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Companies Act 1989 (c. 40)

(The document as of February, 2008)

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Companies Act 1989

1989 CHAPTER 40

ARRANGEMENT OF SECTIONS

Content
  1. Part I

    Company Accounts

    1. Introduction

      1. 1. Introduction.

    2. Provisions applying to companies generally

      1. 2. Accounting records.

      2. 3. A company's financial year and accounting reference periods.

      3. 4. Individual company accounts.

      4. 5. Group accounts.

      5. 6. Additional disclosure required in notes to accounts.

      6. 7. Approval and signing of accounts.

      7. 8. Directors' report.

      8. 9. Auditors' report.

      9. 10. Publication of accounts and reports.

      10. 11. Laying and delivering of accounts and reports.

      11. 12. Remedies for failure to comply with accounting requirements.

    3. Exemptions and special provisions

      1. 13. Small and medium-sized companies and groups.

      2. 14. Dormant companies.

      3. 15. Public listed companies: provision of summary financial statement.

      4. 16. Private companies: election to dispense with laying of accounts and reports before general meeting.

      5. 17. Unlimited companies: exemption from requirement to deliver accounts and reports.

      6. 18. Banking and insurance companies and groups: special provisions.

    4. Supplementary provisions

      1. 19. Accounting standards.

      2. 20. Power to alter accounting requirements.

      3. 21. Parent and subsidiary undertakings.

      4. 22. Other interpretation provisions.

    5. Consequential amendments

      1. 23. Consequential amendments.

  2. Part II

    Eligibility for Appointment as Company Auditor

    1. Introduction

      1. 24. Introduction.

    2. Eligibility for appointment

      1. 25. Eligibility for appointment.

      2. 26. Effect of appointment of partnership.

      3. 27. Ineligibility on ground of lack of independence.

      4. 28. Effect of ineligibility.

      5. 29. Power of Secretary of State to require second audit.

    3. Recognition of supervisory bodies and professional qualifications

      1. 30. Supervisory bodies.

      2. 31. Meaning of "appropriate qualification".

      3. 32. Qualifying bodies and recognised professional qualifications.

      4. 33. Approval of overseas qualifications.

      5. 34. Eligibility of individuals retaining only 1967 Act authorisation.

    4. Duties of recognised bodies

      1. 35. The register of auditors.

      2. 36. Information about firms to be available to public.

      3. 37. Matters to be notified to the Secretary of State.

      4. 38. Power to call for information.

      5. 39. Compliance orders.

      6. 40. Directions to comply with international obligations.

    5. Offences

      1. 41. False and misleading statements.

      2. 42. Offences by bodies corporate, partnerships and unincorporated associations.

      3. 43. Time limits for prosecution of offences.

      4. 44. Jurisdiction and procedure in respect of offences.

    6. Supplementary provisions

      1. 45. Fees.

      2. 46. Delegation of functions of Secretary of State.

      3. 47. Restrictive practices.

      4. 48. Exemption from liability for damages.

      5. 49. Service of notices.

      6. 50. Power to make consequential amendments.

      7. 51. Power to make provision in consequence of changes affecting accountancy bodies.

      8. 52. Meaning of "associate".

      9. 53. Minor definitions.

      10. 54. Index of defined expressions.

  3. Part III

    Investigations and Powers to Obtain Information

    1. Amendments of the Companies Act 1985

      1. 55. Investigations by inspectors not leading to published report.

      2. 56. Production of documents and evidence to inspectors.

      3. 57. Duty of inspectors to report.

      4. 58. Power to bring civil proceedings on the company's behalf.

      5. 59. Expenses of investigating a company's affairs.

      6. 60. Power of Secretary of State to present winding-up petition.

      7. 61. Inspectors' reports as evidence.

      8. 62. Investigation of company ownership.

      9. 63. Secretary of State's power to require production of documents.

      10. 64. Entry and search of premises.

      11. 65. Provision for security of information obtained.

