F of the Companies Act 1985 (makingunauthorised application to strike off company) omit “and liable to a fine”.


“(3) A person guilty of an offence under this section is liable—

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maximum.”.

Failure by insurance company etc to send twice yearly statement in form required

46 For section 720(4) of the Companies Act 1985 (c. 6) (failure by insurancecompany, etc. to publish periodical statement) substitute—

“(4) If default is made in complying with this section an offence iscommitted by—



SCHEDULE 5 Section 750(1)

DOCUMENTS AND INFORMATION SENT OR SUPPLIED TO A COMPANY

PART 1

INTRODUCTION

Application of Schedule

1 This Schedule does not apply to documents or information sent or suppliedby one company to another (see section 750(4) and Schedules 6 and 7).

PART 2

COMMUNICATIONS IN HARD COPY FORM

Introduction

2 A document or information is validly sent or supplied to a company if it issent or supplied in hard copy form in accordance with this Part of thisSchedule.

Method of communication in hard copy form

3 (1) A document or information in hard copy form may be sent or supplied byhand or by post to an address (in accordance with paragraph 4).

(2) For the purposes of this Schedule, a person sends a document or informationby post if he prepays and posts an envelope containing the document orinformation.

Address for communications in hard copy form

4 A document or information in hard copy form may be sent or supplied—

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(a) to an address specified by the company for the purpose;(b) to the company’s registered office;(c) to an address to which any provision of the Companies Acts

authorises the document or information to be sent or supplied.

PART 3

COMMUNICATIONS IN ELECTRONIC FORM

Introduction

5 (1) A document or information is validly sent or supplied to a company if it issent or supplied in electronic form in accordance with this Part of thisSchedule.

(2) This paragraph has effect subject to any requirements or contrary provisionin the Companies Acts.

Conditions for use of communications in electronic form

6 (1) A document or information may only be sent or supplied to a company inan electronic form if—

(a) the company has agreed (generally or specifically) that the documentor information may be sent or supplied in that form (and has notrevoked that agreement), or

(b) the company is deemed to have so agreed by a provision in theCompanies Acts.

(2) Where the company has specified (generally or specifically) that the identityof the sender or supplier of the document or information must be confirmedin a particular manner, it must be confirmed in that manner.

Address for communications in electronic form

7 (1) Where the document or information is sent or supplied by electronic means,it may only be sent or supplied in electronic form to an address—

(a) specified for the purpose by the company (generally or specifically),or

(b) deemed by a provision in the Companies Acts to have been sospecified.

(2) Where the document or information is sent or supplied in electronic form byhand or by post, it must be sent or supplied to an address to which it couldbe validly sent if it were in hard copy form.

PART 4

OTHER AGREED FORMS OF COMMUNICATION

8 (1) A document or information that is sent or supplied to a company otherwisethan in hard copy form or electronic form is validly sent or supplied if it issent or supplied in a form or manner that has been agreed by the company.


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SCHEDULE 6 Section 750(2)

COMMUNICATIONS BY A COMPANY OTHER THAN A TRADED COMPANY

PART 1

INTRODUCTION

Application of this Schedule

1 This Schedule applies to documents or information sent or supplied bycompanies that are not traded companies.

PART 2


Introduction

2 A document or information is validly sent or supplied by a company if it issent or supplied in hard copy form in accordance with this Part of thisSchedule.


3 (1) A document or information in hard copy form must be—(a) handed to the intended recipient, or(b) sent or supplied by hand or by post to an address (in accordance with

paragraph 4).



4 (1) A document or information in hard copy form may be sent or supplied bythe company—

(a) to an address specified for the purpose by the intended recipient;(b) to a company at its registered office;(c) to a person in his capacity as a member of the company at his address

as shown in the company’s register of members;(d) to a person in his capacity as a director of the company at his address

as shown in the company’s register of directors;(e) to an address to which any provision of the Companies Acts


(2) Where the company is unable to obtain an address falling within sub-paragraph (1), the document or information may be sent or supplied to theintended recipient’s last address known to the company.

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PART 3


Introduction

5 (1) A document or information is validly sent or supplied by a company if it issent in electronic form in accordance with this Part of this Schedule.


Agreement to communications in electronic form

6 (1) A document or information may only be sent or supplied by a company inelectronic form—

(a) to a person who has agreed (generally or specifically) that thedocument or information may be sent or supplied in that form (andhas not revoked that agreement), or

(b) to a company that is deemed to have so agreed by a provision in theCompanies Acts.

(2) Where the intended recipient has specified (generally or specifically) that theidentity of the sender or supplier of the document or information must beconfirmed in a particular manner, it must be confirmed in that manner.


7 (1) Where the document or information is sent or supplied by electronic means,it may only be sent or supplied to an address—

(a) specified for the purpose by the intended recipient (generally orspecifically), or

(b) where the intended recipient is a company, deemed by a provisionof the Companies Acts to have been so specified.

(2) Where the document or information is sent or supplied in electronic form byhand or by post, it must be—

(a) handed to the intended recipient, or(b) sent or supplied to an address to which it could be validly sent if it

were in hard copy form.

PART 4

COMMUNICATIONS BY MEANS OF A WEBSITE

Use of website

8 (1) A document or information is validly sent or supplied by a company if it ismade available on a website in accordance with this Part of this Schedule.


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Agreement to use of website

9 A document or information may only be sent or supplied by the company toa person by being made available on a website if the person—

(a) has agreed (generally or specifically) that the document orinformation may be sent or supplied to him in that manner, or

(b) is taken to have so agreed under—(i) paragraph 10 (members of the company etc.), or

(ii) paragraph 11 (debenture holders),and has not revoked that agreement.

Deemed agreement of members of company etc. to use of website

10 (1) This paragraph applies to a document or information to be sent or suppliedto a person—

(a) as a member of the company, or(b) as a person identified by a member (in accordance with the

company’s articles or regulations made under section 137) as entitledto enjoy or exercise all or any specified rights of the member inrelation to the company (an “entitled person”).

(2) To the extent that—(a) the members of the company have resolved that the company may

send or supply documents or information to members by makingthem available on a website, or

(b) the company’s articles contain provision to that effect,a member of the company or entitled person in relation to whom thefollowing conditions are met is taken to have agreed that the company maysend or supply documents or information to him in that manner.

(3) The conditions are that the member or entitled person—(a) has been asked individually by the company to agree that the

company may send or supply documents or information generally,or the documents or information in question, to him by means of awebsite, and

(b) failed to respond within the period of 28 days beginning with thedate on which the company’s request was sent.

(4) A member or entitled person is not taken to have so agreed if the company’srequest—

(a) did not state clearly what the effect of a failure to respond would be,or

(b) was sent less than twelve months after a previous request made tohim for the purposes of this paragraph in respect of the same or asimilar class of documents or information.

(5) A resolution under this paragraph is subject to Chapter 3 of Part 3 of this Act(resolutions affecting company’s constitution).

Deemed agreement of debenture holders to use of website

11 (1) This paragraph applies to a document or information to be sent or suppliedto a person as holder of a company’s debentures.

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(2) To the extent that the relevant debenture holders have duly resolved that thecompany may send or supply documents or information to them by makingthem available on a website, a debenture holder in relation to whom thefollowing conditions are met is taken to have agreed that the company maysend or supply documents or information to him in that manner.

(3) The conditions are that the debenture holder—(a) has been asked individually by the company to agree that the



(4) A person is not taken to have so agreed if the company’s request—(a) did not state clearly what the effect of a failure to respond would be,

or(b) was sent less than twelve months after a previous request made to

him for the purposes of this paragraph in respect of the same or asimilar class of documents or information.

(5) For the purposes of this paragraph—(a) the relevant debenture holders are the holders of debentures of the

company ranking pari passu for all purposes with the intendedrecipient, and

(b) a resolution of the relevant debenture holders is duly passed if theyagree in accordance with the provisions of the instruments creatingthe debentures.

Notification of availability

12 (1) The company must notify the intended recipient of—(a) the presence of the document or information on the website,(b) the address of the website,(c) the place on the website where it may be accessed, and(d) how to access the document or information.

(2) The document or information is taken to be sent—(a) on the date on which the notification required by this paragraph is

sent, or(b) if later, the date on which the document or information first appears

on the website after that notification is sent.

Period of availability on website

13 (1) The company must make the document or information available on thewebsite throughout—

(a) the period specified by any applicable provision of the CompaniesActs, or

(b) if no such period is specified, the period of 28 days beginning withthe date on which the notification required under paragraph 12 issent to the person in question.

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(2) For the purposes of this paragraph, a failure to make a document orinformation available on a website throughout the period mentioned in sub-paragraph (1) shall be disregarded if—



PART 5


14 (1) A document or information that is sent or supplied otherwise than in hardcopy or electronic form or by means of a website is validly sent or suppliedif it is sent or supplied in a form or manner that has been agreed by theintended recipient.


PART 6


Joint holders of shares

15 (1) This paragraph applies in relation to documents or information to be sent orsupplied to joint holders of shares of a company.

(2) Anything to be agreed or specified by the member must be agreed orspecified by all of the joint holders.

(3) Anything authorised or required to be sent or supplied to the member maybe sent or supplied either—

(a) to each of the joint holders, or(b) to the holder whose name appears first in the register of members.

(4) This paragraph has effect subject to anything in the company’s articles.

Death or bankruptcy of holder of shares

16 (1) This paragraph has effect in the case of the death or bankruptcy of a holderof a company’s shares.

(2) Documents or information required or authorised to be sent or supplied tothe member may be sent or supplied to the persons claiming to be entitledto the shares in consequence of the death or bankruptcy—

(a) by name, or(b) by the title of representatives of the deceased, or trustee of the

bankrupt, or by any like description,at the address in the United Kingdom supplied for the purpose by those soclaiming.

(3) Until such an address has been so supplied, a document or information maybe sent or supplied in any manner in which it might have been sent orsupplied if the death or bankruptcy had not occurred.

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SCHEDULE 7 750(2)

COMMUNICATIONS BY A TRADED COMPANY

PART 1

INTRODUCTION

Application of this Schedule

1 This Schedule applies to documents or information sent or supplied bytraded companies.

PART 2


Introduction

2 A document or information is validly sent or supplied by a traded companyif it is sent or supplied in hard copy form in accordance with this Part of thisSchedule.


