1 Schedule 6 to the Companies Act 1985 is amended as follows.
2 For the heading substitute—
Disclosure of information: emoluments and other benefits of directors and others
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3 Insert the following provisions (which reproduce, with amendments, the former Part V of Schedule 5 to that Act) as Part I—
Part I Chairman’s and Directors’ Emoluments, Pensions and Compensation for Loss of Office
Aggregate amount of directors’ emoluments
1 (1) The aggregate amount of directors’ emoluments shall be shown.
(2) This means the emoluments paid to or receivable by any person in respect of—
(a) his services as a director of the company, or
(b) his services while director of the company—
(i) as director of any of its subsidiary undertakings, or
(ii) otherwise in connection with the management of the affairs of the company or any of its subsidiary undertakings.
(3) There shall also be shown, separately, the aggregate amount within sub-paragraph (2)(a) and (b)(i) and the aggregate amount withinsub-paragraph (2)(b)(ii).
(4) For the purposes of this paragraph the “emoluments” of a person include—
(a) fees and percentages,
(b) sums paid by way of expenses allowance (so far as those sums are chargeable to United Kingdom income tax),
(c) contributions paid in respect of him under any pension scheme, and
(d) the estimated money value of any other benefits received by him otherwise than in cash,
and emoluments in respect of a person’s accepting office as director shall be treated as emoluments in respect of his services as director.
Details of chairman’s and directors’ emoluments
2 Where the company is a parent company or a subsidiary undertaking, or where the amount shown in compliance with paragraph 1(1) is £60,000 or more, the information required by paragraphs 3 to 6 shall be given with respect to the emoluments of the chairman and directors, and emoluments waived.
3 (1) The emoluments of the chairman shall be shown.
(2) The “chairman” means the person elected by the directors to be chairman of their meetings, and includes a person who, though not so elected, holds an office (however designated) which in accordance with the company’s constitution carries with it functions substantially similar to those discharged by a person so elected.
(3) Where there has been more than one chairman during the year, the emoluments of each shall be stated so far as attributable to the period during which he was chairman.
(4) The emoluments of a person need not be shown if his duties as chairman were wholly or mainly discharged outside the United Kingdom.
4 (1) The following information shall be given with respect to the emoluments of directors.
(2) There shall be shown the number of directors whose emoluments fell within each of the following bands—
not more than £5,000,
more than £5,000 but not more than £10,000,
more than £10,000 but not more than £15,000,
and so on.
(3) If the emoluments of any of the directors exceeded that of the chairman, there shall be shown the greatest amount of emoluments of any director.
(4) Where more than one person has been chairman during the year, the reference in sub-paragraph (3) to the emoluments of the chairman is to the aggregate of the emoluments of each person who has been chairman, so far as attributable to the period during which he was chairman.
(5) The information required by sub-paragraph (2) need not be given in respect of a director who discharged his duties as such wholly or mainly outside the United Kingdom; and any such director shall be left out of account for the purposes of sub-paragraph (3).
5 In paragraphs 3 and 4 “emoluments” has the same meaning as in paragraph 1, except that it does not include contributions paid in respect of a person under a pension scheme.
Emoluments waived
6 (1) There shall be shown—
(a) the number of directors who have waived rights to receive emoluments which, but for the waiver, would have fallen to be included in the amount shown under paragraph 1(1), and
(b) the aggregate amount of those emoluments.
(2) For the purposes of this paragraph it shall be assumed that a sum not receivable in respect of a period would have been paid at the time at which it was due, and if such a sum was payable only on demand, it shall be deemed to have been due at the time of the waiver.
Pensions of directors and past directors
7 (1) There shall be shown the aggregate amount of directors’ or past directors’ pensions.
(2) This amount does not include any pension paid or receivable under a pension scheme if the scheme is such that the contributions under it are substantially adequate for the maintenance of the scheme; but, subject to this, it includes any pension paid or receivable in respect of any such services of a director or past director as are mentioned in paragraph 1(2), whether to or by him or, on his nomination or by virtue of dependence on or other connection with him, to or by any other person.
(3) The amount shown shall distinguish between pensions in respect of services as director, whether of the company or any of its subsidiary undertakings, and other pensions.
(4) References to pensions include benefits otherwise than in cash and in relation to so much of a pension as consists of such a benefit references to its amount are to the estimated money value of the benefit.
The nature of any such benefit shall also be disclosed.
Compensation to directors for loss of office
8 (1) There shall be shown the aggregate amount of any compensation to directors or past directors in respect of loss of office.
(2) This amount includes compensation received or receivable by a director or past director for—
(a) loss of office as director of the company, or
(b) loss, while director of the company or on or in connection with his ceasing to be a director of it, of—
(i) any other office in connection with the management of the company’s affairs, or
(ii) any office as director or otherwise in connection with the management of the affairs of any subsidiary undertaking of the company;
and shall distinguish between compensation in respect of the office of director, whether of the company or any of its subsidiary undertakings, and compensation in respect of other offices.
(3) References to compensation include benefits otherwise than in cash; and in relation to such compensation references to its amount are to the estimated money value of the benefit.
The nature of any such compensation shall be disclosed.
(4) References to compensation for loss of office include compensation in consideration for, or in connection with, a person’s retirement from office.
Sums paid to third parties in respect of directors’ services
9 (1) There shall be shown the aggregate amount of any consideration paid to or receivable by third parties for making available the services of any person—
(a) as a director of the company, or
(b) while director of the company—
(i) as director of any of its subsidiary undertakings, or
(ii) otherwise in connection with the management of the affairs of the company or any of its subsidiary undertakings.
(2) The reference to consideration includes benefits otherwise than in cash; and in relation to such consideration the reference to its amount is to the estimated money value of the benefit.
The nature of any such consideration shall be disclosed.
(3) The reference to third parties is to persons other than—
(a) the director himself or a person connected with him or body corporate controlled by him, and
(b) the company or any of its subsidiary undertakings.
Supplementary
10 (1) The following applies with respect to the amounts to be shown under paragraphs 1, 7, 8 and 9.
(2) The amount in each case includes all relevant sums paid by or receivable from—
(a) the company; and
(b) the company’s subsidiary undertakings; and
(c) any other person,
except sums to be accounted for to the company or any of its subsidiary undertakings or, by virtue of sections 314 and 315 of this Act (duty of directors to make disclosure on company takeover; consequence of non-compliance), to past or present members of the company or any of its subsidiaries or any class of those members.
(3) The amount to be shown under paragraph 8 shall distinguish between the sums respectively paid by or receivable from the company, the company’s subsidiary undertakings and persons other than the company and its subsidiary undertakings.
(4) References to amounts paid to or receivable by a person include amounts pad to or receivable by a person connected with him or a body corporate controlled by him (but not so as to require an amount to be counted twice).
11 (1) The amounts to be shown for any financial year under paragraphs 1, 7, 8 and 9 are the sums receivable in respect of that year (whenever paid) or, in the case of sums not receivable in respect of a period, the sums paid during that year.
(2) But where—
(a) any sums are not shown in a note to the accounts for the relevant financial year on the ground that the person receiving them is liable to account for them as mentioned in paragraph 10(2), but the liability is thereafter wholly or partly released or is not enforced within a period of 2 years; or
(b) any sums paid by way of expenses allowance are charged to United Kingdom income tax after the end of the relevant financial year,
those sums shall, to the extent to which the liability is released or not enforced or they are charged as mentioned above (as the case may be), be shown in a note to the first accounts in which it is practicable to show them and shall be distinguished from the amounts to be shown apart from this provision.
12 Where it is necessary to do so for the purpose of making any distinction required by the preceding paragraphs in an amount to be shown in compliance with this Part of this Schedule, the directors may apportion any payments between the matters in respect of which these have been paid or are receivable in such manner as they think appropriate.
Interpretation
13 (1) The following applies for the interpretation of this Part of this Schedule.
(2) A reference to a subsidiary undertaking of the company—
(a) in relation to a person who is or was, while a director of the company, a director also, by virtue of the company’s nomination (direct or indirect) of any other undertaking, includes (subject to the following sub-paragraph) that undertaking, whether or not it is or was in fact a subsidiary undertaking of the company, and
(b) for the purposes of paragraphs 1 to 7 (including any provision of this Part of this Schedule referring to paragraph 1) is to an undertaking which is a subsidiary undertaking at the time the services were rendered, and for the purposes of paragraph 8 to a subsidiary undertaking immediately before the loss of office as director.
(3) The following definitions apply—
(a) “pension” includes any superannuation allowance, superannuation gratuity or similar payment,
(b) “pension scheme” means a scheme for the provision of pensions in respect of services as director or otherwise which is maintained in whole or in part by means of contributions, and
(c) “contribution”, in relation to a pension scheme, means any payment (including an insurance premium) paid for the purposes of the scheme by or in respect of persons rendering services in respect of which pensions will or may become payable under the scheme except that it does not include any payment in respect of two or more persons if the amount paid in respect of each of them is not ascertainable.
(4) References in this Part of this Schedule to a person being “connected” with a director, and to a director “controlling” a body corporate, shall be construed in accordance with section 346.
Supplementary
14 This Part of this Schedule requires information to be given only so far as it is contained in the company’s books and papers or the company has the right to obtain it from the persons concerned.
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4 (1) For the heading to the present Part I substitute—
Part II Loans, Quasi-loans and Other Dealings in Favour of Directors
(2) Paragraphs 1 to 3 and 5 to 14 of that Part shall be renumbered 15 to 27, and internal cross-references in that Part shall be renumbered accordingly.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) In paragraph 1 (renumbered 15) for “Group accounts” substitute “ The group accounts of a holding company, or if it is not required to prepare group accounts its individual accounts, ”.
(5) For the heading before paragraph 11 (renumbered 24) substitute—
Excluded transactions
5 In paragraph 14 (renumbered 27), make the existing provision sub-paragraph (1) and after it insert—
(2) In this Part of this Schedule “director” includes a shadow director.
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6 (1) For the heading to the present Part II substitute—
Part III Other Transactions, Arrangements and Agreements
(2) Paragraphs 15 to 17 of that Part shall be renumbered 28 to 30, and internal cross-references in that Part shall be renumbered accordingly.
(3) In paragraph 16 (renumbered 29), for “made as mentioned in section 233(1)” substitute “ made by the company or a subsidiary of it for persons who at any time during the financial year were officers of the company (but not directors or shadow directors) ”.
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7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1 Schedule 7 to the Companies Act 1985 (matters to be included in directors’ report) is amended as follows.
Subsidiary undertakings
2 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) In paragraph 6 (general information), for “subsidiaries” in each place where it occurs (three times) substitute “ subsidiary undertakings ”.
Directors’ interests
3 For paragraph 2 (directors’ interests) substitute—
2 (1) The information required by paragraphs 2A and 2B shall be given in the directors’ report, or by way of notes to the company’s annual accounts, with respect to each person who at the end of the financial year was a director of the company.
(2) In those paragraphs—
(a) “the register” means the register of directors’ interests kept by the company under section 325; and
(b) references to a body corporate being in the same group as the company are to its being a subsidiary or holding company, or another subsidiary of a holding company, of the company.
2A (1) It shall be stated with respect to each director whether, according to the register, he was at the end of the financial year interested in shares in or debentures of the company or any other body corporate in the same group.
(2) If he was so interested, there shall be stated the number of shares in and amount of debentures of each body (specifying it) in which, according to the register, he was then interested.
(3) If a director was interested at the end of the financial year in shares in or debentures of the company or any other body corporate in the same group—
(a) it shall also be stated whether, according to the register, he was at the beginning of the financial year (or, if he was not then a director, when he became one) interested in shares in or debentures of the company or any other body corporate in the same group, and
(b) if he was so interested, there shall be stated the number of shares in and amount of debentures of each body (specifying it) in which, according to the register, he was then interested.
(4) In this paragraph references to an interest in shares or debentures have the same meaning as in section 324; and references to the interest of a director include any interest falling to be treated as his for the purposes of that section.
(5) The reference above to the time when a person became a director is, in the case of a person who became a director on more than one occasion, to the time when he first became a director.
2B (1) It shall be stated with respect to each director whether, according to the register, any right to subscribe for shares in or debentures of the company or another body corporate in the same group was during the financial year granted to, or exercised by, the director or a member of his immediate family.
(2) If any such right was granted to, or exercised by, any such person during the financial year, there shall be stated the number of shares in and amount of debentures of each body (specifying it) in respect of which, according to the register, the right was granted or exercised.
(3) A director’s “immediate family” means his or her spouse and infant children; and for this purpose “children” includes step-children, and “infant”, in relation to Scotland, means pupil or minor.
(4) The reference above to a member of the director’s immediate family does not include a person who is himself or herself a director of the company.
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Part I Small Companies
Balance sheet
1 (1) The company may deliver a copy of an abbreviated version of the full balance sheet, showing only those items to which a letter or Roman number is assigned in the balance sheet format adopted under Part I of Schedule 4, but in other respects corresponding to the full balance sheet.
(2) If a copy of an abbreviated balance sheet is delivered, there shall be disclosed in it or in a note to the company’s accounts delivered—
(a) the aggregate of the amounts required by note (5) of the notes on the balance sheet formats set out in Part I of Schedule 4 to be shown separately for each item included under debtors (amounts falling due after one year), and
(b) the aggregate of the amounts required by note (13) of those notes to be shown separately for each item included under creditors in Format 2 (amounts falling due within one year or after more than one year).
(3) The provisions of section 233 as to the signing of the copy of the balance sheet delivered to the registrar apply to a copy of an abbreviated balance sheet delivered in accordance with this paragraph.
Profit and loss account
2 A copy of the company’s profit and loss account need not be delivered.
Disclosure of information in notes to accounts
3 (1) Of the information required by Part III of Schedule 4 (information to be given in notes to accounts if not given in the accounts themselves) only the information required by the following provisions need be given—
paragraph 36 (accounting policies),
paragraph 38 (share capital),
paragraph 39 (particulars of allotments),
paragraph 42 (fixed assets), so far as it relates to those items to which a letter or Roman number is assigned in the balance sheet format adopted,
paragraph 48(1) and (4) (particulars of debts),
paragraph 58(1) (basis of conversion of foreign currency amounts into sterling),
paragraph 58(2) (corresponding amounts for previous financial year), so far as it relates to amounts stated in a note to the company’s accounts by virtue of a requirement of Schedule 4 or under any other provision of this Act.
(2) Of the information required by Schedule 5 to be given in notes to the accounts, the information required by the following provisions need not be given—
paragraph 4 (financial years of subsidiary undertakings),
paragraph 5 (additional information about subsidiary undertakings),
paragraph 6 (shares and debentures of company held by subsidiary undertakings),
paragraph 10 (arrangements attracting merger relief).
(3) Of the information required by Schedule 6 to be given in notes to the accounts, the information required by Part I (directors’ and chairman’s emoluments, pensions and compensation for loss of office) need not be given.
Directors’ report
4 A copy of the directors’ report need not be delivered.
Part II Small Companies
Profit and loss account
5 The company may deliver a profit and loss account in which the following items listed in the profit and loss account formats set out in Part I of Schedule 4 are combined as one item under the heading “gross profit or loss”—
Items 1, 2, 3 and 6 in Format 1;
Items 1 to 5 in Format 2;
Items A.1, B.1 and B.2 in Format 3;
Items A.1, A.2 and B.1 to B.4 in Format 4.
Disclosure of information in notes to accounts
6 The information required by paragraph 55 of Schedule 4 (particulars of turnover) need not be given.
Part III Supplementary Provisions
Statement that advantage taken of exemptions
7 (1) Where the directors of a company take advantage of the exemptions conferred by Part I or Part II of this Schedule, the company’s balance sheet shall contain—
(a) a statement that advantage is taken of the exemptions conferred by Part I or, as the case may be, Part II of this Schedule, and
(b) a statement of the grounds on which, in the directors’ opinion, the company is entitled to those exemptions.
(2) The statements shall appear in the balance sheet immediately above the signature required by section 233.