      12. 66. Punishment for destroying, mutilating, &c. company documents.

      13. 67. Punishment for furnishing false information.

      14. 68. Disclosure of information by Secretary of State or inspector.

      15. 69. Protection of banking information.

      16. 70. Investigation of oversea companies.

      17. 71. Investigation of unregistered companies.

    2. Amendments of the Financial Services Act 1986

      1. 72. Investigations into collective investment schemes.

      2. 73. Investigations into affairs of persons carrying on investment business.

      3. 74. Investigations into insider dealing.

      4. 75. Restrictions on disclosure of information.

      5. 76. Entry and search of premises.

    3. Amendments of other enactments

      1. 77. Amendments of the Insurance Companies Act 1982.

      2. 78. Amendment of the Insolvency Act 1986.

      3. 79. Amendment of the Company Directors Disqualification Act 1986.

      4. 80. Amendment of the Building Societies Act 1986.

      5. 81. Amendments of the Banking Act 1987.

    4. Powers exercisable to assist overseas regulatory authorities

      1. 82. Request for assistance by overseas regulatory authority.

      2. Part IV

        Registration of Company Charges

        1. Introduction

          1. 92. Introduction.

        2. Registration in the companies charges register

          1. 93. Charges requiring registration.

          2. 94. The companies charges register.

          3. 95. Delivery of particulars for registration.

          4. 96. Delivery of further particulars.

          5. 97. Effect of omissions and errors in registered particulars.

          6. 98. Memorandum of charge ceasing to affect company's property.

          7. 99. Further provisions with respect to voidness of charges.

          8. 100. Additional information to be registered.

        3. Copies of instruments and register to be kept by company

          1. 101. Copies of instruments and register to be kept by company.

        4. Supplementary provisions

          1. 102. Power to make further provision by regulations.

          2. 103. Other supplementary provisions.

          3. 104. Interpretation, &c.

          4. 105. Charges on property of oversea company.

          5. 106. Application of provisions to unregistered companies.

          6. 107. Consequential amendments.

      3. Part V

        Other amendments of Company Law

        1. A company's capacity and related matters

          1. 108. A company's capacity and the power of the directors to bind it.

          2. 109. Invalidity of certain transactions involving directors.

          3. 110. Statement of company's objects.

          4. 111. Charitable companies.

          5. 112. Charitable companies (Scotland).

        2. De-regulation of private companies

          1. 113. Written resolutions of private companies.

          2. 114. Written resolutions: supplementary provisions.

          3. 115. Election by private company to dispense with certain requirements.

          4. 116. Elective resolution of private company.

          5. 117. Power to make further provision by regulations.

        3. Appointment and removal of auditors and related matters

          1. 118. Introduction.

          2. 119. Appointment of auditors.

          3. 120. Rights of auditors.

          4. 121. Remuneration of auditors.

          5. 122. Removal, resignation, &c. of auditors.

          6. 123. Statement by person ceasing to hold office as auditor.

          7. 124. Auditors of trade unions and employers' associations.

        4. Company records and related matters

          1. 125. Delivery of documents to the registrar.

          2. 126. Keeping and inspection of company records.

          3. 127. Supplementary provisions as to company records and related matters.

        5. Miscellaneous

          1. 128. Form and articles for partnership company.

          2. 129. Membership of holding company.

          3. 130. Company contracts and execution of documents by companies.

          4. 131. Members' rights to damages, &c.

          5. 132. Financial assistance for purposes of employees' share scheme.

          6. 133. Issue of redeemable shares.

          7. 134. Disclosure of interests in shares.

          8. 135. Orders imposing restrictions on shares.

          9. 136. A company's registered office.

          10. 137. Effecting of insurance for officers and auditors of company.

          11. 138

      4. Part VI

        Mergers and Related Matters

        1. 146. Restriction on references where prior notice given.

        2. 147. Undertakings as alternative to merger reference.

        3. 148. Enforcement of undertakings.

        4. 149. Temporary restrictions on share dealings.