3 (1) A document or information in hard copy form must be—(a) handed to the intended recipient, or(b) sent or supplied by hand or by post to an address (in accordance with

paragraph 4).



4 (1) Documents or information in hard copy form may be sent or supplied by thetraded company—

(a) to an address specified for the purpose by the intended recipient;(b) to a company at its registered office;(c) to a person in his capacity as a member of the company at his address

as shown in the company’s register of members;(d) to a person in his capacity as a director of the company at his address

as shown in the company’s register of directors;(e) to an address to which any provision of the Companies Acts


(2) Where the traded company is unable to obtain an address falling within sub-paragraph (1), the documents or information may be sent or supplied to theintended recipient’s last address known to the company.

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Part 3 — Communications in electronic form

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PART 3


Introduction

5 (1) A document or information is validly sent or supplied by a traded companyif it is sent in electronic form in accordance with this Part of this Schedule.


Agreement to communications in electronic form

6 (1) A document or information may only be sent or supplied by a tradedcompany in electronic form—

(a) to a person who has agreed (generally or specifically) that thedocument or information may be sent or supplied in that form (andhas not revoked that agreement), or

(b) to a company that is deemed to have so agreed by a provision in theCompanies Acts.

(2) A document or information may not be sent or supplied by a tradedcompany in electronic form to—

(a) a member of the company,(b) a person identified by a member (in accordance with the company’s

articles or regulations made under section 137) as entitled to enjoy orexercise all or any specified rights of the member in relation to thecompany, or

(c) a holder of debt securities of the company,except in accordance with paragraph 7 or 8 (resolution required beforedocuments and information sent or supplied in electronic form).

(3) Where the intended recipient has specified (generally or specifically) that theidentity of the sender or supplier of the document or information must beconfirmed in a particular manner, it must be confirmed in that manner.

Resolution required for communications in electronic form with members of traded company etc.

7 (1) This paragraph applies to documents or information to be sent or suppliedto a person—

(a) as a member of a traded company, or(b) as a person identified by a member (in accordance with the

company’s articles or regulations made under section 137) as entitledto enjoy or exercise all or any specified rights of the member inrelation to the company.

(2) The traded company may not send or supply such documents orinformation in electronic form except to the extent that the members of thecompany have resolved that the company may do so.


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Resolution required for communications in electronic form with holders of debt securities

8 (1) This paragraph applies to documents or information to be sent or suppliedto a person as holder of debt securities of traded company.

(2) The company may not send or supply such documents or information inelectronic form except to the extent that the relevant holders of debtsecurities have duly resolved that the company may do so.

(3) For the purposes of this paragraph—(a) the relevant holders of debt securities are the holders of debt

securities of the company ranking pari passu for all purposes withthe intended recipient, and

(b) a resolution of the relevant holders of debt securities is duly passedif they agree in accordance with the provisions of the instrumentscreating the debt securities.

(4) In this Part of this Schedule, “debt securities” means bonds or other forms oftransferable securitised debts, with the exception of securities—

(a) that are equivalent to shares in companies, or(b) that if converted, or if the rights conferred by them are exercised,

give rise to a right to acquire shares or securities equivalent to shares.


9 (1) Where the document or information is sent or supplied by electronic means,it may only be sent or supplied to an address—

(a) specified for the purpose by the intended recipient (generally orspecifically), or

(b) where the intended recipient is a company, deemed by a provisionof the Companies Acts to have been so specified.

(2) Where the document or information is sent or supplied in electronic form byhand or by post, it must be—

(a) handed to the intended recipient, or(b) sent or supplied to an address to which it could be validly sent if it

were in hard copy form.

PART 4

COMMUNICATIONS BY MEANS OF A WEBSITE

Use of website

10 (1) A document or information is validly sent or supplied by a traded companyif it is made available on a website in accordance with this Part of thisSchedule.


Use of website to communicate with members of traded company etc.

11 (1) This paragraph applies to a document or information to be sent or suppliedby a traded company to a person—

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(a) as a member of the company, or(b) as a person identified by a member (in accordance with the

company’s articles or regulations made under section 137) as entitledto enjoy or exercise all or any specified rights of the member inrelation to the company (an “entitled person”).

(2) The traded company may not send or supply such documents orinformation by making them available on a website except to the extent thatthe members of the company have resolved that the company may do so.

(3) The traded company may only send or supply such documents orinformation in that manner to members or entitled persons who—

(a) have agreed that the company may send or supply documents orinformation generally, or the documents or information in question,to them in that manner, or

(b) are taken to have so agreed under the following provisions,and have not revoked that agreement.

(4) A person is taken to have so agreed if—(a) he has been asked individually by the company to agree that the

company may send or supply documents or information generally,or the documents or information in question, to him in that manner,and

(b) he has failed to respond within the period of 28 days beginning withthe date on which the company’s request was sent.


or(b) was sent less than twelve months after a previous request made to

him in respect of the same or a similar class of documents orinformation.


Use of website to communicate with holders of debt securities

12 (1) This paragraph applies to a document or information to be sent or suppliedby a traded company to a person as a holder of debt securities of thecompany.

(2) The company may not send or supply such documents or information bymaking them available on a website except to the extent that the relevantholders of debt securities have duly resolved that the company may do so.

(3) The traded company may only send or supply such documents in thatmanner to holders of debt securities who—

(a) have agreed that the company may send or supply documents orinformation generally, or the documents or information in question,to them in that manner, or

(b) are taken to have so agreed under the following provisions,and have not revoked that agreement.

(4) A person is taken to have so agreed if—

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(a) he has been asked individually by the company to agree that thecompany may send or supply documents or information generally,or the documents or information in question, to him in that manner,and

(b) he has failed to respond within the period of 28 days beginning withthe date on which the company’s request was sent.


or(b) was sent less than twelve months after any previous request made to

him in respect of the same or a similar class of documents orinformation.

(6) For the purposes of this paragraph—(a) the relevant holders of debt securities are the holders of debt

securities of the company ranking pari passu for all purposes withthe intended recipient, and

(b) a resolution of the relevant holders of debt securities is duly passedif they agree in accordance with the provisions of the instrumentscreating the debt securities.

(7) In this Part of this Schedule, “debt securities” means bonds or other forms oftransferable securitised debts, with the exception of securities—

(a) that are equivalent to shares in companies, or(b) that if converted, or if the rights conferred by them are exercised,

give rise to a right to acquire shares or securities equivalent to shares.

Use of website to communicate with other debenture holders

13 (1) A document or information may only be sent or supplied by the company toa person as a holder of debentures of the company (other than debtsecurities) by being made available on a website if the person—

(a) has agreed (generally or specifically) that the document orinformation may be sent or supplied to him in that manner, or

(b) is taken to have so agreed under this paragraph,and has not revoked that agreement.

(2) To the extent that the relevant debenture holders have duly resolved that thecompany may send or supply documents or information to them by makingthem available on a website, a debenture holder in relation to whom thefollowing conditions are met is taken to have agreed that documents orinformation may be sent or supplied to him by the company in that manner.

(3) The conditions are that the debenture holder—(a) has been asked individually by the company to agree that the




or

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472

(b) was sent less than twelve months after a previous request made tohim for the purposes of this paragraph in respect of the same or asimilar class of documents or information.

(5) For the purposes of this paragraph—(a) the relevant debenture holders are the holders of debentures of the

company (other than debt securities) ranking pari passu for allpurposes with the intended recipient, and

(b) a resolution of the relevant debenture holders is duly passed if theyagree in accordance with the provisions of the instruments creatingthe debentures.

Use of website to communicate with other persons

14 A document or information may only be sent or supplied by a tradedcompany to a person who is not—

(a) a member of the company or an entitled person, or(b) a holder of debentures of the company,

by being made available on a website if the person has agreed (generally orspecifically) that the document or information may be sent or supplied tohim in that manner (and has not revoked that agreement).

Notification of availability

15 (1) The traded company must notify the intended recipient of—(a) the presence of the document or information on the website,(b) the address of the website,(c) the place on the website where it may be accessed, and(d) how to access the document or information.

(2) The document or information is taken to be sent—(a) on the date on which the notification required by this paragraph is

sent, or(b) if later, the date on which the document or information first appears

on the website after that notification is sent.

Period of availability on website

16 (1) The traded company must make the document or information available onthe website throughout—

(a) the period specified by any applicable provision of the CompaniesActs, or

(b) if no such period is specified, the period of 28 days beginning withthe date on which the notification required under paragraph 15 issent to the person in question.

(2) For the purposes of this paragraph, a failure to make a document orinformation available on a website throughout the period mentioned in sub-paragraph (1) shall be disregarded if—



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Company Law Reform Bill [HL]Schedule 7 — Communications by a traded companyPart 5 — Other agreed forms of communication

473

PART 5


17 (1) A document or information that is sent or supplied otherwise than in hardcopy or electronic form or by means of a website is validly sent or suppliedif it is sent or supplied in a form or manner that has been agreed by theintended recipient.


PART 6


Joint holders of shares

18 (1) This paragraph applies in relation to documents or information to be sent orsupplied to joint holders of shares of a traded company.

(2) Anything to be agreed or specified by the member must be agreed orspecified by all of the joint holders.

(3) Anything authorised or required to be sent or supplied to the member maybe sent or supplied either—

(a) to each of the joint holders, or(b) to the holder whose name appears first in the register of members.


Death or bankruptcy of holder of shares

19 (1) This paragraph has effect in the case of the death or bankruptcy of a holderof a traded company’s shares.

(2) Documents or information required or authorised to be sent or supplied tothe member may be sent or supplied to the persons claiming to be entitledto the shares in consequence of the death or bankruptcy—

(a) by name, or(b) by the title of representatives of the deceased, or trustee of the

bankrupt, or by any like description,at the address in the United Kingdom supplied for the purpose by those soclaiming.

(3) Until such an address has been so supplied, a document or information maybe sent or supplied in any manner in which it might have been sent orsupplied if the death or bankruptcy had not occurred.