Special auditors’ report
8 (1) If the directors of a company propose to take advantage of the exemptions conferred by Part I or II of this Schedule, it is the auditors’ duty to provide them with a report stating whether in their opinion the company is entitled to those exemptions and whether the documents to be proposed to be delivered in accordance with this Schedule are properly prepared.
(2) The accounts delivered shall be accompanied by a special report of the auditors stating that in their opinion—
(a) the company is entitled to the exemptions claimed in the directors’ statement, and
(b) the accounts to be delivered are properly prepared in accordance with this Schedule.
(3) In such a case a copy of the auditors’ report under section 235 need not be delivered separately, but the full text of it shall be reproduced in the special report; and if the report under section 235 is qualified there shall be included in the special report any further material necessary to understand the qualification.
(4) Section 236 (signature of auditors’ report) applies to a special report under this paragraph as it applies to a report under section 235.
Dormant companies
9 Paragraphs 7 and 8 above do not apply where the company is exempt by virtue of section 250 (dormant companies) from the obligation to appoint auditors.
Requirements in connection with publication of accounts
10 (1) Where advantage is taken of the exemptions conferred by Part I or II of this Schedule, section 240 (requirements in connection with publication of accounts) has effect with the following adaptations.
(2) Accounts delivered in accordance with this Schedule and accounts in the form in which they would be required to be delivered apart from this Schedule are both “statutory accounts” for the purposes of that section.
(3) References in that section to the auditors’ report under section 235 shall be read, in relation to accounts delivered in accordance with this Schedule, as references to the special report under paragraph 8 above.
Preliminary
Schedule 9 to the Companies Act 1985 is amended in accordance with this Schedule, as follows—
for the heading of the Schedule substitute “ SPECIAL PROVISIONS FOR BANKING AND INSURANCE COMPANIES AND GROUPS ”;
omit the introductory paragraph preceding Part I, together with its heading;
make the present provisions of Parts I to V of the Schedule (as amended by Part I of this Schedule) Part I of the Schedule, and accordingly—
for the descriptive Part heading before paragraph 2 substitute “ FORM AND CONTENT OF ACCOUNTS ”, and
omit the Part headings before paragraphs 19, 27, 31 and 32;
the provisions of Parts II, III and IV of this Schedule have effect as Parts II, III and IV of Schedule 9 to the Companies Act 1985.
Part I Form and Content of Accounts
1 In paragraph 10(1)(c) of Schedule 9 to the Companies Act 1985 (disclosure of outstanding loans in connection with certain cases of financial assistance for purchase of company’s own shares), after “153(4)(b)” insert “ , (bb) ”.
2 In paragraph 13 of that Schedule (information supplementing balance sheet), omit sub-paragraph (3) (information as to acquisition of, or creation of lien or charge over, company’s own shares).
3 In paragraph 17(5) of that Schedule (statement of turnover: companies exempt from requirement) for “neither a holding company nor a subsidiary of another body corporate” substitute “ neither a parent company nor a subsidiary undertaking ”.
4 After paragraph 18 of that Schedule insert—
Supplementary provisions
18A (1) Accounting policies shall be applied consistently within the same accounts and from one financial year to the next.
(2) If it appears to the directors of a company that there are special reasons for departing from the principle stated in sub-paragraph (1) in preparing the company’s accounts in respect of any financial year, they may do so; but particulars of the departure, the reasons for it and its effect shall be given in a note to the accounts.
18B It shall be stated whether the accounts have been prepared in accordance with applicable accounting standards, and particulars of any material departure from those standards and the reasons for it shall be given.
18C (1) In respect of every item shown in the balance sheet or profit and loss account, or stated in a note to the accounts, there shall be shown or stated the corresponding amount for the financial year immediately preceding that to which the accounts relate, subject to sub-paragraph (3).
(2) Where the corresponding amount is not comparable, it shall be adjusted and particulars of the adjustment and the reasons for it shall be given in a note to the accounts.
(3) Sub-paragraph (1) does not apply in relation to an amount shown—
(a) as an amount the source or application of which is required by paragraph 8 above (reserves and provisions),
(b) in pursuance of paragraph 13(10) above (acquisitions and disposals of fixed assets),
(c) by virtue of paragraph 13 of Schedule 4A (details of accounting treatment of acquisitions),
(d) by virtue of paragraph 2, 8(3), 16, 21(1)(d), 22(4) or (5), 24(3) or (4) or 27(3) or (4) of Schedule 5 (shareholdings in other undertakings), or
(e) by virtue of Part II or III of Schedule 6 (loans and other dealings in favour of directors and others).
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5 (1) Before paragraph 19 of that Schedule insert the heading “ Provisions where company is parent company or subsidiary undertaking ”;and that paragraph is amended as follows.
(2) In sub-paragraph (1) for the words from “is a holding company” onwards substitute “ is a parent company ”.
(3) In sub-paragraph (2)—
(a) for “subsidiaries” (four times) substitute “ subsidiary undertakings ”, and
(b) in paragraph (a), for “Part I” substitute “ paragraphs 5, 6, 10, 13 and 14 ”.
(4) Omit sub-paragraphs (3) to (7).
6 For paragraph 20 of that Schedule substitute—
20 (1) This paragraph applies where the company is a subsidiary undertaking.
(2) The balance sheet of the company shall show—
(a) the aggregate amount of its indebtedness to undertakings of which it is a subsidiary undertaking or which are fellow subsidiary undertakings, and
(b) the aggregate amount of the indebtedness of all such undertakings to it,
distinguishing in each case between indebtedness in respect of debentures and otherwise.
(3) The balance sheet shall also show the aggregate amount of assets consisting of shares in fellow subsidiary undertakings.
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7 Omit paragraphs 21 to 26 of that Schedule.
8 (1) Before paragraph 27 of that Schedule insert the heading “ Exceptions for certain companies ”;and that paragraph is amended as follows.
(2) In sub-paragraph (2)—
(a) for “Part I of this Schedule” substitute “ paragraphs 2 to 18 of this Schedule ”, and
(b) in paragraph (b) for the words from “paragraphs 15” to the end substitute “ and paragraph 15 ”.
(3) In sub-paragraph (4), omit “of the said Part I”.
9 In paragraph 28 of that Schedule, in sub-paragraph (1) (twice) and in sub-paragraph (2) for “Part I” substitute “ paragraphs 2 to 18 ”.
10 After that paragraph insert—
28A Where a company is entitled to, and has availed itself of, any of the provisions of paragraph 27 or 28 of this Schedule, section 235(2) only requires the auditors to state whether in their opinion the accounts have been properly prepared in accordance with this Act.
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11 Omit paragraphs 29 to 31 of that Schedule.
12 Before paragraph 32 of that Schedule insert the heading “ Interpretation ”;and in sub-paragraphs (1) and (2) of that paragraph for “this Schedule” substitute “ this Part of this Schedule ”.
13 In paragraph 36 of that Schedule for “this Schedule” substitute “ this Part of this Schedule ”.
Part II [Part II of Schedule 9 to the Companies Act 1985]
Accounts of Banking or Insurance Group
Undertakings to be included in consolidation
1 The following descriptions of undertaking shall not be excluded from consolidation under section 229(4) (exclusion of undertakings whose activities are different from those of the undertakings consolidated)—
(a) in the case of a banking group, an undertaking (other than a credit institution) whose activities are a direct extension of or ancillary to banking business;
(b) in the case of an insurance group, an undertaking (other than one carrying on insurance business) whose activities are a direct extension of or ancillary to insurance business.
For the purposes of paragraph (a) “banking” means the carrying on of a deposit-taking business within the meaning of the Banking Act 1987.
General application of provisions applicable to individual accounts
2 (1) In paragraph 1 of Schedule 4A (application to group accounts of provisions applicable to individual accounts), the reference in sub-paragraph (1) to the provisions of Schedule 4 shall be construed as a reference to the provisions of Part I of this Schedule; and accordingly—
(a) the reference in sub-paragraph (2) to paragraph 59 of Schedule 4 shall be construed as a reference to paragraphs 19(2) and 20 of Part I of this Schedule; and
(b) sub-paragraph (3) shall be omitted.
(2) The general application of the provisions of Part I of this Schedule in place of those of Schedule 4 is subject to the following provisions.
Treatment of goodwill
3 (1) The rules in paragraph 21 of Schedule 4 relating to the treatment of goodwill, and the rules in paragraphs 17 to 19 of that Schedule (valuation of fixed assets) so far as they relate to goodwill, apply for the purpose of dealing with any goodwill arising on consolidation.
(2) Goodwill shall be shown as a separate item in the balance sheet under an appropriate heading; and this applies notwithstanding anything in paragraph 10(1)(b) or (2) of Part I of this Schedule (under which goodwill, patents and trade marks may be stated in the company’s individual accounts as a single item).
Minority interests and associated undertakings
4 The information required by paragraphs 17 and 20 to 22 of Schedule 4A (minority interests and associated undertakings) to be shown under separate items in the formats set out in Part I of Schedule 4 shall be shown separately in the balance sheet and profit and loss account under appropriate headings.
Companies entitled to benefit of exemptions
5 (1) Where a banking or insurance company is entitled to the exemptions conferred by paragraph 27 or 28 of Part I of this Schedule, a group headed by that company is similarly entitled.
(2) Paragraphs 27(4), 28(2) and 28A (accounts not to be taken to be other than true and fair; duty of auditors) apply accordingly where advantage is taken of those exemptions in relation to group accounts.
Information as to undertaking in which shares held as result of financial assistance operation
6 (1) The following provisions apply where the parent company of a banking group has a subsidiary undertaking which—
(a) is a credit institution of which shares are held as a result of a financial assistance operation with a view to its reorganisation or rescue, and
(b) is excluded from consolidation under section 229(3)(c) (interest held with a view to resale).
(2) Information as to the nature and terms of the operation shall be given in a note to the group accounts and there shall be appended to the copy of the group accounts delivered to the registrar in accordance with section 242 a copy of the undertaking’s latest individual accounts and, if it is a parent undertaking, its latest group accounts.
If the accounts appended are required by law to be audited, a copy of the auditors’ report shall also be appended.
(3) If any document required to be appended is in a language other than English, the directors shall annex to the copy of that document delivered a translation of it into English, certified in the prescribed manner to be a correct translation.
(4) The above requirements are subject to the following qualifications—
(a) an undertaking is not required to prepare for the purposes of this paragraph accounts which would not otherwise be prepared, and if no accounts satisfying the above requirements are prepared none need be appended;
(b) the accounts of an undertaking need not be appended if they would not otherwise be required to be published, or made available for public inspection, anywhere in the world, but in that case the reason for not appending the accounts shall be stated in a note to the consolidated accounts.
(5) Where a copy of an undertaking’s accounts is required to be appended to the copy of the group accounts delivered to the registrar, that fact shall be stated in a note to the group accounts.
(6) Subsections (2) to (4) of section 242 (penalties, &c. in case of default) apply in relation to the requirements of this paragraph as regards the delivery of documents to the registrar as they apply in relation to the requirements of subsection (1) of that section.
Part III [Part III of Schedule 9 to the Companies Act 1985]
Additional Disclosure: Related Undertakings
1 Where accounts are prepared in accordance with the special provisions of this Part relating to banking companies or groups, there shall be disregarded for the purposes of—
(a) paragraphs 7(2)(a), 23(2)(a) and 26(2)(a) of Schedule 5 (information about significant holdings in undertakings other than subsidiary undertakings: definition of 10 per cent. holding), and
(b) paragraphs 9(1), 25(1) and 28(1) of that Schedule (additional information in case of 20 per cent. holding),
any holding of shares not comprised in the equity share capital of the undertaking in question.
Part IV [Part IV of Schedule 9 to the Companies Act 1985]
Additional Disclosure: Emoluments and Other Benefits of Directors and Others
1 The provisions of this Part of this Schedule have effect with respect to the application of Schedule 6 (additional disclosure: emoluments and other benefits of directors and others) to a banking company or the holding company of such a company.
Loans, quasi-loans and other dealings
2 Part II of Schedule 6 (loans, quasi-loans and other dealings) does not apply for the purposes of accounts prepared by a banking company, or a company which is the holding company of a banking company, in relation to a transaction or arrangement of a kind mentioned in section 330, or an agreement to enter into such a transaction or arrangement, to which that banking company is a party.
Other transactions, arrangements and agreements
3 (1) Part III of Schedule 6 (other transactions, arrangements and agreements) applies for the purposes of accounts prepared by a banking company, or a company which is the holding company of a banking company, only in relation to a transaction, arrangement or agreement made by that banking company for—
(a) a person who was a director of the company preparing the accounts, or who was connected with such a director, or
(b) a person who was a chief executive or manager (within the meaning of the Banking Act 1987) of that company or its holding company.
(2) References in that Part to officers of the company shall be construed accordingly as including references to such persons.
(3) In this paragraph “director” includes a shadow director.
(4) For the purposes of that Part as it applies by virtue of this paragraph, a company which a person does not control shall not be treated as connected with him.
(5) Section 346 of this Act applies for the purposes of this paragraph as regards the interpretation of references to a person being connected with a director or controlling a company.
Recent issues
1 (1) This paragraph applies where a company prepares individual accounts in accordance with the special provisions of this Part relating to banking or insurance companies.
(2) If in the financial year to which the accounts relate the company has issued any shares or debentures, the directors’ report shall state the reason for making the issue, the classes of shares or debentures issued and, as respects each class, the number of shares or amount of debentures issued and the consideration received by the company for the issue.
Turnover and profitability
2 (1) This paragraph applies where a company prepares group accounts in accordance with the special provisions of this Part relating to banking or insurance groups.
(2) If in the course of the financial year to which the accounts relate the group carried on business of two or more classes (other than banking or discounting or a class prescribed for the purposes of paragraph 17(2) of Part I of Schedule 9) that in the opinion of the directors differ substantially from each other, there shall be contained in the directors’ report a statement of—
(a) the proportions in which the turnover for the financial year (so far as stated in the consolidated accounts) is divided amongst those classes (describing them), and
(b) as regards business of each class, the extent or approximate extent (expressed in money terms) to which, in the opinion of the directors, the carrying on of business of that class contributed to or restricted the profit or loss of the group for that year (before taxation).
(3) In sub-paragraph (2) “the group” means the undertakings included in the consolidation.
(4) For the purposes of this paragraph classes of business which in the opinion of the directors do not differ substantially from each other shall be treated as one class.
Labour force and wages paid
3 (1) This paragraph applies where a company prepares individual or group accounts in accordance with the special provisions of this Part relating to banking or insurance companies or groups.
(2) There shall be stated in the directors’ report—
(a) the average number of persons employed by the company or, if the company prepares group accounts, by the company and its subsidiary undertakings, and
(b) the aggregate amount of the remuneration paid or payable to persons so employed.
(3) The average number of persons employed shall be determined by adding together the number of persons employed (whether throughout the week or not) in each week of the financial year and dividing that total by the number of weeks in the financial year.
(4) The aggregate amount of the remuneration paid or payable means the total amount of remuneration paid or payable in respect of the financial year; and for this purpose remuneration means gross remuneration and includes bonuses, whether payable under contract or not.
(5) The information required by this paragraph need not be given if the average number of persons employed is less than 100.
(6) No account shall be taken for the purposes of this paragraph of persons who worked wholly or mainly outside the United Kingdom.
(7) This paragraph does not apply to a company which is a wholly-owned subsidiary of a company incorporated in Great Britain.
Introduction
1 The provisions of this Schedule explain expressions used in section 258 (parent and subsidiary undertakings) and otherwise supplement that section.
Voting rights in an undertaking
2 (1) In section 258(2)(a) and (d) the references to the voting rights in an undertaking are to the rights conferred on shareholders in respect of their shares or, in the case of an undertaking not having a share capital, on members, to vote at general meetings of the undertaking on all, or substantially all, matters.
(2) In relation to an undertaking which does not have general meetings at which matters are decided by the exercise of voting rights, the references to holding a majority of the voting rights in the undertaking shall be construed as references to having the right under the constitution of the undertaking to direct the overall policy of the undertaking or to alter the terms of its constitution.
Right to appoint or remove a majority of the directors
3 (1) In section 258(2)(b) the reference to the right to appoint or remove a majority of the board of directors is to the right to appoint or remove directors holding a majority of the voting rights at meetings of the board on all, or substantially all, matters.