        5. 150. Obtaining control by stages.

        6. 151. False or misleading information.

        7. 152. Fees.

        8. 153. Other amendments about mergers and related matters.

      5. Part VII

        Financial Markets and Insolvency

        1. Introduction

          1. 154. Introduction.

        2. Recognised investment exchanges and clearing houses

          1. 155. Market contracts.

          2. 156. Additional requirements for recognition: default rules, &c.

          3. 157. Changes in default rules.

          4. 158. Modifications of the law of insolvency.

          5. 159. Proceedings of exchange or clearing house take precedence over insolvency procedures.

          6. 160. Duty to give assistance for purposes of default proceedings.

          7. 161. Supplementary provisions as to default proceedings.

          8. 162. Duty to report on completion of default proceedings.

          9. 163. Net sum payable on completion of default proceedings.

          10. 164. Disclaimer of property, rescission of contracts, &c.

          11. 165. Adjustment of prior transactions.

          12. 166. Powers of Secretary of State to give directions.

          13. 167. Application to determine whether default proceedings to be taken.

          14. 168. Delegation of functions to designated agency.

          15. 169. Supplementary provisions.

        3. Other exchanges and clearing houses

          1. 170. Certain overseas exchanges and clearing houses.

          2. 171. Certain money market institutions.

          3. 172. Settlement arrangements provided by the Bank of England.

        4. Market charges

          1. 173. Market charges.

          2. 174. Modifications of the law of insolvency.

          3. 175. Administration orders, &c.

          4. 176. Power to make provision about certain other charges.

        5. Market property

          1. 177. Application of margin not affected by certain other interests.

          2. 178. Priority of floating market charge over subsequent charges.

          3. 179. Priority of market charge over unpaid vendor's lien.

          4. 180. Proceedings against market property by unsecured creditors.

          5. 181. Power to apply provisions to other cases.

        6. Supplementary provisions

          1. 190. Minor definitions.

          2. 191. Index of defined expressions.

      6. Part VIII

        Amendments of the Financial Services Act 1986

        1. 192. Statements of principle.

        2. 193. Restriction of right to bring action for contravention of rules, regulations, &c.

        3. 194. Application of designated rules and regulations to members of self-regulating organisations.

        4. 195. Codes of practice.

        5. 196. Relations with other regulatory authorities.

        6. 197. Construction of references to incurring civil liability.

        7. 198. Offers of unlisted securities.

        8. 199. Offers of securities by private companies and old public companies.

        9. 200. Jurisdiction of High Court and Court of Session.

        10. 201. Directions to secure compliance with international obligations.

        11. 202. Offers of short-dated debentures.

        12. 203. Standard of protection for investors.

        13. 204. Costs of compliance.

        14. 205. Requirements for recognition of investment exchange.

        15. 206. Consequential amendments and delegation of functions on commencement.

      7. Part IX

        Transfer of Securities

        1. 207. Transfer of securities.

      8. Part X

        Miscellaneous and General Provisions

        1. Miscellaneous

          1. 208. Summary proceedings in Scotland for offences in connection with disqualification of directors.

          2. 209. Prosecutions in connection with insider dealing.

          3. 210. Restriction of duty to supply statements of premium income.

          4. 211. Building societies: miscellaneous amendments.

        2. General

          1. 212. Repeals.

          2. 213. Provisions extending to Northern Ireland.

          3. 214. Making of corresponding provision for Northern Ireland.

          4. 215. Commencement and transitional provisions.

          5. 216. Short title.

      9. Schedules:

        1. Schedule 1

          Form and content of company accounts.

        2. Schedule 2

          Form and content of group accounts.

        3. Schedule 3

          Disclosure of information: related undertakings.

          1. Part I

            Companies not required to prepare group accounts.

          2. Part II

            Companies required to prepare group accounts.

        4. Schedule 4

          Disclosure of information: emoluments and other benefits of directors and others.