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Company Law Reform Bill [HL]Schedule 8 — Parent and subsidiary undertakings: supplementary provisions

474


PARENT AND SUBSIDIARY UNDERTAKINGS: SUPPLEMENTARY PROVISIONS

Introduction

1 The provisions of this Schedule explain expressions used in section 761(parent and subsidiary undertakings) and otherwise supplement thatsection.

Voting rights in an undertaking

2 (1) In section 761(2)(a) and (d) the references to the voting rights in anundertaking are to the rights conferred on shareholders in respect of theirshares or, in the case of an undertaking not having a share capital, onmembers, to vote at general meetings of the undertaking on all, orsubstantially all matters.

(2) In relation to an undertaking which does not have general meetings at whichmatters are decided by the exercise of voting rights the references to holdinga majority of the voting rights in the undertaking shall be construed asreferences to having the right under the constitution of the undertaking todirect the overall policy of the undertaking or to alter the terms of itsconstitution.

Rights to appoint or remove a majority of the directors

3 (1) In section 761(2)(b) the reference to the right to appoint or remove a majorityof the board of directors is to the right to appoint or remove directorsholding a majority of the voting rights at meetings of the board on all, orsubstantially all, matters.

(2) An undertaking shall be treated as having the right to appoint to adirectorship if—

(a) a person’s appointment to it follows necessarily from hisappointment as director of the undertaking, or

(b) the directorship is held by the undertaking itself.

(3) A right to appoint or remove which is exercisable only with the consent orconcurrence of another person shall be left out of account unless no otherperson has a right to appoint or, as the case may be, remove in relation to thatdirectorship.

Right to exercise dominant influence

4 (1) For the purposes of section 761(2)(c) an undertaking shall not be regarded ashaving the right to exercise a dominant influence over another undertakingunless it has a right to give directions with respect to the operating andfinancial policies of that other undertaking which its directors are obliged tocomply with whether or not they are for the benefit of that otherundertaking.

(2) A “control contract” means a contract in writing conferring such a rightwhich—

(a) is of a kind authorised by the memorandum or articles of theundertaking in relation to which the right is exercisable, and

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(b) is permitted by the law under which that undertaking is established.

(3) This paragraph shall not be read as affecting the construction of theexpression “actually exercises a dominant influence” in section 761(4)(a).

Rights exercisable only in certain circumstances or temporarily incapable of exercise

5 (1) Rights which are exercisable only in certain circumstances shall be taken intoaccount only—

(a) when the circumstances have arisen, and for so long as they continueto obtain, or

(b) when the circumstances are within the control of the person havingthe rights.

(2) Rights which are normally exercisable but are temporarily incapable ofexercise shall continue to be taken into account.

Rights held by one person on behalf of another

6 Rights held by a person in a fiduciary capacity shall be treated as not held byhim.

7 (1) Rights held by a person as nominee for another shall be treated as held bythe other.

(2) Rights shall be regarded as held as nominee for another if they areexercisable only on his instructions or with his consent or concurrence.

Rights attached to shares held by way of security

8 Rights attached to shares held by way of security shall be treated as held bythe person providing the security—

(a) where apart from the right to exercise them for the purpose ofpreserving the value of the security, or of realising it, the rights areexercisable only in accordance with his instructions, and

(b) where the shares are held in connection with the granting of loans aspart of normal business activities and apart from the right to exercisethem for the purpose of preserving the value of the security, or ofrealising it, the rights are exercisable only in his interests.

Rights attributed to parent undertaking

9 (1) Rights shall be treated as held by a parent undertaking if they are held byany of its subsidiary undertakings.

(2) Nothing in paragraph 7 or 8 shall be construed as requiring rights held by aparent undertaking to be treated as held by any of its subsidiaryundertakings.

(3) For the purposes of paragraph 8 rights shall be treated as being exercisablein accordance with the instructions or in the interests of an undertaking ifthey are exercisable in accordance with the instructions of or, as the case maybe, in the interests of any group undertaking.

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Disregard of certain rights

10 The voting rights in an undertaking shall be reduced by any rights held bythe undertaking itself.

Supplementary

11 References in any provision of paragraphs 6 to 10 to rights held by a personinclude rights falling to be treated as held by him by virtue of any otherprovision of those paragraphs but not rights which by virtue of any suchprovision are to be treated as not held by him.


INDEX OF DEFINED EXPRESSIONS

abbreviated accounts section 427

accounting reference date andaccounting reference period

section 364

accounting standards section 441

accounts meeting, in relation to apublic company

section 477

acquisition, in relation to a non-cashasset

section 739(2) of the Companies Act 1985(c. 6)

address (in the companycommunications provisions)

section 754

allotment and related expressions section 738 of the Companies Act 1985

annual accounts (in Part 15) section 448

annual general meeting section 311

annual return section 363 of the Companies Act 1985

articles section 19

authenticated section 753

authorised insurance company section 742C of the Companies Act 1985

authorised minimum (for the purposesof sections 531 and 532)

section 533

bank holiday section 744 of the Companies Act 1985

banking company section 742B of the Companies Act 1985

body corporate section 766

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477

books and papers, books or papers section 744 of the Companies Act 1985(c. 6)

called-up share capital section 737(1) of the Companies Act 1985

capital redemption reserve section 170(1) of the Companies Act 1985

circulation date, in relation to a writtenresolution (in Part 13)

section 267

class of shares section 762

the Companies Acts section 2

Companies Act accounts sections 369 and 377

Companies Act group accounts section 377

Companies Act individual accounts section 369

companies charges register section 397 of the Companies Act 1985

company section 1

company (in Chapter 2 of Part 22) section 646

company (in Part 31) section 775

the company communicationsprovisions

section 749

company records (in Part 28) section 742

the Consequential Provisions Act section 744 of the Companies Act 1985

constitution, of a company section 18

corporation section 766

the court section 758

credit institution section 766

credit transaction section 183

daily default fine section 734

debenture section 744 of the Companies Act 1985

director section 229

director (in Part 14) section 352

document (in Part 26) section 721

document (in the companycommunications provisions)

section 754

dormant (in relation to a company orother body corporate)

section 763

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EEA State and related expressions section 764

electronic form, in relation tocommunications to or from theregistrar

section 722

in electronic form, in relation tocommunications to or from a company

section 751

electronic means, in relation tocommunications to or from theregistrar

section 722

electronic means, in relation tocommunications to or from a company

section 751

eligible members, in relation to awritten resolution (in Part 13)

section 266

employees’ share scheme section 743 of the Companies Act 1985(c. 6)

enactment section 879

enactments relating to companies (inPart 31)

section 775

equity share capital section 744 of the Companies Act 1985

existing company section 1

financial institution section 766

financial year, of a company section 363

firm section 766

floating charge, in Scotland section 462 of the Companies Act 1985

the former Companies Acts section 765

the Gazette section 766

group (in Part 15) section 451

hard copy, in relation tocommunications to or from theregistrar

section 722

in hard copy form, in relation tocommunications to or from a company

section 751

hire-purchase agreement section 744 of the Companies Act 1985

holding company section 736 of the Companies Act 1985

IAS accounts sections 370 and 379

IAS individual accounts section 370

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IAS Regulation (in Part 15) section 451

included in the consolidation, inrelation to group accounts (in Part 15)

section 451

the insider dealing legislation section 744 of the Companies Act 1985(c. 6)

the Insolvency Act section 735A(1) of the Companies Act1985

insurance company section 742C of the Companies Act 1985

insurance market activity (in Part 15) section 451

insurance market activity (in Part 16) section 524

interest in shares (for the purposes ofPart 21)

section 608

international accounting standards (inPart 15)

section 451

the Joint Stock Companies Acts section 765

joint stock company section 656

limited company section 3

member (of a company) section 112

memorandum of association section 8

non-cash asset section 739(1) of the Companies Act 1985

number, in relation to shares section 744 of the Companies Act 1985

offer period (in Chapter 2 of Part 22) section 646

offeror (in Chapter 2 of Part 22) section 646

officer, in relation to a body corporate section 744 of the Companies Act 1985

officer in default section 730

official seal, in relation to the registrarof companies

section 673

opted-in company (in Chapter 2 of Part22)

section 646

opting-in resolution (in Chapter 2 ofPart 22)

section 641(1)

opting-out resolution (in Chapter 2 ofPart 22)

section 641(5)

ordinary resolution section 259

organisation (in Part 14) section 352

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oversea company section 660

paid up and related expressions section 738 of the Companies Act 1985(c. 6)

the Panel (in Part 22) section 617

parent company section 766

parent undertaking section 761

political donation (in Part 14) section 337

political expenditure (in Part 14) section 338

political organisation (in Part 14) section 336(2)

prescribed, in relation to documentsdelivered to the registrar

section 679

prescribed, otherwise than in relationto documents delivered to the registrar

section 744 of the Companies Act 1985

private company section 4

profit and loss account (in Part 15) section 451

profit and loss account (in Part 16) section 524

public company section 4

publication, in relation to accounts andreports (in sections 411, 412 and 413)

section 414

qualified, in relation to an auditors’report (in Part 15)

section 451

quasi-loan section 181

quoted company (in Part 15) section 358

redenomination reserve section 584

registered number, of a company section 677

registered office, of a company section 86

registrar and registrar of companies section 671

registrar’s index of company names section 707

regulated activity (in Part 15) section 451

regulated activity (in Part 16) section 524

regulated market (in Part 15) section 451

regulated market (in Part 16) section 524

regulated market (in Chapter 2 of Part22)

section 646

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481

reporting accountant section 463

reporting standards section 442

resolution for reducing share capital section 135(3) of the Companies Act 1985(c. 6)

securities (in Chapter 1 of Part 17) section 527

senior statutory auditor section 493

shadow director section 230

share section 744 of the Companies Act 1985

share premium account section 130(1) of the Companies Act 1985

share warrant section 188 of the Companies Act 1985

special notice, in relation to a resolution section 288

special resolution section 260

significant accounting transaction section 763

subsidiary section 736 of the Companies Act 1985

subsidiary undertaking section 761

summary financial statement section 402

takeover bid (in Chapter 2 of Part 22) section 646

the Takeovers Directive (in Chapter 1of Part 22)

section 618(8)

the Takeovers Directive (in Chapter 2of Part 22)

section 646

traded company (in the companycommunications provisions)

section 754

trading certificate, in relation to apublic company

section 531

transfer, in relation to a non-cash asset section 739(2) of the Companies Act 1985

treasury shares section 162A(3) of the Companies Act1985

turnover (in Part 15) section 451

turnover (in Part 16) section 524

uncalled share capital section 737(2) of the Companies Act 1985

undistributable reserves section 764(3) of the Companies Act 1985

undertaking section 760

unlimited company section 3

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Company Law Reform Bill [HL]Schedule 10 — Recognised supervisory bodies

Part 1 — Grant and revocation of recognition of a supervisory body

482


RECOGNISED SUPERVISORY BODIES

PART 1

GRANT AND REVOCATION OF RECOGNITION OF A SUPERVISORY BODY

Application for recognition of supervisory body

1 (1) A supervisory body may apply to the Secretary of State for an orderdeclaring it to be a recognised supervisory body for the purposes of this Partof this Act (“a recognition order”).