(2) An undertaking shall be treated as having the right to appoint to a directorship if—
(a) a person’s appointment to it follows necessarily from his appointment 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 or concurrence of another person shall be left out of account unless no other person has a right to appoint or, as the case may be, remove in relation to that directorship.
Right to exercise dominant influence
4 (1) For the purposes of section 258(2)(c) an undertaking shall not be regarded as having the right to exercise a dominant influence over another undertaking unless it has a right to give directions with respect to the operating and financial policies of that other undertaking which its directors are obliged to comply with whether or not they are for the benefit of that other undertaking.
(2) A “control contract” means a contract in writing conferring such a right which—
(a) is of a kind authorised by the memorandum or articles of the undertaking in relation to which the right is exercisable, and
(b) is permitted by the law under which that undertaking is established.
(3) This paragraph shall not be read as affecting the construction of the expression “actually exercises a dominant influence” in section 258(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 into account only—
(a) when the circumstances have arisen, and for so long as they continue to obtain, or
(b) when the circumstances are within the control of the person having the rights.
(2) Rights which are normally exercisable but are temporarily incapable of exercise 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 by him.
7 (1) Rights held by a person as nominee for another shall be treated as held by the other.
(2) Rights shall be regarded as held as nominee for another if they are exercisable 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 by the person providing the security—
(a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in accordance with his instructions, and
(b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising 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 by any of its subsidiary undertakings.
(2) Nothing in paragraph 7 or 8 shall be construed as requiring rights held by a parent undertaking to be treated as held by any of its subsidiary undertakings.
(3) For the purposes of paragraph 8 rights shall be treated as being exercisable in accordance with the instructions or in the interests of an undertaking if they are exercisable in accordance with the instructions of or, as the case may be, in the interests of any group undertaking.
Disregard of certain rights
10 The voting rights in an undertaking shall be reduced by any rights held by the undertaking itself.
Supplementary
11 References in any provision of paragraphs 6 to 10 to rights held by a person include rights falling to be treated as held by him by virtue of any other provision of those paragraphs but not rights which by virtue of any such provision are to be treated as not held by him.
Part I Grant and Revocation of Recognition
Application for recognition of supervisory body
1 (1) A supervisory body may apply to the Secretary of State for an order declaring it to be a recognised supervisory body for the purposes of this Part of this Act.
(2) Any such application—
(a) shall be made in such manner as the Secretary of State may direct, and
(b) shall be 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 the Secretary of State may require the applicant to furnish additional information.
(4) The directions and requirements given or imposed under sub-paragraphs (2) and (3) may differ as between different applications.
(5) Any information to be furnished to the Secretary of State under this paragraph shall, if he so requires, be in such form or verified in such manner as he may specify.
(6) Every application shall be accompanied by a copy of the applicant’s rules and of any guidance issued by the applicant which is intended to have continuing effect and is issued in writing or other legible form.
Grant and refusal of recognition
2 (1) The Secretary of State may, on an application duly made in accordance with paragraph 1 and after being furnished with all such information as he may require under that paragraph, make or refuse to make an order (a “recognition order”) declaring the applicant to be a recognised supervisory body for the purposes of this Part of this Act.
(2) The Secretary of State shall not make a recognition order unless it appears to him, from the information furnished by the body and having regard to any other information in his possession, that the requirements of Part II of this Schedule are satisfied as respects that body.
(3) The Secretary of State may refuse to make a recognition order in respect of a body if he considers that its recognition is unnecessary having regard to the existence of one or more other bodies which maintain and enforce rules as to the appointment and conduct of company auditors and which have been or are likely to be recognised.
(4) Where the Secretary of State refuses an application for a recognition order he shall give the applicant a written notice to that effect specifying which requirements in the opinion of the Secretary of State are not satisfied or stating that the application is refused on the ground mentioned in sub-paragraph (3).
(5) A recognition order shall 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 the Secretary of State if at any time it appears to him—
(a) that any requirement of Part II of this Schedule is not satisfied in the case of the body to which the recognition order relates (“the recognised body”),
(b) that the recognised body has failed to comply with any obligation to which it is subject by virtue of this Part of this Act, or
(c) that the continued recognition of the body is undesirable having regard to the existence of one or more other bodies which have been or are to be recognised.
(2) An order revoking a recognition order shall state the date on which it takes effect and that date shall not be earlier than three months after the day on which the revocation order is made.
(3) Before revoking a recognition order the Secretary of State shall give written notice of his intention to do so to the recognised body, take such steps as he considers reasonably practicable for bringing the notice to the attention of members of the body and publish it in such manner as he thinks appropriate for bringing it to the attention of any other persons who are in his opinion likely to be affected.
(4) A notice under sub-paragraph (3) shall state the reasons for which the Secretary of State proposes to act and give particulars of the rights conferred by sub-paragraph (5).
(5) A body on which a notice is served under sub-paragraph (3), any member of the body and any other person who appears to the Secretary of State to be affected may within three months after the date of service or publication, or within such longer time as the Secretary of State may allow, make written representations to the Secretary of State and, if desired, oral representations to a person appointed for that purpose by the Secretary of State; and the Secretary of State shall have regard to any representations made in accordance with this sub-paragraph in determining whether to revoke the recognition order.
(6) If in any case the Secretary of State considers it essential to do so in the public interest he may revoke a recognition order without regard to the restriction imposed by sub-paragraph (2) and notwithstanding that no notice has been given or published under sub-paragraph (3) or that the time for making representations in pursuance of such a notice has not expired.
(7) An order revoking a recognition order may contain such transitional provisions as the Secretary of State thinks necessary or expedient.
(8) A recognition order may be revoked at the request or with the consent of the recognised body and any such revocation shall not be subject to the restrictions imposed by sub-paragraphs (1) and (2) or the requirements of sub-paragraphs (3) to (5).
(9) On making an order revoking a recognition order the Secretary of State shall give the body written notice of the making of the order, take such steps as he considers reasonably practicable for bringing the making of the order to the attention of members of the body and publish a notice of the making of the order in such manner as he thinks appropriate for bringing it to the attention of any other persons who are in his opinion likely to be affected.
Part II Requirements for Recognition
Holding of appropriate qualification
4 (1) The body must have rules to the effect that a person is not eligible for appointment as a company auditor unless—
(a) in the case of an individual, he holds an appropriate qualification;
(b) in the case of a firm—
(i) the individuals responsible for company audit work on behalf of the firm hold an appropriate qualification, and
(ii) the firm is controlled by qualified persons (see paragraph 5 below).
(2) This does not prevent the body from imposing more stringent requirements.
(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 a company auditor for a period of not more than three months.
5 (1) The following provisions explain what is meant in paragraph 4(1)(b)(ii) by a firm being “controlled by qualified persons”.
(2) For this purpose references to a person being qualified are, in relation to an individual, to his holding an appropriate qualification, and in relation to a firm, to its being eligible for appointment as a company auditor.
(3) A firm shall 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 the members of that body are qualified persons or, if the body consists of two persons only, at least one of them is a qualified person.
(4) A majority of the members of a firm means—
(a) where under the firm’s constitution matters are decided apon by the exercise of voting rights, members holding a majority of the rights to vote on all, or substantially all, matters;
(b) in any other case, members having such rights under the constitution of the firm as enable them to direct its overall policy or alter its constitution.
(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 the rights to vote on all, or substantially all, matters at such meetings;
(b) in any other case, members having such rights under the constitution of the firm as enable them to direct its overall policy or alter its constitution.
(6) The provisions of paragraphs 5 to 11 of Schedule 10A to the Companies Act 1985 (rights to be taken into account and attribution of rights) apply for the purposes of this paragraph.
Auditors to be fit and proper persons
6 (1) The body must have adequate rules and practices designed to ensure that the persons eligible under its rules for appointment as a company auditor are fit and proper persons to be so appointed.
(2) The matters which the body may take into account for this purpose in relation to a person must include—
(a) any matter relating to any person who is or will be employed by or associated with him for the purposes of or in connection with company audit work; and
(b) in the case of a body corporate, any matter relating to any director or controller of the body, to any other body corporate in the same group or to any director or controller of any such other body; and
(c) in the case of a partnership, any matter relating to any of the partners, any director or controller of any of the partners, any body corporate in the same group as any of the partners and any director or controller of any such other body.
(3) In sub-paragraph (2)(b) and (c) “controller”, in relation to a body corporate, means a person who either alone or with any associate or associates is entitled to exercise or control the exercise of 15 per cent. or more of the rights to vote on all, or substantially all, matters at general meetings of the body or another body corporate of which it is a subsidiary.
Professional integrity and independence
7 (1) The body must have adequate rules and practices designed to ensure—
(a) that company audit work is conducted properly and with integrity, and
(b) that persons are not appointed company auditor in circumstances in which they have any interest likely to conflict with the proper conduct of the audit.
(1A) The body must participate in arrangements within paragraph 17, and the rules and practices mentioned in sub-paragraph (1) above must include provision requiring compliance with any standards for the time being determined under such arrangements.
(2) The body must also have adequate rules and practices designed to ensure that no firm is eligible under its rules for appointment as a company auditor unless the firm has arrangements to prevent—
(a) individuals who do not hold an appropriate qualification, and
(b) persons who are not members of the firm,
from being able to exert any influence over the way in which an audit is conducted in circumstances in which that influence would be likely to affect the independence or integrity of the audit.
Technical standards
8 (1) The body must have rules and practices as to the technical standards to be applied in company audit work and as to the manner in which those standards are to be applied in practice.
(2) The body must participate in arrangements within paragraph 18, and the rules and practices mentioned in sub-paragraph (1) above must include provision requiring compliance with any standards for the time being determined under such arrangements.
Procedures for maintaining competence
9 The body must have rules and practices designed to ensure that persons eligible under its rules for appointment as a company auditor continue to maintain an appropriate level of competence in the conduct of company audits.
Monitoring and enforcement
10 (1) The body must have adequate arrangements and resources for the effective monitoring and enforcement of compliance with its rules.
(2) The arrangements for monitoring may make provision for that function to be 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 and other major companies
10A (1) The body must—
(a) participate in arrangements within paragraph 19(1), and
(b) have rules designed to ensure that members of the body who perform any company audit functions in respect of major audits take such steps as may be reasonably required of them to enable their performance of any such functions to be monitored by means of inspections carried out under the arrangements.
(2) Any monitoring of such persons under the arrangements is to be regarded (so far as their performance of company audit functions in respect of major audits is concerned) as monitoring of compliance with the body’s rules for the purposes of paragraph 10(1).
(3) In this paragraph “company audit function” and “major audit” have the same meaning as in paragraph 19.
Membership, eligibility and discipline
11 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 company auditor, and
(c) the discipline it exercises over its members,
must be fair and reasonable and include adequate provision for appeals.
Investigation of complaints
12 (1) The body must have effective arrangements for the investigation of complaints—
(a) against persons who are eligible under its rules to be appointed company auditor, or
(b) against the body in respect of matters arising out of its functions as a supervisory body.
(2) The arrangements may make provision for the whole or part of that function to be performed by and to be the responsibility of a body or person independent of the body itself.
Independent investigation for disciplinary purposes of public interest cases
12A (1) The body must—
(a) participate in arrangements within paragraph 20(1), and
(b) have rules and practices designed to ensure that, where the designated persons have decided that any particular disciplinary action should be taken against a member of the body following the conclusion of an investigation under such arrangements, that decision is to be treated as if it were a decision made by the body in disciplinary 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, what) disciplinary action should be taken against a member of the body in the light of an investigation carried out under the arrangements.
Meeting of claims arising out of audit work
13 (1) The body must have adequate rules or arrangements designed to ensure that persons eligible under its rules for appointment as a company auditor take such steps as may reasonably be expected of them to secure that they are able to meet claims against them arising out of company audit work.
(2) This may be achieved by professional indemnity insurance or other appropriate arrangements.
Register of auditors and other information to be made available
14 The body must have rules requiring persons eligible under its rules for appointment as a company auditor to comply with any obligations imposed on them by regulations under section 35 or 36.
Taking account of costs of compliance
15 The body must have satisfactory arrangements for taking account, in framing its rules, of the cost to those to whom the rules would apply of complying with those rules and any other controls to which they are subject.
Promotion and maintenance of standards
16 The body must be able and willing to promote and maintain high standards of integrity in the conduct of company audit work and to co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority, body or person having responsibility in the United Kingdom for the qualification, supervision or regulation of auditors.
Part 3 Arrangements in which supervisory bodies are required to participate
Arrangements for setting standards relating to professional integrity and independence
17 The arrangements referred to in paragraph 7(1A) are appropriate funded arrangements—
(a) for the determining of standards for the purposes of the rules and practices mentioned in paragraph 7(1), and
(b) for ensuring that the determination of those standards is done independently of the body.
Arrangements for setting technical standards
18 The arrangements referred to in paragraph 8(2) are appropriate funded arrangements—
(a) for the determining of standards for the purposes of the rules and practices mentioned in paragraph 8(1), and
(b) for ensuring that the determination of those standards is done independently of the body.
Arrangements for independent monitoring of audits of listed and other major companies
19 (1) The arrangements referred to in paragraph 10A(1) are appropriate funded arrangements—
(a) for enabling the performance by members of the body of company audit functions in respect of major audits to be monitored by means of inspections carried out under the arrangements, and
(b) for ensuring that the carrying out of such monitoring and inspections is done independently of the body.
(2) In this paragraph—
“company audit function” means any function performed as a company auditor;
“major audit” means an audit conducted in respect of—
a company any of whose securities have been admitted to the official list (within the meaning of Part 6 of the Financial Services and Markets Act 2000), or
any other company in whose financial condition there is a major public interest.
Arrangements for independent investigation for disciplinary purposes of public interest cases
20 (1) The arrangements referred to in paragraph 12A(1) are appropriate funded arrangements—
(a) for the carrying out of investigations into public interest cases arising in connection with the performance of company audit functions by members of the body,
(b) for the holding of disciplinary hearings relating to members of the body which appear to be desirable following the conclusion of such investigations,
(c) for requiring such hearings to be held in public except where the interests of justice otherwise require,
(d) for the persons before whom such hearings have taken place to decide whether (and, if so, what) disciplinary action should be taken against the members to whom the hearings related, and
(e) for ensuring that the carrying out of those investigations, the holding of those hearings, and the taking of those decisions are done independently of the body.
(2) In this paragraph—
“company audit function” means any function performed as a company auditor;
“public interest cases” means matters which raise or appear to raise important issues affecting the public interest.
Supplementary: arrangements to operate independently of body
21 (1) This paragraph applies for the purposes of—
paragraph 17(b),
paragraph 18(b),
paragraph 19(1)(b), or
paragraph 20(1)(e).
(2) Arrangements cannot be regarded as appropriate for the purpose of ensuring that the thing or things mentioned in that provision is or are done independently of the body unless they are designed to ensure that the body—
(a) will have no involvement in the appointment or selection of any of the persons who are to be responsible for doing the thing or things in question, and
(b) will not otherwise be involved in the doing of that thing or those things.
(3) Sub-paragraph (2) imposes a minimum requirement and does not preclude the possibility that additional criteria may need to be satisfied in order for the arrangements to be regarded as appropriate for the purpose in question.
Supplementary: “funded” arrangements etc.
22 (1) For the purposes of any of paragraphs 17, 18, 19 and 20, arrangements are “funded”arrangements if, in the event of their providing for the payment of costs of maintaining the arrangements, such costs are to be paid by the body in accordance with the arrangements.
(2) Arrangements can qualify as arrangements within any of paragraphs 17, 18, 19(1) and 20(1) even though the matters for which they provide are more extensive in any respect than those mentioned in that provision.
Part I Grant and Revocation of Recognition
Application for recognition of professional qualification
1 (1) A qualifying body may apply to the Secretary of State for an order declaring a qualification offered by it to be a recognised professional qualification for the purposes of this Part of this Act.
(2) Any such application—
(a) shall be made in such manner as the Secretary of State may direct, and
(b) shall be 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 the Secretary of State may require the applicant to furnish additional information.