        5. Schedule 5

          Matters to be included in directors' report.

        6. Schedule 6

          Exemptions for small and medium-sized companies.

          1. Part I

            Small companies.

          2. Part II

            Medium-sized companies.

          3. Part III

            Supplementary provisions.

        7. Schedule 7

          Special provisions for banking and insurance companies and groups.

          1. Part I

            Form and content of accounts.

          2. Part II

            Accounts of banking or insurance group.

          3. Part III

            Additional disclosure: related undertakings.

          4. Part IV

            Additional disclosure: emoluments and other benefits of directors and others.

        8. Schedule 8

          Directors' report where accounts prepared in accordance with special provisions for banking or insurance companies or groups.

        9. Schedule 9

          Parent and subsidiary undertakings: supplementary provisions.

        10. Schedule 10

          Amendments consequential on Part I.

          1. Part I

            Amendments of the Companies Act 1985.

          2. Part II

            Amendments of other enactments.

        11. Schedule 11

          Recognition of supervisory body.

          1. Part I

            Grant and revocation of recognition.

          2. Part II

            Requirements for recognition.

        12. Schedule 12

          Recognition of professional qualification.

          1. Part I

            Grant and revocation of recognition.

          2. Part II

            Requirements for recognition.

        13. Schedule 13

          Supplementary provisions with respect to delegation order.

        14. Schedule 14

          Supervisory and qualifying bodies: restrictive practices.

          1. Part I

            Prevention of restrictive practices.

          2. Part II

            Consequential exemptions from competition law.

        15. Schedule 15

          Charges on property of oversea companies.

        16. Schedule 16

          Amendments consequential on Part IV.

        17. Schedule 17

          Company contracts, seals, &c.: further provisions.

        18. Schedule 18

          "Subsidiary" and related expressions: consequential amendments and savings.

        19. Schedule 19

          Minor amendments of the Companies Act 1985.

        20. Schedule 20

          Amendments about mergers and related matters.

        21. Schedule 21

          Additional requirements for recognition.

          1. Part I

            UK investment exchanges.

          2. Part II

            UK clearing houses.

          3. Part III

            Overseas investment exchanges and clearing houses.

        22. Schedule 22

          Financial markets and insolvency: provisions applying to pre-commencement cases.

        23. Schedule 23

          Consequential amendments of the Financial Services Act 1986.

          1. Part I

            General amendments.

          2. Part II

            Amendments relating to friendly societies.

        24. Schedule 24

          Repeals.

Act to amend the law relating to company accounts; to make new provision with respect to the persons eligible for appointment as company auditors; to amend the Companies Act 1985 and certain other enactments with respect to investigations and powers to obtain information and to confer new powers exercisable to assist overseas regulatory authorities; to make new provision with respect to the registration of company charges and otherwise to amend the law relating to companies; to amend the Fair Trading Act 1973; to enable provision to be made for the payment of fees in connection with the exercise by the Secretary of State, the Director General of Fair Trading and the Monopolies and Mergers Commission of their functions under Part V of that Act; to make provision for safeguarding the operation of certain financial markets; to amend the Financial Services Act 1986; to enable provision to be made for the recording and transfer of title to securities without a written instrument; to amend the Company Directors Disqualification Act 1986, the Company Securities (Insider Dealing) Act 1985, the Policyholders Protection Act 1975 and the law relating to building societies; and for connected purposes.

[16th November 1989]

BE IT ENACTED by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:--



Part I Company Accounts

Introduction

1 Introduction

The provisions of this Part amend Part VII of the [1985 c. 6.] Companies Act 1985 (accounts and audit) by--

(a) inserting new provisions in place of sections 221 to 262 of that Act, and

(b) amending or replacing Schedules 4 to 10 to that Act and inserting new Schedules.