(2) Any such application must be—(a) made in such manner as the Secretary of State may direct, and(b) accompanied by such information as the Secretary of State may

reasonably require for the purpose of determining the application.

(3) At any time after receiving an application and before determining it theSecretary of State may require the applicant to furnish additionalinformation.

(4) The directions and requirements given or imposed under sub-paragraphs(2) and (3) may differ as between different applications.

(5) The Secretary of State may require any information to be furnished underthis paragraph to be in such form or verified in such manner as he mayspecify.

(6) Every application must be accompanied by—(a) a copy of the applicant’s rules, and(b) a copy of any guidance issued by the applicant in writing or other

legible form.

(7) The reference in sub-paragraph (6)(b) to guidance issued by the applicant isa reference to any guidance or recommendation—

(a) issued or made by it to all or any class of its members or personsseeking to become members,

voting rights (in Chapter 2 of Part 22) section 646

voting shares (in Chapter 2 of Part 22) section 646

by means of a website, in relation tocommunications to or from a company

section 751

Welsh company section 88

wholly-owned subsidiary section 736(2) of the Companies Act 1985(c. 6)

working day, in relation to a company section 766

written resolution section 265

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(b) relevant for the purposes of this Part, and(c) intended to have continuing effect,

including any guidance or recommendation relating to the admission orexpulsion of members of the body, so far as relevant for the purposes of thisPart.

Grant and refusal of recognition

2 (1) The Secretary of State may, on an application duly made in accordance withparagraph 1 and after being furnished with all such information as he mayrequire under that paragraph, make or refuse to make a recognition order inrespect of the applicant.

(2) The Secretary of State may make a recognition order only if it appears tohim, from the information furnished by the body and having regard to anyother information in his possession, that the requirements of Part 2 of thisSchedule are satisfied in the case of that body.

(3) The Secretary of State may refuse to make a recognition order in respect of abody if he considers that its recognition is unnecessary having regard to theexistence of one or more other bodies which—

(a) maintain and enforce rules as to the appointment and conduct ofstatutory auditors, and

(b) have been or are likely to be recognised.

(4) Where the Secretary of State refuses an application for a recognition order hemust give the applicant a written notice to that effect—

(a) specifying which requirements, in the opinion of the Secretary ofState, are not satisfied, or

(b) stating that the application is refused on the ground mentioned insub-paragraph (3).

(5) A recognition order must state the date on which it takes effect.

Revocation of recognition

3 (1) A recognition order may be revoked by a further order made by theSecretary of State if at any time it appears to him—

(a) that any requirement of Part 2 of this Schedule is not satisfied in thecase of the body to which the recognition order relates (“therecognised body”),

(b) that the body has failed to comply with any obligation imposed on itby or by virtue of this Part of this Act, or

(c) that the continued recognition of the body is undesirable havingregard to the existence of one or more other bodies which have beenor are to be recognised.

(2) An order revoking a recognition order must state the date on which it takeseffect, which must be after the period of three months beginning with thedate on which the revocation order is made.

(3) Before revoking a recognition order the Secretary of State must—(a) give written notice of his intention to do so to the recognised body,(b) take such steps as he considers reasonably practicable for bringing

the notice to the attention of the members of the body, and

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(c) publish the notice in such manner as he thinks appropriate forbringing it to the attention of any other persons who are in hisopinion likely to be affected.

(4) A notice under sub-paragraph (3) must—(a) state the reasons for which the Secretary of State proposes to act, and(b) give particulars of the rights conferred by sub-paragraph (5).

(5) A person within sub-paragraph (6) may, within the period of three monthsbeginning with the date of service or publication of the notice under sub-paragraph (3) or such longer period as the Secretary of State may allow,make written representations to the Secretary of State and, if desired, oralrepresentations to a person appointed for that purpose by the Secretary ofState.

(6) The persons within this sub-paragraph are—(a) the recognised body on which a notice is served under sub-

paragraph (3),(b) any member of the body, and(c) any other person who appears to the Secretary of State to be affected.

(7) The Secretary of State must have regard to any representations made inaccordance with sub-paragraph (5) in determining whether to revoke therecognition order.

(8) If in any case the Secretary of State considers it essential to do so in the publicinterest he may revoke a recognition order without regard to the restrictionimposed by sub-paragraph (2), even if—

(a) no notice has been given or published under sub-paragraph (3), or(b) the period of time for making representations in pursuance of such a


(9) An order revoking a recognition order may contain such transitionalprovision as the Secretary of State thinks necessary or expedient.

(10) A recognition order may be revoked at the request or with the consent of therecognised body and any such revocation is not subject to—

(a) the restrictions imposed by sub-paragraphs (1) and (2), or(b) the requirements of sub-paragraphs (3) to (5) and (7).

(11) On making an order revoking a recognition order in respect of a body theSecretary of State must—

(a) give written notice of the making of the order to the body,(b) take such steps as he considers reasonably practicable for bringing

the making of the order to the attention of the members of the body,and

(c) publish a notice of the making of the order in such manner as hethinks appropriate for bringing it to the attention of any otherpersons who are in his opinion likely to be affected.

Transitional provision

4 A recognition order made and not revoked under—(a) paragraph 2(1) of Schedule 11 to the Companies Act 1989 (c. 40), or

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(b) paragraph 2(1) of Schedule 11 to the Companies (Northern Ireland)Order 1990 (S.I. 1990/593 (N.I. 5)),

before the commencement of this Chapter of this Part of this Act is to haveeffect after the commencement of this Chapter as a recognition order madeunder paragraph 2(1) of this Schedule.

Orders not statutory instruments

5 Orders under this Part of this Schedule shall not be made by statutoryinstrument.

PART 2

REQUIREMENTS FOR RECOGNITION OF A SUPERVISORY BODY

Holding of appropriate qualification

6 (1) The body must have rules to the effect that a person is not eligible forappointment as a statutory auditor unless—

(a) in the case of an individual, he holds an appropriate qualification,(b) in the case of a firm—

(i) each individual responsible for statutory audit work onbehalf of the firm is eligible for appointment as a statutoryauditor, and

(ii) the firm is controlled by qualified persons (see paragraph 7below).

(2) Sub-paragraph (1) does not prevent the body from imposing more stringentrequirements.

(3) A firm which has ceased to comply with the conditions mentioned in sub-paragraph (1)(b) may be permitted to remain eligible for appointment as astatutory auditor for a period of not more than three months.

7 (1) This paragraph explains what is meant in paragraph 6(1)(b) by a firm being“controlled by qualified persons”.

(2) In this paragraph references to a person being qualified are—(a) in relation to an individual, to his holding—

(i) an appropriate qualification, or(ii) a corresponding qualification to audit accounts under the

law of a member State, or part of a member State, other thanthe United Kingdom;

(b) in relation to a firm, to its—(i) being eligible for appointment as a statutory auditor, or

(ii) being eligible for a corresponding appointment as an auditorunder the law of a member State, or part of a member State,other than the United Kingdom.

(3) A firm is to be treated as controlled by qualified persons if, and only if—(a) a majority of the members of the firm are qualified persons, and(b) where the firm’s affairs are managed by a board of directors,

committee or other management body, a majority of that body arequalified persons or, if the body consists of two persons only, at leastone of them is a qualified person.

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(4) A majority of the members of a firm means—(a) where under the firm’s constitution matters are decided upon by the

exercise of voting rights, members holding a majority of the rights tovote on all, or substantially all, matters;

(b) in any other case, members having such rights under the constitutionof the firm as enable them to direct its overall policy or alter itsconstitution.

(5) A majority of the members of the management body of a firm means—(a) where matters are decided at meetings of the management body by

the exercise of voting rights, members holding a majority of therights to vote on all, or substantially all, matters at such meetings;

(b) in any other case, members having such rights under the constitutionof the firm as enable them to direct its overall policy or alter itsconstitution.

(6) Paragraphs 5 to 11 of Schedule 8 to this Act (rights to be taken into accountand attribution of rights) apply for the purposes of this paragraph.

Auditors to be fit and proper persons

8 (1) The body must have adequate rules and practices designed to ensure thatthe persons eligible under its rules for appointment as a statutory auditor arefit and proper persons to be so appointed.

(2) The matters which the body may take into account for this purpose inrelation to a person must include—

(a) any matter relating to any person who is or will be employed by orassociated with him for the purposes of or in connection withstatutory audit work;

(b) in the case of a body corporate, any matter relating to—(i) any director or controller of the body,

(ii) any other body corporate in the same group, or(iii) any director or controller of any such other body; and

(c) in the case of a partnership, any matter relating to—(i) any of the partners,

(ii) any director or controller of any of the partners,(iii) any body corporate in the same group as any of the partners,

or(iv) any director or controller of any such other body.

(3) Where the person is a limited liability partnership, in sub-paragraph (2)(b)“director” is to be read as “member”.

(4) In sub-paragraph (2)(b) and (c) “controller”, in relation to a body corporate,means a person who either alone or with an associate or associates is entitledto exercise or control the exercise of 15% or more of the rights to vote on all,or substantially all, matters at general meetings of the body or another bodycorporate of which it is a subsidiary.