(4) The directions and requirements given or imposed under sub-paragraphs (2) and (3) may differ as between different applications.
(5) Any information to be furnished to the Secretary of State under this section shall, if he so requires, be in such form or verified in such manner as he may specify.
In the case of examination standards, the verification required may include independent moderation of the examinations over such period as the Secretary of State considers necessary.
(6) Every application shall be accompanied by a copy of the applicant’s rules and of any guidance issued by it which is intended to have continuing effect and is issued in writing or other legible form.
Grant and refusal of recognition
2 (1) The Secretary of State may, on an application duly made in accordance with paragraph 1 and after being furnished with all such information as he may require under that paragraph, make or refuse to make an order (a “recognition order”) declaring the qualification in respect of which the application was made to be a recognised professional qualification for the purposes of this Part of this Act.
In this Part of this Act a “recognised qualifying body” means a qualifying body offering a recognised professional qualification.
(2) The Secretary of State shall not make a recognition order unless it appears to him, from the information furnished by the applicant and having regard to any other information in his possession, that the requirements of Part II of this Schedule are satisfied as respects the qualification.
(3) Where the Secretary of State refuses an application for a recognition order he shall give the applicant a written notice to that effect specifying which requirements, in his opinion, are not satisfied.
(4) A recognition order shall 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 the Secretary of State if at any time it appears to him—
(a) that any requirement of Part II of this Schedule is not satisfied in relation to the qualification to which the recognition order relates, or
(b) that the qualifying body has failed to comply with any obligation to which it is subject by virtue of this Part of this Act.
(2) An order revoking a recognition order shall state the date on which it takes effect and that date shall not be earlier than three months after the day on which the revocation order is made.
(3) Before revoking a recognition order the Secretary of State shall give written notice of his intention to do so to the qualifying body, take such steps as he considers reasonably practicable for bringing the notice to the attention of persons holding the qualification or in the course of studying for it and publish it in such manner as he thinks appropriate for bringing it to the attention of any other persons who are in his opinion likely to be affected.
(4) A notice under sub-paragraph (3) shall state the reasons for which the Secretary of State proposes to act and give particulars of the rights conferred by sub-paragraph (5).
(5) A body on which a notice is served under sub-paragraph (3), any person holding the qualification or in the course of studying for it and any other person who appears to the Secretary of State to be affected may within three months after the date of service or publication, or within such longer time as the Secretary of State may allow, make written representations to the Secretary of State and, if desired, oral representations to a person appointed for that purpose by the Secretary of State; and the Secretary of State shall have regard to any representations made in accordance with this subsection in determining whether to revoke the recognition order.
(6) If in any case the Secretary of State considers it essential to do so in the public interest he may revoke a recognition order without regard to the restriction imposed by sub-paragraph (2) and notwithstanding that no notice has been given or published under sub-paragraph (3) or that the time for making representations in pursuance of such a notice has not expired.
(7) An order revoking a recognition order may contain such transitional provisions as the Secretary of State thinks necessary or expedient.
(8) A recognition order may be revoked at the request or with the consent of the qualifying body and any such revocation shall not be subject to the restrictions imposed by sub-paragraphs (1) and (2) or the requirements of sub-paragraphs (3) to (5).
(9) On making an order revoking a recognition order the Secretary of State shall give the qualifying body written notice of the making of the order, take such steps as he considers reasonably practicable for bringing the making of the order to the attention of persons holding the qualification or in the course of studying for it and publish a notice of the making of the order in such manner as he thinks appropriate for bringing it to the attention of any other persons who are in his opinion likely to be affected.
Part II Requirements for Recognition
Entry requirements
4 (1) The qualification must only be open to persons who have attained university entrance level or have a sufficient period of professional experience.
(2) In relation to a person who has not been admitted to a university or other similar establishment in the United Kingdom, attaining university entrance level means—
(a) being educated to such a standard as would entitle him to be considered for such admission on the basis of—
(i) academic or professional qualifications obtained in the United Kingdom and recognised by the Secretary of State to be of an appropriate standard, or
(ii) academic or professional qualifications obtained outside the United Kingdom which the Secretary of State considers to be of an equivalent standard; or
(b) being assessed on the basis of written tests of a kind appearing to the Secretary of State to be adequate for the purpose, with or without oral examination, as of such a standard of ability as would entitle him to be considered for such admission.
(3) The assessment, tests and oral examination referred to in sub-paragraph (2)(b) may be conducted by the qualifying body or by some other body approved by the Secretary of State.
Course of theoretical instruction
5 The qualification must be restricted to persons who have completed a course of theoretical instruction in the subjects prescribed for the purposes of paragraph 7 or have a sufficient period of professional experience.
Sufficient period of professional experience
6 (1) The references in paragraphs 4 and 5 to a sufficient period of professional experience are to not less than seven years’ experience in a professional capacity in the fields of finance, law and accountancy.
(2) Periods of theoretical instruction in the fields of finance, law and accountancy may be deducted from the required period of professional experience, 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 more than four years.
(3) The period of professional experience together with the practical training required in the case of persons satisfying the requirement in paragraph 5 by virtue of having a sufficient period of professional experience must not be shorter than the course of theoretical instruction referred to in that paragraph and the practical training required in the case of persons satisfying the requirement of that paragraph by virtue of having completed such a course.
Examination
7 (1) The qualification must be restricted to persons who have passed an examination (at least part of which is in writing) testing—
(a) theoretical knowledge of the subjects prescribed for the purposes of this 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 to obtain a degree from a university or similar establishment in the United Kingdom.
(2) The qualification may be awarded to a person without his theoretical knowledge of a subject being tested by examination if he has passed a university or other examination of equivalent standard in that subject or holds a university degree or equivalent qualification in it.
(3) The qualification may be awarded to a person without his ability to apply his theoretical knowledge of a subject in practice being tested by examination if he has received practical training in that subject which is attested by an examination or diploma recognised by the Secretary of State for the purposes of this paragraph.
(4) Regulations under this paragraph shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
Practical training
8 (1) The qualification must be restricted to persons who have completed at least three years’ practical training of which—
(a) part was spent being trained in company audit work, and
(b) a substantial part was spent being trained in company audit work or other audit work of a description approved by the Secretary of State as being similar to company audit work.
For this purpose “company audit work” includes the work of a person appointed as auditor under the Companies (Northern Ireland) Order 1986 or under the law of a country or territory outside the United Kingdom where it appears to the Secretary of State that the law and practice with respect to the audit of company accounts is similar to that in the United Kingdom.
(2) The training must be given by persons approved by the body offering the qualification as persons as to whom the body is satisfied, in the light of undertakings given by them and the supervision to which they are subject (whether by the body itself or some other body or organisation), that they will provide adequate training.
(3) At least two-thirds of the training must be given by a fully-qualified auditor, that is, a person—
(a) eligible in accordance with this Part of this Act to be appointed as a company auditor, or
(b) satisfying the corresponding requirements of the law of Northern Ireland or another member State of the European Economic Community.
The body offering the qualification
9 (1) The body offering the qualification must have—
(a) rules and arrangements adequate to ensure compliance with the requirements of paragraphs 4 to 8, and
(b) adequate arrangements for the effective monitoring of its continued compliance with those requirements.
(2) The arrangements must include arrangements for monitoring the standard of its examinations and the adequacy of the practical training given by the persons approved by it for that purpose.
Operation of this Schedule
1 (1) This Schedule has effect in relation to a body designated by an order under section 46 as follows—
(a) paragraphs 2 to 12 have effect in relation to the body where it is established by the order;
(b) paragraphs 2 and 6 to 11 have effect in relation to the body where it is an existing body (see section 46(1A)(b)); and
(c) paragraph 13 has effect in relation to the body where it is an existing body that is an unincorporated association.
(2) In their operation in accordance with sub-paragraph (1)(b), paragraphs 2 and 6 apply only in relation to—
(a) things done by or in relation to the body in or in connection with the exercise of functions transferred to it by the 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 a power to make provision by an order under section 46.
Status
2 The body shall not be regarded as acting on behalf of the Crown and its members, officers and employees shall not be regarded as Crown servants.
Name, members and chairman
3 (1) The body shall be known by such name as may be specified in the delegation order.
(2) The body shall consist of such persons (not being less than eight) as the Secretary of State may appoint after such consultation as he thinks appropriate; and the chairman of the body shall be such person as the Secretary of State may appoint from amongst its members.
(3) The Secretary of State may make provision by order as to the terms on which the members of the body are to hold and vacate office and as to the terms on which a person appointed as chairman is to hold and vacate the office of chairman.
Financial provisions
4 (1) The body shall pay to its chairman and members such remuneration, and such allowances in respect of expenses properly incurred by them in the performance of their duties, as the Secretary of State may determine.
(2) As regards any chairman or member in whose case the Secretary of State so determines, the body shall pay or make provision for the payment of—
(a) such pension, allowance or gratuity to or in respect of that person on his retirement or death, or
(b) such contributions or other payment towards the provision of such a pension, allowance or gratuity,
as the Secretary of State may determine.
(3) Where a person ceases to be a member of the body otherwise than on the expiry of his term of office and it appears to the Secretary of State that there are special circumstances which make it right for him to receive compensation, the body shall make a payment to him by way of compensation of such amount as the Secretary of State may determine.
Proceedings
5 (1) The delegation order may contain such provision as the Secretary of State considers appropriate with respect to the proceedings of the body.
(2) The 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 or any defect in the appointment of any member.
Fees
6 (1) The body may retain fees payable to it.
(2) The fees shall be applied for meeting the expenses of the body in discharging its functions and for 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 necessary or expedient for the proper performance of its functions.
(4) In prescribing the amount of fees in the exercise of the functions transferred to it the body shall prescribe such fees as appear to it sufficient to defray those expenses, taking one year with another.
(5) Any exercise by the body of the power to prescribe fees requires the approval of the Secretary of State; and the Secretary of State may, after consultation with the body, by order vary or revoke any regulations made by it prescribing fees.
Legislative functions
7 (1) Regulations made by the body in the exercise of the functions transferred to it shall be made by instrument in writing, but not by statutory instrument.
(2) The instrument shall specify the provision of this Part of this Act under which it is made.
(3) The Secretary of State may by order impose such requirements as he thinks necessary or expedient as to the circumstances and manner in which the body must consult on any regulations it proposes to make.
8 (1) Immediately after an instrument is made it shall be printed and made available to the public with or without payment.
(2) A person shall not be taken to have contravened any regulation if he shows that at the time of the alleged contravention the instrument containing the regulation had not been made available as required by this paragraph.
9 (1) The production of a printed copy of an instrument purporting to be made by the body on which is endorsed a certificate signed by an officer of the body authorised 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 prima facie evidence or, in Scotland, sufficient evidence of the facts stated in the certificate.
(2) A certificate purporting to be signed as mentioned in sub-paragraph (1) shall be deemed to have been duly signed unless the contrary is shown.
(3) Any person wishing in any legal proceedings to cite an instrument made by the body may require the body to cause a copy of it to be endorsed with such a certificate as is mentioned in this paragraph.
Report and accounts
10 (1) The body shall at least once in each year for which the delegation order is in force make a report to the Secretary of State on the discharge of the functions transferred to it and on such other matters as the Secretary of State may by order require.
(2) The Secretary of State shall lay before Parliament copies of each report received by him under this paragraph.
(2A) The following provisions of this paragraph apply as follows—
(a) sub-paragraphs (3) and (4) apply only where the body is established by the order, and
(b) sub-paragraphs (5) and (6) apply only where the body is an existing body.
(3) The Secretary of State may, with the consent of the Treasury, give directions to the body with respect to its accounts and the audit of its accounts and it is the duty of the body to comply with the directions.
(4) A person shall not be appointed auditor of the body unless he is eligible for appointment as a company auditor under section 25.
(5) Unless the body is a company to which section 226 of the Companies Act 1985 (duty to prepare individual company accounts) applies—
(a) the Secretary of State may, with the consent of the Treasury, give directions to the body with respect to its accounts and the audit of its accounts, and
(b) it is the duty of the body to comply with the directions.
(6) Whether or not the body is a company to which section 226 of the Companies Act 1985 applies—
(a) the Secretary of State may give directions to the body providing that any provisions of that Act specified in the directions are to apply to the body, with or without any modifications so specified, and
(b) it is the duty of the body to comply with the directions.
Other supplementary provisions
11 (1) The transfer of a function to a body designated by a delegation order does not affect anything previously done in the exercise of the function transferred; and the resumption of a function so transferred does not affect anything previously done in exercise of the function resumed.
(2) The Secretary of State may by order make such transitional and other supplementary provision as he thinks necessary or expedient in relation to the transfer or resumption of a function.
(3) The provision that may be made in connection with the transfer of a function includes, in particular, provision—
(a) for modifying or excluding any provision of this Part of this Act in its application to the function transferred;
(b) for applying to the body designated by the delegation order, in connection with the function transferred, any provision applying to the Secretary of State which is contained in or made under any other enactment;
(c) for the transfer of any property, rights or liabilities from the Secretary of State to that body;
(d) for the carrying on and completion by that body of anything in process of being done by the Secretary of State when the order takes effect;
(e) for the substitution of that body for the Secretary of State in any instrument, contract or legal proceedings.
(4) The provision that may be made in connection with the resumption of a function includes, in particular, provision—
(a) for the transfer of any property, rights or liabilities from that body to the Secretary of State;
(b) for the carrying on and completion by the Secretary of State of anything in process of being done by that body when the order takes effect;
(c) for the substitution of the Secretary of State for that body in any instrument, contract or legal proceedings.
12 Where a delegation order is revoked, the Secretary of State may by order make provision—
(a) for the payment of compensation to persons ceasing to be employed by the body established by the delegation order; and
(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 the name of any body corporate whose constitution provides for the establishment of the body.
(3) In sub-paragraph (2) “relevant proceedings” means proceedings brought in or in connection with the exercise of any transferred function.
(4) In relation to proceedings brought as mentioned in sub-paragraph (2), any reference in paragraph 11(3)(e) or (4)(c) to the body replacing or being replaced by the Secretary of State in any legal proceedings is to be read with the appropriate modifications.
SCHEDULE 14 Supervisory and qualifying bodies: Restrictive practices
Section 47(1).
Part I Prevention of restrictive practices
Refusal of recognition on grounds related to competition
1 (1) The Secretary of State shall before deciding whether to make a recognition order in respect of a supervisory body or professional qualification send to the Office of Fair Trading (in this Schedule referred to as “the OFT”) a copy of the rules and of any guidance which the Secretary of State is required to consider in making that decision together with such other information as the Secretary of State considers will assist the OFT.
(2) The OFT shall consider whether the rules or guidance have, or are intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition, and shall report to the Secretary of State; and the Secretary of State shall have regard to its report in deciding whether to make a recognition order.
(3) The Secretary of State shall not make a recognition order if it appears to him that the rules and any guidance of which copies are furnished with the application have, or are intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition, unless it appears to him that the effect is reasonably justifiable having regard to the purposes of this Part of this Act.
Notification of changes to rules or guidance
2 (1) Where a recognised supervisory or qualifying body amends, revokes or adds to its rules or guidance in a manner which may reasonably be regarded as likely—
(a) to restrict, distort or prevent competition to any significant extent, or
(b) otherwise to affect the question whether the recognition order granted to the body should continue in force,
it shall within seven days give the Secretary of State written notice of the amendment, revocation or addition.
(2) Notice need not be given under sub-paragraph (1) of the revocation of guidance not intended to have continuing effect or issued otherwise than in writing or other legible form, or of any amendment or addition to guidance which does not result in or consist of guidance which is intended to have continuing effect and is issued in writing or other legible form.
Continuing scrutiny by the Director General of Fair Trading
3 (1) The OFT shall keep under review the rules made or guidance issued by a recognised supervisory or qualifying body, and if it is of the opinion that any rules or guidance of such a body have, or are intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition, it shall report its opinion to the Secretary of State, stating what in its opinion the effect is or is likely to be.
(2) The Secretary of State shall send to the OFTcopies of any notice received by him under paragraph 2, together with such other information as he considers will assist the OFT.