Provisions applying to companies generally

<<<< >>>>

2 Accounting records

The following sections are inserted in Part VII of the [1985 c. 6.] Companies Act 1985 at the beginning of Chapter I (provisions applying to companies generally)--



" Accounting records
221 Duty to keep accounting records

(1) Every company shall keep accounting records which are sufficient to show and explain the company's transactions and are such as to--

(a) disclose with reasonable accuracy, at any time, the financial position of the company at that time, and

(b) enable the directors to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.

(2) The accounting records shall 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 and expenditure takes place, and

(b) a record of the assets and liabilities of the company.

(3) If the company's business involves dealing in goods, the accounting records shall contain--

(a) statements of stock held by the company at the end of each financial year of the company,

(b) all statements of stocktakings from which any such statement of stock as is mentioned 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 the buyers and sellers in sufficient detail to enable all these to be identified.

(4) A parent company which has a subsidiary undertaking in relation to which the above requirements do not apply shall take reasonable steps to secure that the undertaking keeps such accounting records as to enable the directors of the parent company to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.

(5) If a company fails to comply with any provision of this section, every officer of the company who is in default is guilty of an offence unless he shows that he acted honestly and that in the circumstances in which the company's business was carried on the default was excusable.

(6) A person guilty of an offence under this section is liable to imprisonment or a fine, or both.

222 Where and for how long records to be kept

(1) A company's accounting records shall be kept at its registered office or such other place as the directors think fit, and shall at all times be open to inspection by the company's officers.

(2) If accounting records are kept at a place outside Great Britain, accounts and returns with respect to the business dealt with in the accounting records so kept shall be sent to, and kept at, a place in Great Britain, and shall at all times be open to such inspection.

(3) The accounts and returns to be sent to Great Britain shall be such as to--

(a) disclose with reasonable accuracy the financial position of the business in question at intervals of not more than six months, and

(b) enable the directors to ensure that the company's balance sheet and profit and loss account comply with the requirements of this Act.

(4) If a company fails to comply with any provision of subsections (1) to (3), every officer of the company who is in default is guilty of an offence, and liable to imprisonment or a fine or both, unless he shows that he acted honestly and that in the circumstances in which the company's business was carried on the default was excusable.

(5) Accounting records which a company is required by section 221 to keep shall be preserved by it--

(a) in the case of a private company, for three years from the date on which they are made, and

(b) in the case of a public company, for six years from the date on which they are made.

This is subject to any provision contained in rules made under section 411 of the Insolvency Act 1986 (company insolvency rules).

(6) An officer of a company is guilty of an offence, and liable to imprisonment or a fine or both, if he fails to take all reasonable steps for securing compliance by the company with subsection (5) or intentionally causes any default by the company under that subsection. " .

3 A company's financial year and accounting reference periods

The following sections are inserted in Part VII of the [1985 c. 66.] Companies Act 1985--

" 223 A company's financial year and accounting reference periodsA company's financial year

(1) A company's "financial year" is determined as follows.

(2) Its first financial year begins with the first day of its first accounting reference period and 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 may determine.

(3) Subsequent financial years begin with the day immediately following the end of the company's previous financial year and 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 that period, as the directors may determine.

(4) In relation to an undertaking which is not a company, references in this Act to its financial year are to any period in respect of which a profit and loss account of the undertaking is required to be made up (by its constitution or by the law under which it is established), whether that period is a year or not.

(5) The directors of a parent company shall secure that, except where in their opinion there are good reasons against it, the financial year of each of its subsidiary undertakings coincides with the company's own financial year.

224 Accounting reference periods and accounting reference date

(1) A company's accounting reference periods are determined according to its accounting reference date.

(2) A company may, at any time before the end of the period of nine months beginning with the date of its incorporation, by notice in the prescribed form given to the registrar specify its accounting reference date, that is, the date on which its accounting reference period ends in each calendar year.

(3) Failing such notice, a company's accounting reference date is--

(a) in the case of a company incorporated before the commencement of section 3 of the Companies Act 1989, 31st March;

(b) in the case of a company incorporated after the commencement of that section, the last day of the month in which the anniversary of its incorporation falls.