Professional integrity and independence

9 (1) The body must have adequate rules and practices designed to ensure that—(a) statutory audit work is conducted properly and with integrity, and

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(b) persons are not appointed as statutory auditors in circumstances inwhich they have an interest likely to conflict with the proper conductof the audit.

(2) The body must participate in arrangements within paragraph 21, and therules and practices mentioned in sub-paragraph (1) must include provisionrequiring compliance with any standards for the time being determinedunder such arrangements.

(3) The body must also have adequate rules and practices designed to ensurethat no firm is eligible under its rules for appointment as a statutory auditorunless the firm has arrangements to prevent a person to whom sub-paragraph (4) applies from being able to exert any influence over the way inwhich a statutory audit is conducted in circumstances in which thatinfluence would be likely to affect the independence or integrity of the audit.

(4) This sub-paragraph applies to—(a) any individual who is not a qualified person within the meaning of

paragraph 7, and(b) any person who is not a member of the firm.

Technical standards

10 (1) The body must have rules and practices as to—(a) the technical standards to be applied in statutory audit work, and(b) the manner in which those standards are to be applied in practice.

(2) The body must participate in arrangements within paragraph 22, and therules and practices mentioned in sub-paragraph (1) must include provisionrequiring compliance with any standards for the time being determinedunder such arrangements.

Procedures for maintaining competence

11 The body must have rules and practices designed to ensure that personseligible under its rules for appointment as a statutory auditor continue tomaintain an appropriate level of competence in the conduct of statutoryaudits.

Monitoring and enforcement

12 (1) The body must have adequate arrangements and resources for the effectivemonitoring and enforcement of compliance with its rules.

(2) The arrangements for monitoring may make provision for that function tobe performed on behalf of the body (and without affecting its responsibility)by any other body or person who is able and willing to perform it.

Independent monitoring of audits of listed companies and other major bodies

13 (1) The body must—(a) participate in arrangements within paragraph 23(1), and(b) have rules designed to ensure that members of the body who

perform any statutory audit functions in respect of major audits takesuch steps as may be reasonably required of them to enable their

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performance of any such functions to be monitored by means ofinspections carried out under the arrangements.

(2) Any monitoring of such persons under the arrangements is to be regarded(so far as their performance of statutory audit functions in respect of majoraudits is concerned) as monitoring of compliance with the body’s rules forthe purposes of paragraph 12(1).

(3) In this paragraph—“major audit” means a statutory audit conducted in respect of—

(a) a company any of whose securities have been admitted to theofficial list (within the meaning of Part 6 of the FinancialServices and Markets Act 2000 (c. 8)), or

(b) any other person in whose financial condition there is a majorpublic interest;

“statutory audit function” means any function performed as a statutoryauditor.

Membership, eligibility and discipline

14 The rules and practices of the body relating to—(a) the admission and expulsion of members,(b) the grant and withdrawal of eligibility for appointment as a statutory

auditor, and(c) the discipline it exercises over its members,

must be fair and reasonable and include adequate provision for appeals.

Investigation of complaints

15 (1) The body must have effective arrangements for the investigation ofcomplaints against—

(a) persons who are eligible under its rules for appointment as astatutory auditor, and

(b) the body in respect of matters arising out of its functions as asupervisory body.

(2) The arrangements mentioned in sub-paragraph (1) may make provision forthe whole or part of that function to be performed by and to be theresponsibility of a body or person independent of the body itself.

Independent investigation for disciplinary purposes of public interest cases

16 (1) The body must—(a) participate in arrangements within paragraph 24(1), and(b) have rules and practices designed to ensure that, where the

designated persons have decided that any particular disciplinaryaction should be taken against a member of the body following theconclusion of an investigation under such arrangements, thatdecision is to be treated as if it were a decision made by the body indisciplinary proceedings against the member.

(2) In sub-paragraph (1) “the designated persons” means the persons who,under the arrangements, have the function of deciding whether (and if so,

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what) disciplinary action should be taken against a member of the body inthe light of an investigation carried out under the arrangements.

Meeting of claims arising out of audit work

17 (1) The body must have adequate rules or arrangements designed to ensure thatpersons eligible under its rules for appointment as a statutory auditor takesuch steps as may reasonably be expected of them to secure that they are ableto meet claims against them arising out of statutory audit work.

(2) This may be achieved by professional indemnity insurance or otherappropriate arrangements.

Register of auditors and other information to be made available

18 The body must have rules requiring persons eligible under its rules forappointment as a statutory auditor to comply with any obligations imposedon them by—

(a) requirements under section 821 (Secretary of State’s power to call forinformation);

(b) regulations under section 836 (the register of auditors);(c) regulations under section 837 (information to be made available to

the public).

Taking account of costs of compliance

19 The body must have satisfactory arrangements for taking account, inframing its rules, of the cost to those to whom the rules would apply ofcomplying with those rules and any other controls to which they are subject.

Promotion and maintenance of standards

20 The body must be able and willing—(a) to promote and maintain high standards of integrity in the conduct

of statutory audit work, and(b) to co-operate, by the sharing of information and otherwise, with the

Secretary of State and any other authority, body or person havingresponsibility in the United Kingdom for the qualification,supervision or regulation of auditors.

PART 3

ARRANGEMENTS IN WHICH RECOGNISED SUPERVISORY BODIES ARE REQUIRED TO PARTICIPATE

Arrangements for setting standards relating to professional integrity and independence

21 The arrangements referred to in paragraph 9(2) are appropriatearrangements—

(a) for the determining of standards for the purposes of the rules andpractices mentioned in paragraph 9(1), and

(b) for ensuring that the determination of those standards is doneindependently of the body.

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Arrangements for setting technical standards

22 The arrangements referred to in paragraph 10(2) are appropriatearrangements—

(a) for the determining of standards for the purposes of the rules andpractices mentioned in paragraph 10(1), and

(b) for ensuring that the determination of those standards is doneindependently of the body.

Arrangements for independent monitoring of audits of listed companies and other major bodies

23 (1) The arrangements referred to in paragraph 13(1) are appropriatearrangements—

(a) for enabling the performance by members of the body of statutoryaudit functions in respect of major audits to be monitored by meansof inspections carried out under the arrangements, and

(b) for ensuring that the carrying out of such monitoring and inspectionsis done independently of the body.

(2) In this paragraph “major audit” and “statutory audit function” have thesame meaning as in paragraph 13.

Arrangements for independent investigation for disciplinary purposes of public interest cases

24 (1) The arrangements referred to in paragraph 16(1) are appropriatearrangements—

(a) for the carrying out of investigations into public interest cases arisingin connection with the performance of statutory audit functions bymembers of the body,

(b) for the holding of disciplinary hearings relating to members of thebody which appear to be desirable following the conclusion of suchinvestigations,

(c) for requiring such hearings to be held in public except where theinterests of justice otherwise require,

(d) for the persons before whom such hearings have taken place todecide whether (and, if so, what) disciplinary action should be takenagainst the members to whom the hearings related, and

(e) for ensuring that the carrying out of those investigations, the holdingof those hearings and the taking of those decisions are doneindependently of the body.

(2) In this paragraph—“public interest cases” means matters which raise or appear to raise

important issues affecting the public interest;“statutory audit function” means any function performed as a statutory

auditor.

Supplementary: arrangements to operate independently of body

25 (1) This paragraph applies for the purposes of—(a) paragraph 21(b),(b) paragraph 22(b),(c) paragraph 23(1)(b), or

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(d) paragraph 24(1)(e).

(2) Arrangements are not to be regarded as appropriate for the purpose ofensuring that a thing is done independently of the body unless they aredesigned to ensure that the body—

(a) will have no involvement in the appointment or selection of any ofthe persons who are to be responsible for doing that thing, and

(b) will not otherwise be involved in the doing of that thing.

(3) Sub-paragraph (2) imposes a minimum requirement and does not precludethe possibility that additional criteria may need to be satisfied in order forthe arrangements to be regarded as appropriate for the purpose in question.

Supplementary: funding of arrangements

26 The body must pay any of the costs of maintaining any arrangements withinparagraph 21, 22, 23 or 24 which the arrangements provide are to be paid byit.

Supplementary: scope of arrangement

27 Arrangements may qualify as arrangements within any of paragraphs 21,22, 23 and 24 even though the matters for which they provide are moreextensive in any respect than those mentioned in the applicable paragraph.


RECOGNISED PROFESSIONAL QUALIFICATIONS

PART 1

GRANT AND REVOCATION OF RECOGNITION OF A PROFESSIONAL QUALIFICATION

Application for recognition of professional qualification

1 (1) A qualifying body may apply to the Secretary of State for an order declaringa qualification offered by it to be a recognised professional qualification forthe purposes of this Part of this Act (“a recognition order”).

(2) In this Part of this Act “a recognised qualifying body” means a qualifyingbody offering a recognised professional qualification.

(3) Any application must be—(a) made in such manner as the Secretary of State may direct, and(b) accompanied by such information as the Secretary of State may

reasonably require for the purpose of determining the application.

(4) At any time after receiving an application and before determining it theSecretary of State may require the applicant to furnish additionalinformation.

(5) The directions and requirements given or imposed under sub-paragraphs(3) and (4) may differ as between different applications.

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(6) The Secretary of State may require any information to be furnished underthis paragraph to be in such form or verified in such manner as he mayspecify.

(7) In the case of examination standards, the verification required may includeindependent moderation of the examinations over such a period as theSecretary of State considers necessary.

(8) Every application must be accompanied by—(a) a copy of the applicant’s rules, and(b) a copy of any guidance issued by the applicant in writing or other

legible form.

(9) The reference in sub-paragraph (8)(b) to guidance issued by the applicant isa reference to any guidance or recommendation—

(a) issued or made by it to all or any class of persons holding or seekingto hold a qualification, or approved or seeking to be approved by thebody for the purposes of giving practical training,

(b) relevant for the purposes of this Part of this Act, and(c) intended to have continuing effect,

including any guidance or recommendation relating to a matter within sub-paragraph (10).