(3) The OFT may report to the Secretary of State its opinion that any matter mentioned in such a notice does not have, and is not intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition.
(4) The OFT may from time to time consider whether—
(a) any practices of a recognised supervisory or qualifying body in its capacity as such, or
(b) any relevant practices required or contemplated by the rules or guidance of such a body or otherwise attributable to its conduct in its capacity as such,
have, or are intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition and, if so, what that effect is or is likely to be; and if it is of that opinion it shall make a report to the Secretary of State stating its opinion and what the effect is or is likely to be.
(5) The practices relevant for the purposes of sub-paragraph (4)(b) in the case of a recognised supervisory body are practices engaged in for the purposes of, or in connection with, appointment as a company auditor or the conduct of company audit work by persons who—
(a) are eligible under its rules for appointment as a company auditor, or
(b) hold an appropriate qualification and are directors or other officers of bodies corporate which are so eligible or partners in, or employees of, partnerships which are so eligible.
(6) The practices relevant for the purposes of sub-paragraph (4)(b) in the case of a recognised qualifying body are—
(a) practices engaged in by persons in the course of seeking to obtain a recognised professional qualification from that body, and
(b) practices engaged in by persons approved by the body for the purposes of giving practical training to persons seeking such a qualification and which relate to such training.
Investigatory powers of the Director
4 (1) The following powers are exercisable by the OFT for the purpose of investigating any matter in connection with its functions under paragraph 1or 3.
(2) The OFT may by a notice in writing require any person to produce, at a time and place specified in the notice, to the OFT or to any person appointed by it for the purpose, any documents which are specified or described in the notice and which are documents in his custody or under his control and relating to any matter relevant to the investigation.
(3) The OFT may by a notice in writing require any person to furnish to the OFT such information as may be specified or described in the notice, and specify the time within which and the manner and form in which any such information is to be furnished.
(4) A person shall not under this paragraph be required to produce any document or disclose any information which he would be entitled to refuse to produce or disclose on grounds of legal professional privilege in proceedings in the High Court or on the grounds of confidentiality as between client and professional legal adviser in proceedings in the Court of Session.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enforcement
4A (1) The court may, on an application by the OFT, enquire into whether any person (“the defaulter”) has refused or otherwise failed, without reasonable excuse, to comply with a notice under paragraph 4.
(2) An application under sub-paragraph (1) shall include details of the possible failure which the OFT considers has occurred.
(3) In enquiring into a case under sub-paragraph (1), the court shall hear any witness who may be produced against or on behalf of the defaulter and any statement which may be offered in defence.
(4) Sub-paragraphs (5) and (6) apply where the court is satisfied, after hearing any witnesses and statements as mentioned in sub-paragraph (3), that the defaulter has refused or otherwise failed, without reasonable excuse, to comply with the notice under paragraph 4.
(5) The court may punish the defaulter as it would have been able to punish him had he been guilty of contempt of court.
(6) Where the defaulter is a body corporate, the court may punish any director or officer of the defaulter as it would have been able to punish that director or officer had the director or officer been guilty of contempt of court.
(6A) Where the defaulter is a partnership constituted under the law of Scotland, the court may punish any partner of the defaulter as it would have been able to punish him had he been guilty of contempt of court.
(7) In this section “the court”—
(a) in relation to England and Wales, means the High Court, and
(b) in relation to Scotland, means the Court of Session.
4B (1) A person commits an offence if he intentionally alters, suppresses or destroys a document which he has been required to produce by a notice under paragraph 4.
(2) A person who commits an offence under sub-paragraph (1) shall be liable—
(a) on summary conviction, to a fine not exceeding the statutory maximum;
(b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.
Publication of Director’s reports
5 (1) The OFT may, if it thinks fit, publish any report made by it under paragraph 1 or 3.
(2) It shall exclude from a published report, so far as practicable, any matter which relates to the affairs of a particular person (other than the supervisory or qualifying body concerned) the publication of which would or might in its opinion seriously and prejudicially affect the interests of that person.
Powers exercisable by the Secretary of State in consequence of report
6 (1) The powers conferred by this section are exercisable by the Secretary of State if, having received and considered a report from the OFT under paragraph 3(1) or (4), it appears to him that—
(a) any rules made or guidance issued by a recognised supervisory or qualifying body, or
(b) any such practices as are mentioned in paragraph 3(4),
have, or are intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition and that that effect is greater than is reasonably justifiable having regard to the purposes of this Part of this Act.
(2) The powers are—
(a) to revoke the recognition order granted to the body concerned,
(b) to direct it to take specified steps for the purpose of securing that the rules, guidance or practices in question do not have the effect mentioned in sub-paragraph (1), and
(c) to make alterations in the rules of the body for that purpose.
(3) The provisions of paragraph 3(2) to (5), (7) and (9) of Schedule 11 or, as the case may be, Schedule 12 have effect in relation to the revocation of a recognition order under sub-paragraph (2)(a) above as they have effect in relation to the revocation of such an order under that Schedule.
(4) Before the Secretary of State exercises the power conferred by sub-paragraph (2)(b) or (c) above he shall—
(a) give written notice of his intention to do so to the body concerned and take such steps (whether by publication or otherwise) as he thinks appropriate for bringing the notice to the attention of any other person who in his opinion is likely to be affected by the exercise of the power, and
(b) have regard to any representation made within such time as he considers reasonable by the body or any such other person.
(5) A notice under sub-paragraph (4) shall give particulars of the manner in which the Secretary of State proposes to exercise the power in question and state the reasons for which he proposes to act; and the statement of reasons may include matters contained in any report received by him under paragraph 4.
Supplementary provisions
7 (1) A direction under paragraph 6 is, on the application of the Secretary of State, enforceable by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988.
(2) The fact that any rules made by a recognised supervisory or qualifying body have been altered by the Secretary of State, or pursuant to a direction of the Secretary of State, under paragraph 6 does not preclude their subsequent alteration or revocation by that body.
(3) In determining for the purposes of this Part of this Schedule whether any guidance has, or is likely to have, any particular effect the Secretary of State and the OFT may assume that the persons to whom it is addressed will act in conformity with it.
Part II Consequential Exemptions from Competition Law
Fair Trading Act 1973 (c. 41)
8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Competition Act 1998
9 (1) The Chapter I prohibition does not apply to an agreement for the constitution of a recognised supervisory or qualifying body to the extent to which it relates to—
(a) rules of, or guidance issued by, the body; and
(b) incidental matters connected with the rules or guidance.
(2) The Chapter I prohibition does not apply to an agreement the parties to which consist of or include—
(a) a recognised supervisory or qualifying body, or
(b) any person mentioned in paragraph 3(5) or (6) above,
to the extent to which the agreement consists of provisions the inclusion of which in the agreement is required or contemplated by the rules or guidance of that body.
(3) The Chapter I prohibition does not apply to the practices mentioned in paragraph 3(4)(a) and (b) above.
(4) Where a recognition order is revoked, sub-paragraphs (1) to (3) above are to continue to apply for a period of six months beginning with the day on which the revocation takes effect, as if the order were still in force.
(5) In this paragraph—
(a) “the Chapter I prohibition” means the prohibition imposed by section 2(1) of the Competition Act 1998,
(b) references to an agreement are to be read as applying equally to, or in relation to, a decision or concerted practice,
and expressions used in this paragraph which are also used in Part I of the Competition Act 1998 are to be interpreted in the same way as for the purposes of that Part of that Act.
(6) In the application of this paragraph to decisions and concerted practices, references to provisions of an agreement are to be read as references to elements of a decision or concerted practice.
Competition Act 1980 (c. 21)
10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE 18 “Subsidiary” and related expressions: consequential amendments and savings
Section 144(4).
Coal Industry Nationalisation Act 1946 (c. 59)
1 In Schedule 2A to the Coal Industry Nationalisation Act 1946 (eligibility for superannuation benefits), in the definition of “subsidiary” in paragraph 5 of the Table, for “section 154 of the Companies Act 1948” substitute “section 736 of the Companies Act 1985”.
Electricity Act 1947 (c. 54)
2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Landlord and Tenant Act 1954 (c. 56)
3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transport Act 1962 (c. 46)
4 In the Transport Act 1946, in the definition of “subsidiary” in section 92(1) (interpretation) omit the words “(taking references in that section to a company as being references to a body corporate)”.
Harbours Act 1964 (c. 40)
5 In section 57(1) of the Harbours Act 1964 (interpretation), in the definition of “marine work” for “section 154 of the Companies Act 1948” substitute “ section 736 of the Companies Act 1985 ”.
General Rate Act 1967 (c. 9)
6 In section 32A of the General Rate Act 1967 (rateable premises of Transport Boards), in the definition of “subsidiary” in subsection (6) omit the words “(taking references in that section to a company as being references to a body corporate)”.
Transport Act 1968 (c. 73)
7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Post Office Act 1969 (c. 48)
8 In section 86 of the Post Office Act 1969 (interpretation), in subsection (2) for “736(5)(b)” substitute “ 736 ”.
Industry Act 1972 (c. 63)
9 In section 10 of the Industry Act 1972 (construction credits), in subsection (9) for “for the purposes of the Companies Act 1985 by section 736 of that Act” substitute “ by section 736 of the Companies Act 1985 ”.
Coal Industry Act 1973 (c. 8)
10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industry Act 1975 (c. 68)
11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scottish Development Agency Act 1975 (c. 69)
12 In section 25(1) of the Scottish Development Agency Act 1975 (interpretation), in the definition of “wholly-owned subsidiary” for “section 736(5)(b)” substitute “ section 736 ”.
Welsh Development Agency Act 1975 (c. 70)
13 In section 27(1) of the Welsh Development Agency Act 1975 (interpretation), in the definition of “wholly-owned subsidiary” for “section 736(5)(b)” substitute “ section 736 ”.
Restrictive Trade Practices Act 1976 (c. 41)
14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial Common Ownership Act 1976 (c. 78)
15 In section 2(5) of the Industrial Common Ownership Act 1976 (common ownership and co-operative enterprises) for “for the purposes of the Companies Act 1985” substitute “ as defined by section 736 of the Companies Act 1985 or for the purposes of ”.
Aircraft and Shipbuilding Industries Act 1977 (c. 3)
16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nuclear Industry (Finance) Act 1977 (c. 7)
17 In section 3 of the Nuclear Industry (Finance) Act 1977 (expenditure on acquisition of shares in National Nuclear Corporation Ltd and subsidiaries), after “within the meaning of” insert “ section 736 of ”.
Coal Industry Act 1977 (c. 39)
18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shipbuilding (Redundancy Payments) Act 1978 (c. 11)
19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Gains Tax Act 1979 (c. 14)
20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crown Agents Act 1979 (c. 43)
21 In section 31(1) of the Crown Agents Act 1979 (interpretation), in the definition of “wholly-owned subsidiary” for “section 736(5)(b)” substitute “ section 736(2) ”.
Competition Act 1980 (c. 21)
22 In sections 11(3)(f) and 12 of the Competition Act 1980 (references relating to public bodies, &c.), after “within the meaning of” insert “ section 736 of ”.
British Aerospace Act 1980 (c. 26)
23 In section 14(1) of the British Aerospace Act 1980 (interpretation)—
(a) in the definition of “subsidiary” for “the same meaning as in the Companies Act 1948”, and
(b) in the definition of “wholly-owned subsidiary” for “the same meaning as it has for the purposes of section 150 of the Companies Act 1948”,
substitute “ the meaning given by section 736 of the Companies Act 1985 ”.
Local Government, Planning and Land Act 1980 (c. 65)
24 In sections 100(1), 141(7) and 170(1)(d) and (2) of the Local Government, Planning and Land Act 1980 (which refer to wholly-owned subsidiaries) for “within the meaning of section 736(5)(b)” substitute “ as defined by section 736 ”.
British Telecommunications Act 1981 (c. 38)
25 In section 85 of the British Telecommunications Act 1981 (interpretation), for subsection (2) substitute—
(2) Any reference in this Act to a subsidiary or wholly-owned subsidiary shall be construed in accordance with section 736 of the Companies Act 1985.
.
Transport Act 1981 (c. 56)
26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value Added Tax Act 1983 (c. 55)
27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telecommunications Act 1984 (c. 12)
28 In section 73(1) of the Telecommunications Act 1984 (interpretation of Part V), for “the same meaning as in” substitute “the meaning given by section 736 of”.
London Regional Transport Act 1984 (c. 32)
29 In section 68 of the London Regional Transport Act 1984 (interpretation), for the definition of “subsidiary” substitute—
“subsidiary” (subject to section 62 of this Act) has the meaning given by section 736 of the Companies Act 1985;
.
Inheritance Tax Act 1984 (c. 51)
30 (1) The Inheritance Tax Act 1984 is amended as follows.
(2) In section 13 (dispositions by close companies for benefit of employees), in the definition of “subsidiary” in subsection (5) for “the same meaning as in” substitute “ the meaning given by section 736 of ”.
(3) In section 103 (introductory provisions relating to relief for business property), in subsection (2) for “the same meanings as in” substitute “ the meanings given by section 736 of ”.
(4) In section 234 (interest on instalments) in subsection (3) for “within the meaning of” substitute “ as defined in section 736 of ”.
Ordnance Factories and Military Services Act 1984 (c. 59)
31 In section 14 of the Ordnance Factories and Military Services Act 1984 (interpretation), for the definitions of “subsidiary” and “wholly-owned subsidiary” substitute—
“subsidiary” and “wholly-owned subsidiary” have the meanings given by section 736 of the Companies Act 1985.
.
Companies Act 1985 (c. 6)
32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transport Act 1985 (c. 67)
39 In section 137(1) of the Transport Act 1985 (interpretation), in the definition of “subsidiary” for the words from “as defined” to the end substitute “ within the meaning of section 736 of the Companies Act 1985 as originally enacted (and not as substituted by section 144(1) of the Companies Act 1989); ”.
Housing Act 1985 (c. 68)
40 In section 622 of the Housing Act 1985 (minor definitions: general), in the definition of “subsidiary” for “the same meaning as in” substitute “ the meaning given by section 736 of ”.
Housing Associations Act 1985 (c. 69)
41 In section 101 of the Housing Associations Act 1985 (minor definitions: Part II), in the definition of “subsidiary” for “the same meaning as in” substitute “ the meaning given by section 736 of ”.
Atomic Energy Authority Act 1986 (c. 3)
42 In section 9 of the Atomic Energy Authority Act 1986 (interpretation), in the definition of “subsidiary” and “wholly-owned subsidiary” for “have the same meaning as in” substitute “ have the meaning given by section 736 of ”.
Airports Act 1986 (c. 31)
43 In section 82 of the Airports Act 1986 (general interpretation), in the definition of “subsidiary” for “has the same meaning as in” substitute “ has the meaning given by section 736 of ”.
Gas Act 1986 (c. 44)
44 In the Gas Act 1986—
(a) in section 48(1) (interpretation of Part I), in the definitions of “holding company” and “subsidiary”, and
(b) in section 61(1) (interpretation of Part II), in the definition of “subsidiary”,
for “has the same meaning as in” substitute “ has the meaning given by section 736 of ”.
Building Societies Act 1986 (c. 53)
45 In section 119 of the Building Societies Act 1986 (interpretation), in the definition of “subsidiary” for “has the same meaning as in” substitute “ has the meaning given by section 736 of ”.
Income and Corporation Taxes Act 1988 (c. 1)
46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
British Steel Act 1988 (c. 35)
47 In section 15(1) of the British Steel Act 1988 (interpretation), in the definition of “subsidiary” for “has the same meaning as in” substitute “ has the meaning given by section 736 of ”.
Part I U.K. investment exchanges
Default Rules
1 (1) The exchange must have default rules which, in the event of a member of the exchange appearing to be unable to meet his obligations in respect of one or more market contracts, enable action to be taken in respect of unsettled market contracts to which he is a party.
(2) The rules may authorise the taking of the same or similar action in relation to a member who appears to be likely to become unable to meet his obligations in respect of one or more market contracts.