(4) A company's first accounting reference period is the period of more than six months, but not more than 18 months, beginning with the date of its incorporation and ending with its accounting reference date.

(5) Its subsequent accounting reference periods are successive periods of twelve months beginning immediately after the end of the previous accounting reference period and ending with its accounting reference date.

(6) This section has effect subject to the provisions of section 225 relating to the alteration of accounting reference dates and the consequences of such alteration.

225 Alteration of accounting reference date

(1) A company may by notice in the prescribed form given to the registrar specify a new accounting reference date having effect in relation to the company's current accounting reference period and subsequent periods.

(2) A company may by notice in the prescribed form given to the registrar specify a new accounting reference date having effect in relation to the company's previous accounting reference period and subsequent periods if--

(a) the company is a subsidiary undertaking or parent undertaking of another company and the new accounting reference date coincides with the accounting reference date of that other company, or

(b) an administration order under Part II of the Insolvency Act 1986 is in force.

A company's "previous accounting reference period" means that immediately preceding its current accounting reference period.

(3) The notice shall state whether the current or previous accounting reference period--

(a) is to be shortened, so as to come to an end on the first occasion on which the new accounting reference date falls or fell after the beginning of the period, or

(b) is to be extended, so as to come to an end on the second occasion on which that date falls or fell after the beginning of the period.

(4) A notice under subsection (1) stating that the current accounting reference period is to be extended is ineffective, except as mentioned below, if given less than five years after the end of an earlier accounting reference period of the company which was extended by virtue of this section.

This subsection does not apply--

(a) to a notice given by a company which is a subsidiary undertaking or parent undertaking of another company and the new accounting reference date coincides with that of the other company, or

(b) where an administration order is in force under Part II of the Insolvency Act 1986,

or where the Secretary of State directs that it should not apply, which he may do with respect to a notice which has been given or which may be given.

(5) A notice under subsection (2)(a) may not be given if the period allowed for laying and delivering accounts and reports in relation to the previous accounting reference period has already expired.

(6) An accounting reference period may not in any case, unless an administration order is in force under Part II of the Insolvency Act 1986, be extended so as to exceed 18 months and a notice under this section is ineffective if the current or previous accounting reference period as extended in accordance with the notice would exceed that limit. " .

4 Individual company accounts

(1) The following section is inserted in Part VII of the [1985 c. 6.] Companies Act 1985--



" Annual accounts
226 Duty to prepare individual company accounts

(1) The directors of every company shall prepare for each financial year of the company--

(a) a balance sheet as at the last day of the year, and

(b) a profit and loss account.

Those accounts are referred to in this Part as the company's "individual accounts".

(2) The balance sheet shall give a true and fair view of the state of affairs of the company as at the end of the financial year; and the profit and loss account shall give a true and fair view of the profit or loss of the company for the financial year.

(3) A company's individual accounts shall comply with the provisions of Schedule 4 as to the form and content of the balance sheet and profit and loss account and additional information to be provided by way of notes to the accounts.

(4) Where compliance with the provisions of that Schedule, and the other provisions of this Act as to the matters to be included in a company's individual accounts or in notes to those accounts, would not be sufficient to give a true and fair view, the necessary additional information shall be given in the accounts or in a note to them.

(5) If in special circumstances compliance with any of those provisions is inconsistent with the requirement to give a true and fair view, the directors shall depart from that provision to the extent necessary to give a true and fair view.

Particulars of any such departure, the reasons for it and its effect shall be given in a note to the accounts. " .

(2) Schedule 4 to the [1978 c. 30.] Companies Act 1985 (form and content of company accounts) is amended in accordance with Schedule 1 to this Act.

5 Group accounts

(1) The following section is inserted in Part VII of the [1986 c. 45.] Companies Act 1985--

" 227 Duty to prepare group accounts

(1) If at the end of a financial year a company is a parent company the directors shall, as well as preparing individual accounts for the year, prepare group accounts.