(10) The matters within this sub-paragraph are—(a) admission to or expulsion from a course of study leading to a

qualification,(b) the award or deprivation of a qualification, and(c) the approval of a person for the purposes of giving practical training

or the withdrawal of such an approval,so far as relevant for the purposes of this Part of this Act.

Grant and refusal of recognition

2 (1) The Secretary of State may, on an application duly made in accordance withparagraph 1 and after being furnished with all such information as he mayrequire under that paragraph, make or refuse to make a recognition order inrespect of the qualification in relation to which the application was made.

(2) The Secretary of State may make a recognition order only if it appears tohim, from the information furnished by the applicant and having regard toany other information in his possession, that the requirements of Part 2 ofthis Schedule are satisfied in relation to the qualification.

(3) Where the Secretary of State refuses an application for a recognition order hemust give the applicant a written notice to that effect specifying whichrequirements, in his opinion, are not satisfied.

(4) A recognition order must state the date on which it takes effect.

Revocation of recognition

3 (1) A recognition order may be revoked by a further order made by theSecretary of State if at any time it appears to him—

(a) that any requirement of Part 2 of this Schedule is not satisfied inrelation to the qualification to which the recognition order relates, or

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(b) that the qualifying body has failed to comply with any obligationimposed on it by or by virtue of this Part of this Act.

(2) An order revoking a recognition order must state the date on which it takeseffect, which must be after the period of three months beginning with thedate on which the revocation order is made.

(3) Before revoking a recognition order the Secretary of State must—(a) give written notice of his intention to do so to the qualifying body,(b) take such steps as he considers reasonably practicable for bringing

the notice to the attention of persons holding the qualification or inthe course of studying for it, and

(c) publish the notice in such manner as he thinks appropriate forbringing it to the attention of any other persons who are in hisopinion likely to be affected.

(4) A notice under sub-paragraph (3) must—(a) state the reasons for which the Secretary of State proposes to act, and(b) give particulars of the rights conferred by sub-paragraph (5).

(5) A person within sub-paragraph (6) may, within the period of three monthsbeginning with the date of service or publication or such longer period as theSecretary of State may allow, make written representations to the Secretaryof State and, if desired, oral representations to a person appointed for thatpurpose by the Secretary of State.

(6) The persons within this sub-paragraph are—(a) the qualifying body on which a notice is served under sub-paragraph

(3),(b) any person holding the qualification or in the course of studying for

it, and(c) any other person who appears to the Secretary of State to be affected.

(7) The Secretary of State must have regard to any representations made inaccordance with subsection (5) in determining whether to revoke therecognition order.

(8) If in any case the Secretary of State considers it essential to do so in the publicinterest he may revoke a recognition order without regard to the restrictionimposed by sub-paragraph (2), even if—

(a) no notice has been given or published under sub-paragraph (3), or(b) the period of time for making representations in pursuance of such a


(9) An order revoking a recognition order may contain such transitionalprovision as the Secretary of State thinks necessary or expedient.

(10) A recognition order may be revoked at the request or with the consent of thequalifying body and any such revocation is not subject to—

(a) the restrictions imposed by sub-paragraphs (1) and (2), or(b) the requirements of sub-paragraphs (3) to (5) and (7).

(11) On making an order revoking a recognition order the Secretary of Statemust—

(a) give written notice of the making of the order to the qualifying body,

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(b) take such steps as he considers reasonably practicable for bringingthe making of the order to the attention of persons holding thequalification or in the course of studying for it, and

(c) publish a notice of the making of the order in such manner as hethinks appropriate for bringing it to the attention of any otherpersons who are in his opinion likely to be affected.

Transitional provision

4 A recognition order made and not revoked under—(a) paragraph 2(1) of Schedule 12 to the Companies Act 1989 (c. 40), or(b) paragraph 2(1) of Schedule 12 to the Companies (Northern Ireland)

Order 1990 (S.I. 1990/593 (N.I. 5)),before the commencement of this Chapter of this Part of this Act is to haveeffect after the commencement of this Chapter as a recognition order madeunder paragraph 2(1) of this Schedule.

Orders not statutory instruments

5 Orders under this Part of this Schedule shall not be made by statutoryinstrument.

PART 2

REQUIREMENTS FOR RECOGNITION OF A PROFESSIONAL QUALIFICATION

Entry requirements

6 (1) The qualification must only be open to persons who—(a) have attained university entrance level, or(b) have a sufficient period of professional experience.

(2) In relation to a person who has not been admitted to a university or othersimilar establishment in the United Kingdom, “attaining university entrancelevel” means—

(a) being educated to such a standard as would entitle him to beconsidered for such admission on the basis of—

(i) academic or professional qualifications obtained in theUnited Kingdom and recognised by the Secretary of State tobe of an appropriate standard, or

(ii) academic or professional qualifications obtained outside theUnited Kingdom which the Secretary of State considers to beof an equivalent standard, or

(b) being assessed, on the basis of written tests of a kind appearing to theSecretary of State to be adequate for the purpose (with or withoutoral examination), as of such a standard of ability as would entitlehim to be considered for such admission.

(3) The assessment, tests and oral examination referred to in sub-paragraph(2)(b) may be conducted by—

(a) the qualifying body, or(b) some other body approved by the Secretary of State.

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(4) The reference in sub-paragraph (1)(b) to “a sufficient period of professionalexperience” is to not less than seven years’ experience in a professionalcapacity in the fields of finance, law and accountancy.

Requirement for theoretical instruction or professional experience

7 (1) The qualification must be restricted to persons who—(a) have completed a course of theoretical instruction in the subjects

prescribed for the purposes of paragraph 8, or(b) have a sufficient period of professional experience.

(2) The reference in sub-paragraph (1)(b) to “a sufficient period of professionalexperience” is to not less than seven years’ experience in a professionalcapacity in the fields of finance, law and accountancy.

Examination

8 (1) The qualification must be restricted to persons who have passed anexamination (at least part of which is in writing) testing—

(a) theoretical knowledge of the subjects prescribed for the purposes ofthis paragraph by regulations made by the Secretary of State, and

(b) ability to apply that knowledge in practice,and requiring a standard of attainment at least equivalent to that required toobtain a degree from a university or similar establishment in the UnitedKingdom.

(2) The qualification may be awarded to a person without his theoreticalknowledge of a subject being tested by examination if he has passed auniversity or other examination of equivalent standard in that subject orholds a university degree or equivalent qualification in it.

(3) The qualification may be awarded to a person without his ability to applyhis theoretical knowledge of a subject in practice being tested byexamination if he has received practical training in that subject which isattested by an examination or diploma recognised by the Secretary of Statefor the purposes of this paragraph.

(4) Regulations under this paragraph are subject to negative resolutionprocedure.

Practical training

9 (1) The qualification must be restricted to persons who have completed at leastthree years’ practical training of which—

(a) part was spent being trained in statutory audit work, and(b) a substantial part was spent being trained in statutory audit work or

other audit work of a description approved by the Secretary of Stateas being similar to statutory audit work.

(2) For the purpose of sub-paragraph (1) “statutory audit work” includes thework of a person appointed as the auditor of a person under the law of acountry or territory outside the United Kingdom where it appears to theSecretary of State that the law and practice with respect to the audit ofaccounts is similar to that in the United Kingdom.

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(3) The training must be given by persons approved by the body offering thequalification as persons whom the body is satisfied, in the light ofundertakings given by them and the supervision to which they are subject(whether by the body in itself or some other body or organisation), willprovide adequate training.

(4) At least two-thirds of the training must be given by a person—(a) eligible for appointment as a statutory auditor, or(b) eligible for a corresponding appointment as an auditor under the law

of a member State, or part of a member State, other than the UnitedKingdom.

Supplementary provision with respect to a sufficient period of professional experience

10 (1) Periods of theoretical instruction in the fields of finance, law andaccountancy may be deducted from the required period of professionalexperience, provided the instruction—

(a) lasted at least one year, and(b) is attested by an examination recognised by the Secretary of State for

the purposes of this paragraph;but the period of professional experience may not be so reduced by morethan four years.

(2) The period of professional experience together with the practical trainingrequired in the case of persons satisfying the requirement in paragraph 7 byvirtue of having a sufficient period of professional experience must not beshorter than the course of theoretical instruction referred to in thatparagraph and the practical training required in the case of personssatisfying the requirement of that paragraph by virtue of having completedsuch a course.

The body offering the qualification

11 (1) The body offering the qualification must have—(a) rules and arrangements adequate to ensure compliance with the

requirements of paragraphs 6 to 10, and(b) adequate arrangements for the effective monitoring of its continued

compliance with those requirements.

(2) The arrangements must include arrangements for monitoring—(a) the standard of the body’s examinations, and(b) the adequacy of the practical training given by the persons approved

by it for that purpose.


ARRANGEMENTS IN WHICH REGISTERED THIRD COUNTRY AUDITORS ARE REQUIRED TO PARTICIPATE

Arrangements for independent monitoring of audits of traded non-Community companies

1 (1) The arrangements referred to in section 839(1)(a) are appropriatearrangements—

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(a) for enabling the performance by the registered third country auditorof third country audit functions to be monitored by means ofinspections carried out under the arrangements, and

(b) for ensuring that the carrying out of such monitoring and inspectionsis done independently of the registered third country auditor.

(2) In this paragraph “third country audit function” means any functionperformed as a third country auditor.

Arrangements for independent investigations for disciplinary purposes

2 (1) The arrangements referred to in section 839(1)(b) are appropriatearrangements—

(a) for the carrying out of investigations into matters arising inconnection with the performance of third country audit functions bythe registered third country auditor,

(b) for the holding of disciplinary hearings relating to the registeredthird country auditor which appear to be desirable following theconclusion of such investigations,

(c) for requiring such hearings to be held in public except where theinterests of justice otherwise require,

(d) for the persons before whom such hearings have taken place todecide whether (and, if so, what) disciplinary action should be takenagainst the registered third country auditor, and

(e) for ensuring that the carrying out of those investigations, the holdingof those hearings and the taking of those decisions are doneindependently of the registered third country auditor.

(2) In this paragraph—“disciplinary action” includes the imposition of a fine; and“third country audit function” means any function performed as a third

country auditor.