(3) The rules must enable action to be taken in respect of all unsettled market contracts, other than those entered into by a recognised clearing house for the purposes of or in connection with the provision of clearing services for the exchange.
(4) As regards contracts falling within section 155(2)(b) above, the rules must contain provision corresponding to that required by paragraphs 9 to 11 below in the case of a UK clearing house.
(5) As regards contracts falling within section 155(2)(a) above the rules must contain provision complying with paragraphs 2 and 3 below.
Content of rules
2 (1) The rules must provide for all rights and liabilities between those party as principal to unsettled market contracts to which the defaulter is party as principal to be discharged and for there to be paid by one party to the other such sum of money (if any) as may be determined in accordance with the rules.
(2) The rules must further provide—
(a) for the sums so payable in respect of different contracts between the same parties to be aggregated or set off so as to produce a net sum, and
(b) for the certification by or on behalf of the exchange of the net sum payable or, as the case may be, of the fact that no sum is payable.
(3) The rules may make special provision with respect to, or exclude from the provisions required by sub-paragraphs (1) and (2), contracts of any description prescribed for the purposes of this sub-paragraph by regulations made by the Secretary of State.
(4) The reference in sub-paragraph (1) to rights and liabilities between those party as principal to unsettled market contracts does not include rights and liabilities—
(a) in respect of margin; or
(b) arising out of a failure to perform a market contract.
Notification to other parties affected
3 The exchange must have adequate arrangements for securing that—
(a) parties to unsettled market contracts with a defaulter acting as principal are notified as soon as reasonably practicable of the default and of any decision taken under the rules in relation to contracts to which they are a party; and
(b) parties to unsettled market contracts with a defaulter acting as agent and the defaulter’s principals are notified as soon as reasonably practicable of the default and of the identity of the other party to the contract.
Application of default rules to designated non-members
4 (1) The rules may make the same or similar provision in relation to designated non-members as in relation to members of the exchange.
(2) If such provision is made, the exchange must have adequate procedures—
(a) for designating the persons, or descriptions of person, in respect of whom action may be taken,
(b) for keeping under review the question which persons or descriptions of person should be or remain so designated, and
(c) for withdrawing such designation.
(3) The procedures shall be designed to secure that a person is not or does not remain designated if failure by him to meet his obligations in respect of one or more market contracts would be unlikely adversely to affect the operation of the market, and that a description of persons is not or does not remain designated if failure by a person of that description to meet his obligations in respect of one or more market contracts would be unlikely adversely to affect the operation of the market.
(4) The exchange must have adequate arrangements—
(a) for bringing a designation or withdrawal of designation to the attention of the person or description of persons concerned, and
(b) where a description of persons is designated, or the designation of a description of persons is withdrawn, for ascertaining which persons fall within that description.
Delegation of functions in connection with default procedures
5 The rules may make provision for the whole or part of the functions mentioned in paragraphs 1 to 4 to be performed by another body or person on behalf of the exchange.
Co-operation with other authorities
6 The exchange must be able and willing to co-operate, by the sharing of information and otherwise, with the Secretary of State, any relevant office-holder and any other authority or body having responsibility for any matter arising out of, or connected with, the default of a member of the exchange or any designated non-member.
Margin
7 Where the exchange provides clearing services, paragraph 14 below applies in respect of any margined transactions effected by or on behalf of the exchange as it applies in relation to a clearing house.
Part II U.K. clearing houses
Default rules
8 (1) The clearing house must have default rules which, in the event of a member of the clearing house appearing to be unable to meet his obligations in respect of one or more market contracts, enable action to be taken to close out his position in relation to all unsettled market contracts to which he is a party.
(2) The rules may authorise the taking of the same or similar action where a member appears to be likely to become unable to meet his obligations in respect of one or more market contracts.
Content of rules
9 (1) The rules must provide for all rights and liabilities of the defaulter under or in respect of unsettled market contracts to be discharged and for there to be paid by or to the defaulter such sum of money (if any) as may be determined in accordance with the rules.
(2) The rules must further provide—
(a) for the sums so payable by or to the defaulter in respect of different contracts to be aggregated or set off so as to produce a net sum;
(b) for that sum—
(i) if payable by the defaulter to the clearing house, to be set off against any property provided by or on behalf of the defaulter as cover for margin (or the proceeds of realisation of such property) so as to produce a further net sum, and
(ii) if payable by the clearing house to the defaulter to be aggregated with any property provided by or on behalf of the defaulter as cover for margin (or the proceeds of realisation of such property); and
(c) for the certification by or on behalf of the clearing house of the sum finally payable or, as the case may be, of the fact that no sum is payable.
10 (1) The reference in paragraph 9 to the rights and liabilities of a defaulter under or in respect of an unsettled market contract includes (without prejudice to the generality of that provision) rights and liabilities arising in consequence of action taken under provisions of the rules authorising—
(a) the effecting by the clearing house of corresponding contracts in relation to unsettled market contracts to which the defaulter is a party;
(b) the transfer of the defaulter’s position under an unsettled market contract to another member of the clearing house;
(c) the exercise by the clearing house of any option granted by an unsettled market contract.
(2) A “corresponding contract” means a contract on the same terms (except as to price or premium) as the market contract, but under which the person who is the buyer under the market contract agrees to sell and the person who is the seller under the market contract agrees to buy.
This sub-paragraph applies with any necessary modifications in relation to a market contract which is not an agreement to sell.
(3) The reference in paragraph 9 to the rights and liabilities of a defaulter under or in respect of an unsettled market contract does not include, where he acts as agent, rights or liabilities of his arising out of the relationship of principal and agent.
Notification to other parties affected
11 The clearing house must have adequate arrangements for securing that parties to unsettled market contracts with a defaulter are notified as soon as reasonably practicable of the default and of any decision taken under the rules in relation to contracts to which they are a party.
Delegation of functions in connection with default procedures
12 The rules may make provision for the whole or part of the functions mentioned in paragraphs 8 to 11 to be performed by another body or person on behalf of the clearing house.
Co-operation with other authorities
13 The clearing house must be able and willing to co-operate, by the sharing of information and otherwise, with the Secretary of State, any relevant office-holder and any other authority or body having responsibility for any matter arising out of, or connected with, the default of a member of the clearing house.
Margin
14 (1) The rules of the clearing house must provide that, in the event of a default, margin provided by the defaulter for his own account is not to be applied to meet a shortfall on a client account.
(2) This is without prejudice to the requirements of any relevant regulations under section 55 of the Financial Services Act 1986 (clients’ money).
Part III Overseas investment exchanges and clearing houses
15 (1) The rules and practices of the body, together with the law of the country in which the body’s head office is situated, must be such as to provide adequate procedures for dealing with the default of persons party to market contracts connected with the body.
(2) The reference in sub-paragraph (1) to default is to a person being unable to meet his obligations.
Introductory
1 The provisions of this Schedule have effect for the purpose of safeguarding the operation of certain financial markets—
(a) in the event of the insolvency, winding up or default of a person party to transactions in the market (paragraphs 2 to 8), and
(b) as regards the effectiveness or enforcement of certain charges given to secure obligations in connection with such transactions (paragraphs 9 to 12).
Recognised investment exchanges and clearing houses
2 (1) This Schedule applies to the following descriptions of contract connected with a recognised investment exchange or recognised clearing house.
The contracts are referred to in this Schedule as “market contracts”.
(2) In relation to a recognised investment exchange, this Schedule applies to—
(a) contracts entered into by a member or designated non-member of the exchange which are—
(i) made on or otherwise subject to the rules of the exchange,
(ii) on terms expressed to be as traded on the exchange, or
(iii) on the same terms as those on which an equivalent contract would be made on the exchange; and
(b) contracts subject to the rules of the exchange entered into by the exchange for the purposes of or in connection with the provision of clearing services.
A “designated non-member” means a person in respect of whom action may be taken under the default rules of the exchange but who is not a member of the exchange.
(3) In relation to a recognised clearing house, this Schedule applies to contracts subject to the rules of the clearing house entered into by the clearing house for the purposes of or in connection with the provision of clearing services for a recognised investment exchange.
This includes contracts effected under or in consequence of action taken by the clearing house under its default rules.
3 The general law of insolvency has effect in relation to market contracts, and action taken under the rules of a recognised investment exchange or recognised clearing house with respect to such contracts, subject to the following provisions of this Schedule.
4 (1) None of the following shall be regarded as to any extent invalid at law on the ground of inconsistency with the law relating to the distribution of the assets of a person on bankruptcy, winding up or sequestration, or in the administration of an insolvent estate—
(a) a market contract,
(b) the rules of a recognised investment exchange or recognised clearing house as to the settlement of market contracts,
(c) the default rules of a recognised investment exchange or recognised clearing house.
(2) The powers of a relevant office-holder in his capacity as such, and the powers of the court under the Insolvency Act 1986 or the Bankruptcy (Scotland) Act 1985, shall not be exercised in such a way as to prevent or interfere with—
(a) the settlement of a market contract in accordance with the rules of a recognised investment exchange or recognised clearing house,
(b) any action taken under the default rules of such an exchange or clearing house.
(3) Nothing in the following provisions of this Schedule shall be construed as affecting the generality of sub-paragraph (2).
(4) A debt or other liability arising out of a market contract which is the subject of default proceedings may not be proved in a winding up or bankruptcy, or in Scotland claimed in a winding up or sequestration, until the completion of the default proceedings.
A debt or other liability which by virtue of this sub-paragraph may not be proved or claimed shall not be taken into account for the purposes of any set-off until the completion of the default proceedings.
5 (1) A liquidator or trustee of a defaulter shall not—
(a) declare or pay any dividend to the creditors, or
(b) return any capital to contributories,
unless he has retained what he reasonably considers to be an adequate reserve in respect of any claims arising as a result of the default proceedings of the exchange or clearing house concerned.
(2) Nothing in section 11(3), 130 or 285 of the Insolvency Act 1986 (which restrict the taking of certain legal proceedings and other steps), and nothing in the Bankruptcy (Scotland) Act 1985, shall affect any action taken by an exchange or clearing house for the purpose of its default proceedings.
6 (1) The following provisions apply with respect to the net sum certified by a recognised investment exchange or recognised clearing house, upon the completion of proceedings under its default rules, to be payable by or to a defaulter.
(2) If, in England and Wales, a bankruptcy or winding up order has been made, or a resolution for voluntary winding up has been passed, the debt—
(a) is provable in the bankruptcy or winding up or, as the case may be, is payable to the relevant office-holder, and
(b) shall be taken into account, where appropriate, under section 323 of the Insolvency Act 1986 (mutual dealings and set-off) or the corresponding provision applicable in the case of a winding up,
in the same way as a debt due before the commencement of the bankruptcy or winding up.
(3) If, in Scotland, an award of sequestration or a winding-up order has been made, or a resolution for voluntary winding up has been passed, the debt—
(a) may be claimed in the sequestration or winding up or, as the case may be, is payable to the relevant office-holder, and
(b) shall be taken into account for the purposes of any rule of law relating to compensation or set-off applicable in sequestration or winding up,
in the same way as a debt due before the date of sequestration (within the meaning of section 73(1) of the Bankruptcy (Scotland) Act 1985) or the commencement of the winding up.
7 (1) Sections 178, 186, 315 and 345 of the Insolvency Act 1986 (power to disclaim onerous property and court’s power to order rescission of contracts, &c.) do not apply in relation to—
(a) a market contract, or
(b) a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to market contracts.
In the application of this sub-paragraph in Scotland, the reference to sections 178 and 315 shall be construed as a reference to any rule of law having the like effect as those sections.
(2) Sections 127 and 284 of the Insolvency Act 1986 (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition) do not apply to—
(a) a market contract, or any disposition of property in pursuance of such a contract,
(b) the provision of margin in relation to market contracts,
(c) a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to a market contract, or any disposition of property in pursuance of such a contract, or
(d) any disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as margin.
(3) However, if a person enters into a market contract knowing that a petition has been presented for the winding up or bankruptcy of the other party to the contract, the value of any profit or benefit to him arising from the contract is recoverable from him by the relevant office-holder unless the court directs otherwise.
(4) Any sum recoverable by virtue of sub-paragraph (3) has the same priority, in the event of the insolvency of the person from whom it is due, as if it were secured by a fixed charge.
8 (1) No order shall be made in relation to a market contract under—
(a) section 238 or 339 of the Insolvency Act 1986 (transactions at an under-value),
(b) section 239 or 340 of that Act (preferences), or
(c) section 423 of that Act (transactions defrauding creditors),
unless the court is satisfied that the person in favour of whom the contract was made knew at the time he entered into it that it was at an under-value (within the meaning of the relevant provision) or, as the case may be, that a preference was being given.
(2) As respects Scotland, no decree shall be granted in relation to a market contract—
(a) under section 34 or 36 of the Bankruptcy (Scotland) Act 1985 or section 242 or 243 of the Insolvency Act 1986 (gratuitous alienations and unfair preferences), or
(b) at common law,
unless the court is satisfied that the person with whom the contract was made knew at the time he entered into it that it was challengeable under any of the provisions mentioned in paragraph (a) or at common law.
(3) Sub-paragraphs (1) and (2) apply in relation to—
(a) a disposition of property in pursuance of a market contract,
(b) the provision of margin in relation to market contracts,
(c) a contract effected by a recognised investment exchange or recognised clearing house for the purpose of realising property provided as margin, or
(d) a disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as margin,
as they apply in relation to the making of a market contract.
Market charges
9 (1) The charges to which paragraphs 10 to 12 apply are charges, whether fixed or floating, granted—
(a) in favour of a recognised investment exchange, for the purpose of securing debts or liabilities arising in connection with the settlement of market contracts,
(b) in favour of a recognised clearing house, for the purpose of securing debts or liabilities arising in connection with their ensuring the performance of market contracts, or
(c) in favour of a person who agrees to make payments as a result of the transfer of specified securities made through the medium of a computer-based system established by the Bank of England and The Stock Exchange, for the purpose of securing debts or liabilities of the transferee arising in connection with the payments.
Those charges are referred to in this Schedule as “market charges”.
(2) Where a charge is granted partly for purposes specified in sub-paragraph (1)(a), (b) or (c) and partly for other purposes, paragraphs 10 to 12 apply to it so far as it has effect for the specified purposes; and the expression “market charge” shall be construed accordingly.
(3) In this paragraph and paragraphs 10 to 12—
“charge” means any form of security, including a mortgage and, in Scotland, a heritable security; and
“specified securities” means securities for the time being specified in the list in Schedule 1 to the Stock Transfer Act 1982, and includes any right to such securities.
10 The general law of insolvency has effect in relation to market charges and action taken in enforcing them subject to the following provisions of this Schedule.
11 (1) Sections 10(1)(b) and 11(3)(c) of the Insolvency Act 1986 (no enforcement of security while petition for administration order pending or order in force) do not apply to a market charge.
(2) Section 11(2) of that Act (receiver to vacate office when so required by administrator) does not apply to a receiver appointed under a market charge.
(3) Section 15(1) and (2) of that Act (administrator’s power to deal with charged property) do not apply to a market charge.
(4) Sections 127 and 284 of that Act (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition) do not apply to—
(a) a disposition of property as a result of which the property becomes subject to a market charge, or any transaction pursuant to which that disposition is made, or
(b) any disposition of property made in enforcing a market charge.
(5) However, if a person (other than the chargee under the market charge) who is a party to a disposition mentioned in sub-paragraph (4)(a) knows at the time of the disposition that a petition has been presented for the winding up or bankruptcy of the party making the disposition, the value of any profit or benefit to him arising from the disposition is recoverable from him by the relevant office-holder unless the court directs otherwise.
(6) Any sum recoverable by virtue of sub-paragraph (5) has the same priority, in the event of the insolvency of the person from whom it is due, as if it were secured by a fixed charge.
12 (1) No legal proceedings, execution or other legal process may be commenced or continued, and no distress may be levied against property which is, or becomes, subject to a market charge except with the consent of the person in whose favour the charge was granted or the leave of the court.
(2) The court may give leave subject to such terms as it thinks fit.
(3) Sub-paragraph (1) does not apply to proceedings to enforce any security over, or any equitable interest in, the property.