(2) Group accounts shall be consolidated accounts comprising--

(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.

(3) The accounts shall give a true and fair view of the state of affairs as at the end of the financial year, and the profit or loss for the financial year, of the undertakings included in the consolidation as a whole, so far as concerns members of the company.

(4) A company's group accounts shall comply with the provisions of Schedule 4A as to the form and content of the consolidated balance sheet and consolidated profit and loss account and additional information to be provided by way of notes to the accounts.

(5) Where compliance with the provisions of that Schedule, and the other provisions of this Act, as to the matters to be included in a company's group accounts or in notes to those accounts, would not be sufficient to give a true and fair view, the necessary additional information shall be given in the accounts or in a note to them.

(6) If in special circumstances compliance with any of those provisions is inconsistent with the requirement to give a true and fair view, the directors shall depart from that provision to the extent necessary to give a true and fair view.

Particulars of any such departure, the reasons for it and its effect shall be given in a note to the accounts. " .

(2) Schedule 2 to this Act (form and content of group accounts) is inserted after Schedule 4 to the [1985 c. 6.] Companies Act 1985, as Schedule 4A.

(3) The following sections are inserted in Part VII of the [1985 c. 6.] Companies Act 1985--

" 228 Exemption for parent companies included in accounts of larger group

(1) A company is exempt from the requirement to prepare group accounts if it is itself a subsidiary undertaking and its immediate parent undertaking is established under the law of a member State of the European Economic Community, in the following cases--

(a) where the company is a wholly-owned subsidiary of that parent undertaking;

(b) where that parent undertaking holds more than 50 per cent. of the shares in the company and notice requesting the preparation of group accounts has not been served on the company by shareholders holding in aggregate--

(i) more than half of the remaining shares in the company, or

(ii) 5 per cent. of the total shares in the company.

Such notice must be served not later than six months after the end of the financial year before that to which it relates.

(2) Exemption is conditional upon compliance with all of the following conditions--

(a) that the company is included in consolidated accounts for a larger group drawn up to the same date, or to an earlier date in the same financial year, by a parent undertaking established under the law of a member State of the European Economic Community;

(b) that those accounts are drawn up and audited, and that parent undertaking's annual report is drawn up, according to that law, in accordance with the provisions of the Seventh Directive (83/349/EEC);

(c) that the company discloses in its individual accounts that it is exempt from the obligation to prepare and deliver group accounts;

(d) that the company states in its individual accounts the name of the parent undertaking which draws up the group accounts referred to above and--

(i) if it is incorporated outside Great Britain, the country in which it is incorporated,

(ii) if it is incorporated in Great Britain, whether it is registered in England and Wales or in Scotland, and

(iii) if it is unincorporated, the address of its principal place of business;

(e) that the company delivers to the registrar, within the period allowed for delivering its individual accounts, copies of those group accounts and of the parent undertaking's annual report, together with the auditors' report on them; and

(f) that if any document comprised in accounts and reports delivered in accordance with paragraph (e) is in a language other than English, there is annexed to the copy of that document delivered a translation of it into English, certified in the prescribed manner to be a correct translation.

(3) The exemption does not apply to a company any of whose securities are listed on a stock exchange in any member State of the European Economic Community.

(4) Shares held by directors of a company for the purpose of complying with any share qualification requirement shall be disregarded in determining for the purposes of subsection (1)(a) whether the company is a wholly-owned subsidiary.

(5) For the purposes of subsection (1)(b) shares held by a wholly-owned subsidiary of the parent undertaking, or held on behalf of the parent undertaking or a wholly-owned subsidiary, shall be attributed to the parent undertaking.

(6) In subsection (3) "securities" includes--

(a) shares and stock,

(b) debentures, including debenture stock, loan stock, bonds, certificates of deposit and other instruments creating or acknowledging indebtedness,

(c) warrants or other instruments entitling the holder to subscribe for securities falling within paragraph (a) or (b), and

(d) certificates or other instruments which 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 if he held any such security to which the certificate or other instrument relates, or

(iii) a contractual right (other than an option) to acquire any such security otherwise than by subscription.