Supplementary: arrangements to operate independently of body

3 (1) This paragraph applies for the purposes of—(a) paragraph 1(1)(b), or(b) paragraph 2(1)(e).

(2) Arrangements are not to be regarded as appropriate for the purpose ofensuring that a thing is done independently of the registered third countryauditor unless they are designed to ensure that the registered third countryauditor—

(a) will have no involvement in the appointment or selection of any ofthe persons who are to be responsible for doing that thing, and

(b) will not otherwise be involved in the doing of that thing.

(3) Sub-paragraph (2) imposes a minimum requirement and does not precludethe possibility that additional criteria may need to be satisfied in order forthe arrangements to be regarded as appropriate for the purpose in question.

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Supplementary: funding of arrangements

4 (1) The registered third country auditor must pay any of the costs ofmaintaining any relevant arrangements which the arrangements provideare to be paid by it.

(2) For this purpose “relevant arrangements” are arrangements withinparagraph 1 or 2 in which the registered third country auditor is obliged toparticipate.

Supplementary: scope of arrangement

5 Arrangements may qualify as arrangements within either of paragraphs 1and 2 even though the matters for which they provide are more extensive inany respect than those mentioned in the applicable paragraph.

Specification of particular arrangements by the Secretary of State

6 (1) If there exist two or more sets of arrangements within paragraph 1 or withinparagraph 2, the obligation of a registered third country auditor undersection 839(1)(a) or (b), as the case may be, is to participate in such set ofarrangements as the Secretary of State may by order specify.

(2) An order under sub-paragraph (1) is subject to negative resolutionprocedure.


SUPPLEMENTARY PROVISIONS WITH RESPECT TO DELEGATION ORDER

Operation of this Schedule

1 (1) This Schedule has effect in relation to a body designated by a delegationorder under section 848 as follows—

(a) paragraphs 2 to 12 have effect in relation to the body where it isestablished by the order;

(b) paragraphs 2 and 6 to 11 have effect in relation to the body where itis an existing body;

(c) paragraph 13 has effect in relation to the body where it is an existingbody that is an unincorporated association.

(2) In their operation in accordance with sub-paragraph (1)(b), paragraphs 2and 6 apply only in relation to—

(a) things done by or in relation to the body in or in connection with theexercise of functions transferred to it by the delegation order, and

(b) functions of the body which are functions so transferred.

(3) Any power conferred by this Schedule to make provision by order is apower to make provision by an order under section 848.

Status

2 The body is not to be regarded as acting on behalf of the Crown and itsmembers, officers and employees are not to be regarded as Crown servants.

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Name, members and chairman

3 (1) The body is to be known by such name as may be specified in the delegationorder.

(2) The body is to consist of such persons (not being less than eight) as theSecretary of State may appoint after such consultation as he thinksappropriate.

(3) The chairman of the body is to be such person as the Secretary of State mayappoint from among its members.

(4) The Secretary of State may make provision by order as to—(a) the terms on which the members of the body are to hold and vacate

office;(b) the terms on which a person appointed as chairman is to hold and

vacate the office of chairman.

Financial provisions

4 (1) The body must pay to its chairman and members such remuneration, andsuch allowances in respect of expenses properly incurred by them in theperformance of their duties, as the Secretary of State may determine.

(2) As regards any chairman or member in whose case the Secretary of State sodetermines, the body must pay or make provision for the payment of—

(a) such pension, allowance or gratuity to or in respect of that person onhis retirement or death, or

(b) such contributions or other payment towards the provision of such apension, allowance or gratuity,

as the Secretary of State may determine.

(3) Where—(a) a person ceases to be a member of the body otherwise than on the

expiry of his term of office, and(b) it appears to the Secretary of State that there are special

circumstances which make it right for that person to receivecompensation,

the body must make a payment to him by way of compensation of suchamount as the Secretary of State may determine.

Proceedings

5 (1) The delegation order may contain such provision as the Secretary of Stateconsiders appropriate with respect to the proceedings of the body.

(2) The delegation order may, in particular—(a) authorise the body to discharge any functions by means of

committees consisting wholly or partly of members of the body;(b) provide that the validity of proceedings of the body, or of any such

committee, is not affected by any vacancy among the members orany defect in the appointment of any member.

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Fees

6 (1) The body may retain fees payable to it.

(2) The fees must be applied for—(a) meeting the expenses of the body in discharging its functions, and(b) any purposes incidental to those functions.

(3) Those expenses include any expenses incurred by the body on such staff,accommodation, services and other facilities as appear to it to be necessaryor expedient for the proper performance of its functions.

(4) In prescribing the amount of fees in the exercise of the functions transferredto it the body must prescribe such fees as appear to it sufficient to defraythose expenses, taking one year with another.

(5) Any exercise by the body of the power to prescribe fees requires theapproval of the Secretary of State.

(6) The Secretary of State may, after consultation with the body, by order varyor revoke any regulations prescribing fees made by the body.

Legislative functions

7 (1) Regulations or an order made by the body in the exercise of the functionstransferred to it must be made by instrument in writing, but not by statutoryinstrument.

(2) The instrument must specify the provision of this Part of this Act underwhich it is made.

(3) The Secretary of State may by order impose such requirements as he thinksnecessary or expedient as to the circumstances and manner in which thebody must consult on any regulations or order it proposes to make.

(4) Nothing in this Part applies to make regulations or an order made by thebody subject to negative resolution procedure or affirmative resolutionprocedure.

8 (1) Immediately after an instrument is made it must be printed and madeavailable to the public with or without payment.

(2) A person is not to be taken to have contravened any regulation or order if heshows that at the time of the alleged contravention the instrumentcontaining the regulation or order had not been made available as requiredby this paragraph.

9 (1) The production of a printed copy of an instrument purporting to be made bythe body on which is endorsed a certificate signed by an officer of the bodyauthorised by it for the purpose and stating—

(a) that the instrument was made by the body,(b) that the copy is a true copy of the instrument, and(c) that on a specified date the instrument was made available to the

public as required by paragraph 8,is evidence (or, in Scotland, sufficient evidence) of the facts stated in thecertificate.

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(2) A certificate purporting to be signed as mentioned in sub-paragraph (1) is tobe deemed to have been duly signed unless the contrary is shown.

(3) Any person wishing in any legal proceedings to cite an instrument made bythe body may require the body to cause a copy of it to be endorsed with sucha certificate as is mentioned in this paragraph.

Report and accounts

10 (1) The body must, at least once in each calendar year for which the delegationorder is in force, make a report to the Secretary of State on—

(a) the discharge of the functions transferred to it, and(b) such other matters as the Secretary of State may by order require.

(2) The delegation order may modify subsection (1) as it has effect in relation tothe calendar year in which the order comes into force or is revoked.

(3) The Secretary of State must lay before Parliament copies of each reportreceived by him under this paragraph.

(4) The following provisions of this paragraph apply as follows—(a) sub-paragraphs (5) and (6) apply only where the body is established

by the order, and(b) sub-paragraphs (7) and (8) apply only where the body is an existing

body.

(5) The Secretary of State may, with the consent of the Treasury, give directionsto the body with respect to its accounts and the audit of its accounts.

(6) A person may only be appointed as auditor of the body if he is eligible forappointment as a statutory auditor.

(7) Unless the body is a company to which section 226 of the Companies Act1985 (c. 6) (duty to prepare individual company accounts) applies, theSecretary of State may, with the consent of the Treasury, give directions tothe body with respect to its accounts and the audit of its accounts.

(8) Whether or not the body is a company to which section 226 of theCompanies Act 1985 applies, the Secretary of State may direct that anyprovisions of that Act specified in the directions are to apply to the body,with or without any modifications so specified.


11 (1) The transfer of a function to a body designated by a delegation order doesnot affect anything previously done in the exercise of the functiontransferred; and the resumption of a function so transferred does not affectanything previously done in exercise of the function resumed.

(2) The Secretary of State may by order make such transitional and othersupplementary provision as he thinks necessary or expedient in relation tothe transfer or resumption of a function.

(3) The provision that may be made in connection with the transfer of a functionincludes, in particular, provision—

(a) for modifying or excluding any provision of this Part of this Act in itsapplication to the function transferred;

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(b) for applying to the body designated by the delegation order, inconnection with the function transferred, any provision applying tothe Secretary of State which is contained in or made under any otherenactment;

(c) for the transfer of any property, rights or liabilities from the Secretaryof State to that body;

(d) for the carrying on and completion by that body of anything in theprocess of being done by the Secretary of State when the order takeseffect;

(e) for the substitution of that body for the Secretary of State in anyinstrument, contract or legal proceedings.

(4) The provision that may be made in connection with the resumption of afunction includes, in particular, provision—

(a) for the transfer of any property, rights or liabilities from that body tothe Secretary of State;

(b) for the carrying on and completion by the Secretary of State ofanything in the process of being done by that body when the ordertakes effect;

(c) for the substitution of the Secretary of State for that body in anyinstrument, contract or legal proceedings.

12 Where a delegation order is revoked, the Secretary of State may by ordermake provision—

(a) for the payment of compensation to persons ceasing to be employedby the body established by the delegation order;

(b) as to the winding up and dissolution of the body.

13 (1) This paragraph applies where the body is an unincorporated association.

(2) Any relevant proceedings may be brought by or against the body in thename of any body corporate whose constitution provides for theestablishment of the body.

(3) In sub-paragraph (2) “relevant proceedings” means proceedings brought inor in connection with the exercise of any transferred function.

(4) In relation to proceedings brought as mentioned in sub-paragraph (2), anyreference in paragraph 11(3)(e) or (4)(c) to the body replacing or beingreplaced by the Secretary of State in any legal proceedings is to be read withthe appropriate modifications.


STATUTORY AUDITORS: CONSEQUENTIAL AMENDMENTS

Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27)

1 (1) Section 16 of the Companies (Audit, Investigations and CommunityEnterprise) Act 2004 (grants to bodies concerned with accounting standardsetc) is amended as follows.