(4) Sections 10(1)(c), 11(3)(d), 130(3) and 285(3) of the Insolvency Act 1986 (which restrict the taking of certain legal proceedings and other steps) have effect accordingly.
(5) In the application of this paragraph to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied shall be omitted.
Supplementary provisions
13 (1) In this Schedule “default rules” means—
(a) in relation to a recognised investment exchange, rules which provide in the event of a member or designated non-member of the exchange appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts, for the settlement forthwith of all unsettled market contracts to which he is a party as principal, other than those whose performance is ensured by a recognised clearing house;
(b) in relation to a recognised clearing house, rules which provide in the event of a member of the clearing house appearing to be unable, or likely to become unable, to meet his obligations in respect of any market contract, for the closing out of his position in relation to all market contracts to which he is a party.
(2) References in this Schedule to a “defaulter” are to a person in respect of whom action has been taken by a recognised investment exchange or recognised clearing house under its default rules, whether by declaring him to be a defaulter or otherwise; and references in this Schedule to “default” shall be construed accordingly.
(3) In this Schedule “default proceedings” means proceedings taken by a recognised investment exchange or recognised clearing house under its default rules.
14 (1) The following are relevant office-holders for the purposes of this Schedule—
(a) the official receiver,
(b) any person acting in relation to a company as its liquidator, provisional liquidator, administrator or administrative receiver,
(c) any person acting in relation to an individual (or, in Scotland, a deceased debtor) as his trustee in bankruptcy or interim receiver of his property or as permanent or interim trustee in the sequestration of his estate,
(d) any person acting as administrator (or, in Scotland, as judicial factor) of an insolvent estate of a deceased person.
(2) Sub-paragraph (1)(c) applies in relation to a partnership, and any debtor within the meaning of the Bankruptcy (Scotland) Act 1985, as it applies in relation to an individual.
(3) In this paragraph—
“administrative receiver” has the meaning given by section 251 of the Insolvency Act 1986;
“company” means a company within the meaning of section 735(1) of the Companies Act 1985 or a company which may be wound up under Part V of the Insolvency Act 1986.
“interim trustee” and “permanent trustee” have the same meaning as in the Bankruptcy (Scotland) Act 1985.
15 (1) In this Schedule—
“clearing house” has the same meaning as in the Financial Services Act 1986;
“investment” and “investment exchange” have the same meaning as in the Financial Services Act 1986;
“recognised” means recognised under the Financial Services Act 1986;
“The Stock Exchange” means The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited.
(2) References in this Schedule to ensuring the performance of a transaction have the same meaning as in the Financial Services Act 1986.
(3) References in this Schedule to a market contract to which a person is a party include, unless the contrary intention appears, contracts to which he is party as agent.
Part I General Amendments
1 (1) Section 13 of the Financial Services Act 1986 (power to direct alteration of rules of recognised self-regulating organisation) is amended as follows.
(2) Omit subsection (1).
(3) For subsection (2) substitute—
(2) If at any time it appears to the Secretary of State that—
(a) a recognised self-regulating organisation is concerned with two or more kinds of investment business, and
(b) the requirement in paragraph 3(1) of Schedule 2 to this Act is not satisfied in respect of investment business of one or more but not all of those kinds,
he may, instead of revoking the recognition order or making an application under section 12 above, direct the organisation to alter, or himself alter, its rules so that they preclude a member from carrying on investment business of a kind in respect of which that requirement is not satisfied, unless he is an authorised person otherwise than by virtue of membership of the organisation or is an exempted person in respect of that business.
.
(4) For subsection (3) substitute—
(3) A direction under this section is enforceable on the application of the Secretary of State by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988.
.
(5) Omit subsections (4) to (6).
2 (1) Section 48 of the Financial Services Act 1986 (conduct of business rules) is amended as follows.
(2) In subsection (1) omit the words “members of a recognised self-regulating organisation or” and “organisation or”.
(3) After subsection (10) insert—
(11) Section 63A below (application of designated rules) has effect as regards the application of rules under this section to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.
.
3 (1) Section 49 of the Financial Services Act 1986 (financial resources rules) is amended as follows.
(2) For subsection (1) substitute—
(1) The Secretary of State may make rules requiring—
(a) a person authorised to carry on investment business by virtue of section 25 or 31 above, or
(b) a member of a recognised self-regulating organisation carrying on investment business in the carrying on of which he is subject to the rules of the organisation,
to have and maintain in respect of that business such financial resources as are required by the rules.
.
(3) After subsection (2) insert—
(3) Section 63A below (application of designated rules) has effect as regards the application of rules under this section to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.
.
4 In section 50 of the Financial Services Act 1986 (power of Secretary of State to modify conduct of business and financial resources rules for particular cases), after subsection (3) insert—
(4) The powers conferred by subsection (1) above shall not be exercised in a case where the powers conferred by section 63B below are exercisable (powers of recognised self-regulating organisation in relation to designated rules).
.
5 In section 52 of the Financial Services Act 1986 (notification regulations), in subsection (3) (application to member of recognised self-regulating organisation or professional body), for “subject to any of the rules made under section 48 above” substitute “not subject to the rules of that organisation or body”.
6 (1) Section 55 of the Financial Services Act 1986 (clients’ money) is amended as follows.
(2) In subsection (2)(b) and (e) omit the words “a member of a recognised self-regulating organisation or” and “organisation or”.
(3) In subsection (3) omit the words “organisation or”.
(4) After subsection (5) insert—
(6) Section 63A below (application of designated regulations) has effect as regards the application of regulations under this section to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.
.
7 In section 56 of the Financial Services Act 1986 (unsolicited calls), for subsection (7) substitute—
(7) Section 63A below (application of designated regulations) has effect as regards the application of regulations under this section to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.
As it applies to such persons in respect of such business the reference in subsection (1) above to conduct permitted by regulations made by the Secretary of State shall be construed—
(a) where or to the extent that the regulations do not apply, as a reference to conduct permitted by the rules of the organisation; and
(b) where or to the extent that the regulations do apply but are expressed to have effect subject to the rules of the organisation, as a reference to conduct permitted by the regulations together with the rules of the organisation.
(7A) In the application of this section to anything done by a person certified by a recognised professional body in carrying on investment business in the carrying on of which he is subject to the rules of the body, the reference in subsection (1) above to conduct permitted by regulations made by the Secretary of State shall be construed as a reference to conduct permitted by the rules of the body.
.
8 In section 86 of the Financial Services Act 1986 (collective investment schemes constituted in other member States), in subsection (7) (restriction on application of conduct of business rules), at the end add—
This subsection also applies to statements of principle under section 47A and codes of practice under section 63A so far as they relate to matters falling within the rule-making power in section 48.
.
9 In section 95 of the Financial Services Act 1986 (collective investment schemes: contraventions), after subsection (2) add—
(3) The disciplinary action which may be taken by virtue of section 47A(3) (failure to comply with statement of principle) includes—
(a) the giving of a direction under section 91(2), and
(b) the application by the Secretary of State for an order under section 93;
and subsection (6) of section 47A (duty of the Secretary of State as to exercise of powers) has effect accordingly.
.
10 (1) Section 107 of the Financial Services Act 1986 (appointment of auditors) is amended as follows.
(2) For subsection (1) (power to make rules) substitute—
(1) The Secretary of State may make rules requiring—
(a) a person authorised to carry on investment business by virtue of section 25 or 31 above, or
(b) a member of a recognised self-regulating organisation carrying on investment business in the carrying on of which he is subject to the rules of the organisation,
and who, apart from the rules, is not required by or under any enactment to appoint an auditor, to appoint as an auditor a person satisfying such conditions as to qualifications and otherwise as may be specified in or imposed under the rules.
.
(3) After subsection (3) add—
(4) In its application to members of recognised self-regulating organisations, this section has effect subject to section 107A below.
.
11 After section 107 of the Financial Services Act 1986 insert—
Application of audit rules to members of self-regulating organisations.
107A (1) The Secretary of State may in rules under section 107 designate provisions which apply, to such extent as may be specified, to a member of a recognised self-regulating organisation in respect of investment business in the carrying on of which he is subject to the rules of the organisation.
(2) It may be provided that the designated rules have effect, generally or to such extent as may be specified, subject to the rules of the organisation.
(3) A member of a recognised self-regulating organisation who contravenes a rule applying to him by virtue of that section shall be treated as having contravened the rules of the organisation.
(4) Except as mentioned above, rules made under section 107 do not apply to members of recognised self-regulating organisations in respect of investment business in the carrying on of which they are subject to the rules of the organisation.
(5) A recognised self-regulating organisation may on the application of a member of the organisation—
(a) modify a rule designated under this section so as to adapt it to his circumstances or to any particular kind of business carried on by him, or
(b) dispense him from compliance with any such rule, generally or in relation to any particular kind of business carried on by him.
(6) The powers conferred by subsection (5) shall not be exercised unless it appears to the organisation—
(a) that compliance with the rule in question would be unduly burdensome for the applicant having regard to the benefit which compliance would confer on investors, and
(b) that the exercise of those powers will not result in any undue risk to investors.
(7) The powers conferred by subsection (5) may be exercised unconditionally or subject to conditions; and subsection (3) applies in the case of a contravention of a condition as in the case of contravention of a designated rule.
(8) The reference in paragraph 4(1) of Schedule 2 (requirements for recognition of self-regulating organisations) to monitoring and enforcement of compliance with rules includes monitoring and enforcement of compliance with conditions imposed by the organisation under subsection (7).
.
12 (1) Section 114 of the Financial Services Act 1986 (power to transfer functions to designated agency) is amended as follows.
(2) For subsection (9) substitute—
(9) The Secretary of State shall not make a delegation order transferring any legislative functions unless—
(a) the agency has furnished him with a copy of the instruments it proposes to issue or make in the exercise of those functions, and
(b) he is satisfied that those instruments will afford investors an adequate level of protection and, in the case of such provisions as are mentioned in Schedule 8 to this Act, comply with the principles set out in that Schedule.
In this subsection “legislative functions” means the functions of issuing or making statements of principle, rules, regulations or codes of practice.
.
(3) In subsection (12) for “rules or regulations made” substitute “statements of principle, rules, regulations or codes of practice issued or made”.
13 (1) Section 115 of the Financial Services Act 1986 (resumption of transferred functions) is amended as follows.
(2) For subsection (5) substitute—
(5) Where the transferred functions consist of or include any legislative functions, an order may be made under subsection (2) above if at any time it appears to the Secretary of State that the instruments issued or made by the agency do not satisfy the requirements of section 114(9)(b) above.
.
(3) In subsection (7)—
(a) in the opening words, for “subsection (2)(b) above” substitute “this section”, and
(b) in paragraph (a) for “functions of making rules or regulations” substitute “functions of issuing or making statements of principle, rules, regulations or codes of practice”.
14 (1) Section 119 of the Financial Services Act 1986 (competition scrutiny: recognition orders) is amended as follows.
(2) In subsection (1) (considerations relevant to making of recognition order), for paragraphs (a) and (b) substitute—
(a) in the case of a self-regulating organisation, the rules and any guidance of which copies are furnished with the application for the order, together with any statements of principle, rules, regulations or codes of practice to which members of the organisation would be subject by virtue of Chapter V of this Part,
(b) in the case of an investment exchange, the rules and any guidance of which copies are furnished with the application for the order, together with any arrangements of which particulars are furnished with the application,
(c) in the case of a clearing house, the rules and any guidance of which copies are furnished with the application for the order,
.
(3) In subsection (2) (circumstances in which powers are exercisable in relation to recognised body), for paragraphs (a) to (c) substitute—
(a) in the case of a self-regulating organisation—
(i) any rules made or guidance issued by the organisation,
(ii) any practices of the organisation, or
(iii) any practices of persons who are members of, or otherwise subject to the rules made by, the organisation,
together with any statements of principle, rules, regulations or codes of practice to which members of the organisation are subject by virtue of Chapter V of this Part,
(b) in the case of a recognised investment exchange—
(i) any rules made or guidance issued by the exchange,
(ii) any practices of the exchange, or
(iii) any practices of persons who are members of, or otherwise subject to the rules made by, the exchange,
(c) in the case of a recognised clearing house—
(i) any rules made or guidance issued by the clearing house,
(ii) any practices of the clearing house, or
(iii) any practices of persons who are members of, or otherwise subject to the rules made by, the clearing house,
or any clearing arrangements made by the clearing house,
.
(4) In subsection (3) (powers exercisable in relation to recognised body)—
(a) in paragraph (b) for “the rules” substitute “its rules, or the”, and
(b) in paragraph (c) for “the rules” substitute “its rules”.
(5) In subsection (5) (construction of references to practices)—
(a) for “paragraph (b)” substitute “paragraph (a)(ii), (b)(ii) and (c)(ii)”, and
(b) omit the words from “and the practices referred to in paragraph (c)” to the end.
(6) After that subsection insert—
(6) The practices referred to in paragraph (a)(iii), (b)(iii) and (c)(iii) of subsection (2) above are—
(a) in relation to a recognised self-regulating organisation, practices in relation to business in respect of which the persons in question are subject to—
(i) the rules of the organisation, or
(ii) statements of principle, rules, regulations or codes of practice to which its members are subject by virtue of Chapter V of this Part,
and which are required or contemplated by the rules of the organisation or by those statements, rules, regulations or codes, or by guidance issued by the organisation,
(b) in relation to a recognised investment exchange or clearing house, practices in relation to business in respect of which the persons in question are subject to the rules of the exchange or clearing house, and which are required or contemplated by its rules or guidance,
or which are otherwise attributable to the conduct of the organisation, exchange or clearing house as such.
.
15 (1) Section 121 of the Financial Services Act 1986 (competition scrutiny: designated agencies) is amended as follows.
(2) In subsection (1) for “rules, regulations” substitute “statements of principle, rules, regulations, codes of practice”.
(3) In subsection (2)(a) and (c) for “rules or regulations made” substitute “statements of principle, rules, regulations or codes of practice issued or made”.
(4) In subsection (3)(b) for “rules, regulations” substitute “statements of principle, rules, regulations, codes of practice”.
(5) In subsection (4) for “rules or regulations” (twice) substitute “statements of principle, rules, regulations or codes of practice”.
16 (1) Section 122 of the Financial Services Act 1986 (reports by Director General of Fair Trading) is amended as follows.
(2) In subsection (1) for “and regulations” substitute “, statements of principle, regulations and codes of practice”.
(3) In subsection (2) for “regulations,” substitute “statements of principle, regulations, codes of practice,”.
(4) In subsection (4)—
(a) in paragraph (a) for “rules, guidance, arrangements and regulations” substitute “rules, statements of principle, regulations, codes of practice, guidance and arrangements”, and
(b) in the words following the paragraphs, for “rules, guidance, arrangements, regulations” substitute “rules, statements of principle, regulations, codes of practice, guidance, arrangements”, and for “rules, guidance, arrangements or regulations” substitute “rules, statements of principle, regulations, codes of practice, guidance or arrangements”.
17 (1) Section 124 of the Financial Services Act 1986 (matters to be left out of account for certain purposes in connection with competition scrutiny) is amended as follows.
(2) In subsection (1) (matters to be left out of account in determining whether monopoly situation exists), in paragraph (c) for “rules or regulations made or guidance issued” substitute “statements of principle, rules, regulations, codes of practice or guidance issued or made”.
(3) In subsection (3) (matters to be excluded from consideration where monopoly situation exists)—
(a) in paragraph (a), for “rules or regulations made” substitute “statements of principle, rules, regulations or codes of practice issued or made”,
(b) in paragraph (b), for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”, and
(c) in the closing words, for “rules, regulations” substitute “statements of principle, rules, regulations, codes of practice”.
18 For section 205 of the Financial Services Act 1986 (regulations, rules and orders) substitute—
General power to make regulations.
205 The Secretary of State may make regulations prescribing anything which by this Act is authorised or required to be prescribed.
Supplementary provisions with respect to subordinate legislation.
205A (1) The following provisions apply to any power of the Secretary of State under this Act—
(a) to issue statements of principle,
(b) to make rules or regulations,
(c) to make orders (other than such orders as are excepted by subsection (4) below), or
(d) to issue codes of practice.