229 Subsidiary undertakings included in the consolidation

(1) Subject to the exceptions authorised or required by this section, all the subsidiary undertakings of the parent company shall be included in the consolidation.

(2) A subsidiary undertaking may be excluded from consolidation if its inclusion is not material for the purpose of giving a true and fair view; but two or more undertakings may be excluded only if they are not material taken together.

(3) In addition, 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 that undertaking, or

(b) the information necessary for the preparation of group accounts cannot be obtained without disproportionate expense or undue delay, or

(c) the interest of the parent company is held exclusively with a view to subsequent resale and the undertaking has not previously been included in consolidated group accounts prepared by the parent company.

The reference in paragraph (a) to the rights of the parent company and the reference in paragraph (c) to the interest of the parent company are, respectively, to rights and interests held by or attributed to the company for the purposes of section 258 (definition of "parent undertaking") in the absence of which it would not be the parent company.

(4) Where the activities of one or more subsidiary undertakings are so different from those of other undertakings to be included in the consolidation that their inclusion would be incompatible with the obligation to give a true and fair view, those undertakings shall be excluded from consolidation.

This subsection does not apply merely because some of the undertakings are industrial, some commercial and some provide services, or because they carry on industrial or commercial activities involving different products or provide different services.

(5) Where all the subsidiary undertakings of a parent company fall within the above exclusions, no group accounts are required. " .

(4) The following section is inserted in Part VII of the [1985 c. 6.] Companies Act 1985--

" 230 Treatment of individual profit and loss account where group accounts prepared

(1) The following provisions apply with respect to the individual profit and loss account of a parent company where--

(a) the company is required to prepare and does prepare 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 in accordance with this Act.

(2) The profit and loss account need not contain the information specified in paragraphs 52 to 57 of Schedule 4 (information supplementing the profit and loss account).

(3) The profit and loss account must be approved in accordance with section 233(1) (approval by board of directors) but may be omitted from the company's annual accounts for the purposes of the other provisions below in this Chapter.

(4) The exemption conferred by this section is conditional upon its being disclosed in the company's annual accounts that the exemption applies. " .

6 Additional disclosure required in notes to accounts

(1) The following section is inserted in Part VII of the [1985 c. 6.] Companies Act 1985--

" 231 Disclosure required in notes to accounts: related undertakings

(1) The information specified in Schedule 5 shall be given in notes to a company's annual accounts.

(2) Where the company is not required to prepare group accounts, the information specified in Part I of that Schedule shall be given; and where the company is required to prepare group accounts, the information specified in Part II of that Schedule shall be given.

(3) The information required by Schedule 5 need not be disclosed with respect to an undertaking which--

(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 be seriously prejudicial to the business of that undertaking, or to the business of the company or any of its subsidiary undertakings, and the Secretary of State agrees that the information need not be disclosed.

This subsection does not apply in relation to the information required under paragraph 5(2), 6 or 20 of that Schedule.

(4) Where advantage is taken of subsection (3), that fact shall be stated in a note to the company's annual accounts.

(5) If the directors of the company are of the opinion that the number of undertakings in respect of which the company is required to disclose information under any provision of Schedule 5 to this Act is such that compliance with that provision would result in information of excessive length being given, 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's annual accounts, and

(b) undertakings excluded from consolidation under section 229(3) or (4).

This subsection does not apply in relation to the information required under paragraph 10 or 29 of that Schedule.

(6) If advantage is taken of subsection (5)--

(a) there shall be included in the notes to the company's annual accounts a statement that the information is given only with respect to such undertakings as are mentioned in that subsection, and

(b) the full information (both that which is disclosed in the notes to the accounts and that which is not) shall be annexed to the company's next annual return.

For this purpose the "next annual return" means that next delivered to the registrar after the accounts in question have been approved under section 233.

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