(2) In subsection (2)—

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(a) in paragraph (f) for “paragraph 17” to the end substitute “paragraph21, 22, 23(1) or 24(1) of Schedule 10 to the Company Law Reform Act2006;”,

(b) in paragraph (g) for “Part 2 of that Act” substitute “Part 33 of thatAct”.

(3) In subsection (5), in the definition of “professional accountancy body”—(a) in paragraph (a) for “Part 2 of the Companies Act 1989 (c. 40)”

substitute “Part 33 of the Company Law Reform Act 2006”, and(b) in paragraph (b) for “section 32” substitute “section 817”.


REPEALS

Company law repeals (Great Britain)

Short title and chapter Extent of repeal

Companies Act 1985 (c. 6) Parts 1 to 3.Sections 80 to 88.Section 95.Sections 97 and 98.Sections 117 and 118.Sections 120 and 121.Sections 123 and 124.In section 127—

(a) subsection (1)(a), and(b) in subsection (5), the words “; and, if

default is made” to the end.In section 128—

(a) in subsection (3), the words from“otherwise than” to “section 380”, and

(b) in subsection (4), the words from“(otherwise than” to “above)”.

In section 129—(a) in subsection (1), the words from “with

rights which” to “section 380 applies”,(b) in subsection (2), the words from

“otherwise than” to “section 380”, and(c) in subsection (3), the words from

“(otherwise than” to “above)”.In section 135(2), the words following

paragraph (c).Section 138(5) and (6).In section 141, “and liable to a fine”.In section 143(2) in subsection (2), the words

“the company is liable” to “or both; and,”.Sections 155 to 158.

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Companies Act 1985 (c. 6)—cont.

In section 159—(a) in subsection (1), “if authorised to do so

by its articles”, and(b) in subsection (3), “; and the terms of

redemption must provide for paymenton redemption”.

Section 160(3).Section 162A(2).Section 169(4), (5) and (7) to (9).Section 183(4) to (6).Sections 190 and 191.Parts 6 and 7.In section 281, “or rule of law”.Parts 9 and 10.Sections 348 to 361.Sections 366 to 394A.In section 426(7), the words “; and any person”

to the end.In section 427(5), the words “; and if default is

made” to the end.In section 437-

(a) in subsection (1), the second sentence,and

(b) subsections (1B) and (1C).Section 438.In section 439—

(a) in subsection (2), “, or is ordered to paythe whole or any part of the costs ofproceedings brought under section 438”,

(b) subsections (3) and (7), and(c) in subsection (8), “; and any such liability

imposed by subsection (2) is (subject asmentioned above) a liability also toindemnify all persons against liabilityunder subsection (3)”.

Section 442(2).Section 446.In section 448(7), the words “and liable to a

fine.” to the end.Section 449(7).Section 450(4).Section 451(3).Section 453(1A)(b).Section 453A(6).In section 461(5), the words “; and if a company

makes default” to the end.In section 651(3), the second sentence.In section 652E—

(a) in subsection (1), “and liable to a fine”,and

(b) in subsection (2), “and liable toimprisonment or a fine, or both”.

In section 652F(2), “and liable to a fine”.Sections 675 to 677.


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Sections 680 to 690.Parts 23 and 24.Section 718.Section 720. Sections 722 to 723F.Sections 725 to 734Section 735.In section 735A(2), “, 729”. Sections 740 to 742A.Section 743A.In section 744, the definitions of “agent”,

“articles”, “communication”, “the CompaniesActs”, “document”, “electroniccommunication”, “EEA State”, “expert”,“Gazette”, “insurance market activity”,“memorandum”, “official seal”, “overseacompany”, “place of business”, “prospectus”and “registrar of companies”.

Section 744A.Section 745.Schedule 1.Schedule 2 so far as applying for the purposes of

Schedule 5.Schedules 4 to 11.Schedule 13.Schedule 15A.Schedules 21 to 24.

Insolvency Act 1986 (c. 45) In Schedule 13, in Part 1, the entries relating tothe following provisions of the CompaniesAct 1985—(a) section 13(4),(b) section 44(7), and(c) section 156(3).

Financial Services Act 1986(c. 60)

In Schedule 16, paragraph 20.

Companies Act 1989 (c. 40) Sections 1 to 22.Sections 57 and 58.Section 64(2).Section 66(3).Section 71.Part 4.Sections 105 and 106.Section 108(1) to (3).Section 109(1) and (2).Section 110.Section 113.Section 114(1).Sections 115 to 123.Sections 125 and 126.Section 127(1), (2), (4) and (7).Section 128.Section 129(1).Section 130(1) to (5).Section 133(1) and (2).Section 134.


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Section 136.Section 137(1).Section 138.Section 139(1) to (3).Section 142.In section 143, subsections (1) and (4) to (11).In section 207(4), the second sentence.Schedules 1 to 9.In Schedule 10, paragraphs 1, 3, 10 and 11 to 15

and 17 to 24.Schedules 15 and 16.In Schedule 17, paragraphs 1 to 4 and 7.In Schedule 19, paragraphs 2 to 9, 12 to 14, 17, 18

and 21.Age of Legal Capacity

(Scotland) Act 1991 (c. 50)In Schedule 1, paragraph 39.

Charities Act 1993 (c. 10) In Schedule 6, paragraph 20.Welsh Language Act 1993

(c. 38)Section 30(3) and (6).

Deregulation and ContractingOut Act 1994 (c. 40)

In Schedule 5, paragraph 4.In Schedule 16, paragraph 8.

Requirements of Writing(Scotland) Act 1995 (c. 7)

In Schedule 4, paragraphs 51 to 54.

Criminal Procedure(Consequential Provisions)(Scotland) Act 1995 (c. 40)

In Schedule 4, paragraph 56(3) and (4).

Disability Discrimination Act1995 (c. 50)


Financial Services and MarketsAct 2000 (c. 8)

Section 143.

Political Parties, Elections andReferendums Act 2000 (c. 41)

Part 9.Schedule 19.

Criminal Justice and Police Act2001 (c. 16)

Section 45.

Enterprise Act 2002 (c. 40) In Schedule 17, paragraph 4.Companies (Audit,

Investigations andCommunity Enterprise) Act2004 (c. 27)

Section 7.Sections 9 and 10.Section 11(1).Sections 12 and 13.Sections 19 and 20.Schedule 1.In Schedule 2, paragraphs 6 to 10, 22 to 24 and

26.In Schedule 6, paragraphs 1 to 9.

Civil Partnership Act 2004(c. 33)Constitutional ReformAct 2005 (c. 4)

In Schedule 27, paragraphs 99 to 102 and 104.In Schedule 11, in paragraph 4(3), the reference

to the Companies Act 1985.


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Repeals and revocations relating to Northern Ireland

Short title and chapter Extent of repeal or revocation

Companies (Northern Ireland)Order 1986 (SI 1986/1032)(NI 6))

The whole Order.

Companies Consolidation(Consequential Provisions)(Northern Ireland) Order1986 (SI 1986/1035 (NI 9))

The whole Order.

Business Names (NorthernIreland) Order 1986 (SI 1986/1033 (NI 7))

The whole Order.

The Industrial Relations(Northern Ireland) Order1987 (SI 1987/936 NI 9))

Article 3.

The Companies (NorthernIreland) Order 1989 (SI 1989/2404 (NI 18))

The whole Order.

The Insolvency (NorthernIreland) Order 1989 (SI 1989/2405 (NI 19))

In Schedule 9, Part I.

European Economic InterestGroupings Regulations(Northern Ireland) 1989 (SR1989/216)

The whole Regulations.

The Companies (NorthernIreland) Order 1990 (SI 1990/593 (NI 5))

The whole Order.

The Companies (No. 2)(Northern Ireland) Order1990 (SI 1990/1504 (NI 10))

Parts II to IV.Part VI.Schedules 1 to 6.

Criminal Justice Act 1993 (c. 36) In Schedule 5, Part 2.Schedule 6.

The Financial Provisions(Northern Ireland) Order1993 (SI 1993/1252 (NI 5))

Article 15.

Deregulation and ContractingOut Act 1994 (c. 40)

Section 13(2).

The Pensions (NorthernIreland) Order 1995 (SI 1995/3213 (NI 22))


The Deregulation andContracting Out (NorthernIreland) Order 1996 (SI 1996/1632 (NI 11))

Article 11.Schedule 2.In Schedule 5, paragraph 4.

Youth Justice and CriminalEvidence Act 1999 (c. 23)


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Other repeals

Limited Liability PartnershipsAct (Northern Ireland) 2002(c. 12 (NI))

The whole Act.

The Open-Ended InvestmentCompanies Act (NorthernIreland) 2002 (c. 13)

The whole Act.

The Companies DirectorsDisqualification (NorthernIreland) Order 2002 (SI 2002/3150 (NI 4))

In Schedule 3, paragraphs 3 to 5.

Open-Ended InvestmentCompanies Regulations(Northern Ireland) 2004 (SR2004/335)

The whole Regulations.

Companies (Audit,Investigations andCommunity Enterprise) Act2004 (c. 27)

Section 11(2).

The Law Reform(Miscellaneous Provisions)(Northern Ireland) Order2005 (SI 2005/1452 (NI 7))

Article 4(2).

The Companies (Audit,Investigations andCommunity Enterprise)(Northern Ireland) Order2005 (SI 2005/1967 (NI 17))

The whole Order.


Business Names Act 1985 (c. 7) The whole Act.Companies Act 1989 (c.40) Part 2.


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HL Bill 34 (xxxxxx) 54/1


© Parliamentary copyright House of Lords 2005Applications for reproduction should be made in writing to the Copyright Unit,

Her Majesty’s Stationery Office, St. Clements House, 2-16 Colegate, Norwich, NR3 1BQ

PUBLISHED BY AUTHORITY OF THE HOUSE OF LORDSLONDON — THE STATIONERY OFFICE LIMITED

Printed in the United Kingdom byThe Stationery Office Limited

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A

B I L LTo reform company law and restate the greater part of the enactments relatingto companies; to make other provision relating to companies and other formsof business organisation; to make provision about business names, auditorsand actuaries; to amend Part 9 of the Enterprise Act 2002; and for connectedpurposes.

The Lord Sainsbury of Turville

Ordered to be Printed, 1st November 2005