(2) Any such power is exercisable by statutory instrument and includes power to make different provision for different cases.
(3) Except as otherwise provided, a statutory instrument containing statements of principle, rules or regulations shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(4) The above provisions do not apply to a recognition order, an order declaring a collective investment scheme to be an authorised unit trust scheme or a recognised scheme or to an order revoking any such order.
.
19 In section 206(1) of the Financial Services Act 1986 (publication of information and advice)—
(a) in paragraph (a), for “rules and regulations made” substitute “statements of principle, rules, regulations and codes of practice issued or made”, and
(b) in paragraph (b) for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”.
20 In Schedule 2 to the Financial Services Act 1986 (requirements for recognition of self-regulating organisations), in paragraph 4(1) (monitoring and enforcement) for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”.
21 In Schedule 3 to the Financial Services Act 1986 (requirements for recognition of professional bodies), in paragraph 4(2) (monitoring and enforcement) for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”.
22 In Schedule 7 to the Financial Services Act 1986 (qualifications of designated agency), in paragraph 2(2) (arrangements for discharge of functions: matters to be decided upon by the governing body) for “rules or regulations must be made” substitute “statements of principle, rules, regulations and codes of practice must be issued or made”.
23 (1) Schedule 8 to the Financial Services Act 1986 (principles applicable to designated agency’s rules and regulations) is amended as follows.
(2) In the heading for “Rules and Regulations” substitute “Legislative Provisions”.
(3) For paragraph 1, and the cross-heading preceding it, substitute—
Introduction
1 (1) In this Schedule “legislative provisions” means the provisions of statements of principle, rules, regulations and codes of practice issued or made under Part I of this Act.
(2) References in this Schedule to “conduct of business provisions” are to rules made under section 48 of this Act and statements of principle and codes of practice so far as they relate to matters falling within that rule-making power.
(3) References in this Schedule to provisions made for the purposes of a specified section or Chapter are to rules or regulations made under that section or Chapter and statements of principle and codes of practice so far as they relate to matters falling within that power to make rules or regulations.
Standards
1A The conduct of business provisions and the other legislative provisions must promote high standards of integrity and fair dealing in the conduct of investment business.
.
(4) In paragraphs 2 to 7, 9, 11 and 12 for “conduct of business rules” substitute “conduct of business provisions”.
(5) In paragraph 7 for “those rules and rules under” substitute “those provisions and provisions made for the purposes of”.
(6) In paragraph 8 for “Rules made under” substitute “Provisions made for the purposes of”.
(7) In paragraph 9 for “regulations made under” substitute “provisions made for the purposes of”.
(8) In paragraph 10 for “Rules made under” substitute “Provisions made for the purposes of” and for “under those sections” substitute “for the purposes of those sections”.
(9) In paragraph 12 for “rules and regulations made under” substitute “provisions made for the purposes of”.
24 (1) Schedule 9 to the Financial Services Act 1986 (designated agency: exercise of transferred functions) is amended as follows.
(2) In paragraph 4(1) (copies of instruments to be sent to Secretary of State), for “any rules or regulations made” substitute “any statements of principle, rules, regulations or codes of practice issued or made”.
(3) For paragraphs 5 and 6 substitute—
5 Paragraphs 6 to 9 below have effect instead of section 205A of this Act in relation to statements of principle, rules, regulations and codes of practice issued or made by a designated agency in the exercise of powers transferred to it by a delegation order.
6 Any such power is exercisable by instrument in writing and includes power to make different provision for different cases.
.
(4) In paragraph 8 (instruments to be printed and made available to public)—
(a) in sub-paragraph (1) for “is made” substitute “is issued or made”, and
(b) in sub-paragraph (2) for “rule or regulation” (twice) substitute “statement of principle, rule, regulation or code of practice”.
(5) In paragraph 9 (proof of instruments), for “made by the agency” (twice) substitute “made or issued by the agency”.
(6) For paragraph 12 (consultation) substitute—
12 (1) Where a designated agency proposes, in the exercise of powers transferred to it by a delegation order, to issue or make any statements of principle, rules, regulations or codes of practice, it shall publish the proposed instrument in such manner as appears to it best calculated to bring the proposals to the attention of the public, together with a statement that representations about the proposals (and, in particular, representations as to the cost of complying with the proposed provisions) can be made to the agency within a specified time.
(2) Before issuing or making the instrument the agency shall have regard to any representations duly made in accordance with that statement.
(3) The above requirements do not apply—
(a) where the agency considers that the delay involved in complying with them would be prejudicial to the interests of investors;
(b) to the issuing or making of an instrument in the same, or substantially the same, terms as a proposed instrument which was furnished by the agency to the Secretary of State for the purposes of section 114(9) of this Act.
.
25 (1) Schedule 10 to the Financial Services Act 1986 (application of investment business provisions to regulated insurance companies) is amended as follows.
(2) In paragraph 4 (modification of conduct of business rules), after sub-paragraph (2) insert—
(2A) Sub-paragraphs (1) and (2) also apply to statements of principle under section 47A and codes of practice under section 63A so far as they relate to matters falling within the rule-making power in section 48.
.
(3) In paragraph 7 (withdrawal of authorisation) after sub-paragraph (2) insert—
(3) The disciplinary action which may be taken by virtue of section 47A(3) of this Act (failure to comply with statement of principle) includes—
(a) the withdrawal of authorisation under section 11(2)(a) of the Insurance Companies Act 1982, and
(b) the giving of a direction under section 13(2A) of that Act;
and subsection (6) of section 47A (duty of the Secretary of State as to exercise of powers) has effect accordingly.
.
Part II Amendments Relating to Friendly Societies
26 Schedule 11 to the Financial Services Act 1986 (friendly societies) is amended as follows.
27 In paragraph 3(2) (competition scrutiny: recognition of self-regulating organisation for friendly societies), after “sent to him under this sub-paragraph” insert “, together with any statements of principle, rules, regulations or codes of practice to which members of the organisation would be subject by virtue of this Schedule,”.
28 (1) Paragraph 4 (requirements for recognition of self-regulating organisation for friendly societies) is amended as follows.
(2) In sub-paragraph (4)—
(a) in paragraph (a) for “22” substitute “22D”, and
(b) omit paragraph (b).
(3) In sub-paragraph (5) for “22” substitute “22D”.
29 Omit paragraph 7.
30 (1) Paragraph 10 (competition scrutiny: circumstances in which powers are exercisable in relation to recognised self-regulating organisation for friendly societies) is amended as follows.
(2) In sub-paragraph (1), after paragraph (c) insert “together with any statements of principle, rules, regulations or codes of practice to which members of the organisation are subject by virtue of this Schedule,”.
(3) In sub-paragraph (2)—
(a) in paragraph (b), for “the rules” substitute “its rules, or the”, and
(c) in paragraph (c), for “the rules” substitute “its rules”.
(4) In sub-paragraph (3) (construction of references to practices), omit the words from “and the practices referred to in paragraph (c)” to the end; and after that sub-paragraph insert—
(3A) The practices referred to in paragraph (c) of sub-paragraph (1) above are practices in relation to business in respect of which the persons in question are subject to—
(a) the rules of the organisation, or
(b) statements of principle, rules, regulations or codes of practice to which its members are subject by virtue of this Schedule,
and which are required or contemplated by the rules of the organisation or by those statements, rules, regulations or codes, or by guidance issued by the organisation, or which are otherwise attributable to the conduct of the organisation as such.
.
31 In paragraph 13, for “Paragraphs 14 to 25” substitute “Paragraphs 13A to 25”.
32 Before paragraph 14 and after the heading “Conduct of investment business”, insert—
13A (1) The Registrar may issue statements of principle with respect to the conduct expected of regulated friendly societies.
(2) The conduct expected may include compliance with a code or standard issued by another person, as for the time being in force, and may allow for the exercise of discretion by any person pursuant to any such code or standard.
(3) Failure to comply with a statement of principle under this paragraph is a ground for the taking of disciplinary action or the exercise of powers of intervention, but it does not give rise to any right of action by investors or other persons affected or affect the validity of any transaction.
(4) The disciplinary action which may be taken by virtue of sub-paragraph (3) is—
(a) the making of a public statement under paragraph 21, or
(b) the application by the Registrar for an injunction, interdict or other order under paragraph 22(1), or
(c) any action under paragraph 26 or 27 of this Schedule;
and the reference in that sub-paragraph to powers of intervention is to the powers conferred by Chapter VI of Part I of this Act.
(5) Where a statement of principle relates to compliance with a code or standard issued by another person, the statement of principle may provide—
(a) that failure to comply with the code or standard shall be a ground for the taking of disciplinary action, or the exercise of powers of intervention, only in such cases and to such extent as may be specified; and
(b) that no such action shall be taken, or any such power exercised, except at the request of the person by whom the code or standard in question was issued.
(6) The Registrar shall exercise his powers in such manner as appears to him appropriate to secure compliance with statements of principle under this paragraph.
13B (1) The relevant regulatory authority may on the application of a regulated friendly society—
(a) modify a statement of principle issued under paragraph 13A so as to adapt it to the circumstances of the society or to any particular kind of business carried on by it, or
(b) dispense the society from compliance with any such statement of principle, generally or in relation to any particular kind of business carried on by it.
(2) The powers conferred by this paragraph shall not be exercised unless it appears to the relevant regulatory authority—
(a) that compliance with the statement of principle in question would be unduly burdensome for the applicant having regard to the benefit which compliance would confer on investors, and
(b) that the exercise of those powers will not result in any undue risk to investors.
(3) The powers conferred by this paragraph may be exercised unconditionally or subject to conditions; and paragraph 13A(3) applies in the case of failure to comply with a condition as in the case of failure to comply with a statement of principle.
(4) The relevant regulatory authority for the purposes of this paragraph is—
(a) in the case of a member society of a recognised self-regulating organisation for friendly societies, in relation to investment business in the carrying on of which it is subject to the rules of the organisation, that organisation;
(b) in any other case, or in relation to other investment business, the Registrar.
(5) The reference in paragraph 4(1) of Schedule 2 as applied by paragraph 4 above (requirements for recognition of self-regulating organisation for friendly societies) to monitoring and enforcement of compliance with statements of principle includes monitoring and enforcement of compliance with conditions imposed by the organisation under this paragraph.
.
33 (1) Paragraph 14 (conduct of business rules) is amended as follows.
(2) In sub-paragraph (1), omit the words “other than a member society”.
(3) After sub-paragraph (2) insert—
(2A) Paragraph 22B below has effect as regards the application of rules under this paragraph to member societies in respect of investment business in the carrying on of which they are subject to the rules of a recognised self-regulating organisation for friendly societies.
.
(4) In sub-paragraph (3), omit the word “and” after paragraph (a); and after paragraph (b) insert—
; and
(c) for the references in subsection (4) to section 63B and a recognised self-regulating organisation there shall be substituted references to paragraph 13B and a recognised self-regulating organisation for friendly societies.
.
34 (1) Paragraph 19 (clients’ money regulations) is amended as follows.
(2) In sub-paragraph (2) for the words from “(but with the substitution” to the end substitute “(but with the substitution for the reference in paragraph (e) of subsection (2) to the Secretary of State of a reference to the Registrar)”.
(3) After that sub-paragraph insert—
(3) Paragraph 22B below has effect as regards the application of regulations under this paragraph to member societies in respect of investment business in the carrying on of which they are subject to the rules of a recognised self-regulating organisation for friendly societies.
.
35 For paragraph 20 (unsolicited calls) substitute—
20 (1) Regulations under section 56(1) of this Act shall not permit anything to be done by a regulated friendly society but that section shall not apply to anything done by such a society in the course of or in consequence of an unsolicited call which, as respects the society, constitutes the carrying on of regulated business, if it is permitted to be done by the society by regulations made by the Registrar with the consent of the Secretary of State.
(2) Paragraph 22B below has effect as regards the application of regulations under this paragraph to member societies in respect of investment business in the carrying on of which they are subject to the rules of a recognised self-regulating organisation for friendly societies.
(3) As it applies to such persons in respect of such business, the reference in sub-paragraph (1) above to conduct permitted by regulations made by the Registrar with the consent of the Secretary of State shall be construed—
(a) where or to the extent that the regulations do not apply, as a reference to conduct permitted by the rules of the organisation; and
(b) where or to the extent that the regulations do apply but are expressed to have effect subject to the rules of the organisation, as a reference to conduct permitted by the regulations together with the rules of the organisation.
.
36 After paragraph 22 (and after the paragraph inserted by section 193(3)) insert—
22B (1) The Registrar may in rules and regulations under—
(a) paragraph 14 (conduct of business rules),
(b) paragraph 19 (clients’ money regulations), or
(c) paragraph 20 (regulations as to unsolicited calls),
designate provisions which apply, to such extent as may be specified, to a member society in respect of investment business in the carrying on of which it is subject to the rules of a recognised self-regulating organisation for friendly societies.
(2) It may be provided that the designated rules or regulations have effect, generally or to such extent as may be specified, subject to the rules of the organisation.
(3) A member society which contravenes a rule or regulation applying to it by virtue of this paragraph shall be treated as having contravened the rules of the relevant recognised self-regulating organisation for friendly societies.
(4) It may be provided that, to such extent as may be specified, the designated rules or regulations may not be modified or waived (under paragraph 22C below or section 50) in relation to a member society.
Where such provision is made any modification or waiver previously granted shall cease to have effect, subject to any transitional provision or saving contained in the rules or regulations.
(5) Except as mentioned in sub-paragraph (1), the rules and regulations referred to in that sub-paragraph do not apply to a member society in respect of investment business in the carrying on of which it is subject to the rules of a recognised self-regulating organisation for friendly societies.
22C (1) A recognised self-regulating organisation for friendly societies may on the application of a society which is a member of the organisation—
(a) modify a rule or regulation designated under paragraph 22B so as to adapt it to the circumstances of the society or to any particular kind of business carried on by it, or
(b) dispense the society from compliance with any such rule or regulation, generally or in relation to any particular kind of business carried on by it.
(2) The powers conferred by this paragraph shall not be exercised unless it appears to the organisation—
(a) that compliance with the rule or regulation in question would be unduly burdensome for the applicant having regard to the benefit which compliance would confer on investors, and
(b) that the exercise of those powers will not result in any undue risk to investors.
(3) The powers conferred by this paragraph may be exercised unconditionally or subject to conditions; and paragraph 22B(3) applies in the case of a contravention of a condition as in the case of contravention of a designated rule or regulation.
(4) The reference in paragraph 4(1) of Schedule 2 as applied by paragraph 4 above (requirements for recognition of self-regulating organisation for friendly societies) to monitoring and enforcement of compliance with rules and regulations includes monitoring and enforcement of compliance with conditions imposed by the organisation under this paragraph.
22D (1) The Registrar may issue codes of practice with respect to any matters dealt with by statements of principle issued under paragraph 13A or by rules or regulations made under any provision of this Schedule.
(2) In determining whether a society has failed to comply with a statement of principle—
(a) a failure by it to comply with any relevant provision of a code of practice may be relied on as tending to establish failure to comply with the statement of principle, and
(b) compliance by it with the relevant provisions of a code of practice may be relied on as tending to negative any such failure.
(3) A contravention of a code of practice with respect to a matter dealt with by rules or regulations shall not of itself give rise to any liability or invalidate any transaction; but in determining whether a society’s conduct amounts to contravention of a rule or regulation—
(a) contravention by it of any relevant provision of a code of practice may be relied on as tending to establish liability, and
(b) compliance by it with the relevant provisions of a code of practice may be relied on as tending to negative liability.
(4) Where by virtue of paragraph 22B (application of designated rules and regulations to member societies) rules or regulations—
(a) do not apply, to any extent, to a member society of a recognised self-regulating organisation for friendly societies, or
(b) apply, to any extent, subject to the rules of the organisation,
a code of practice with respect to a matter dealt with by the rules or regulations may contain provision limiting its application to a corresponding extent.
.
37 For paragraph 29 (transfer of functions of making rules or regulations) substitute—
29 (1) The Registrar shall not make a transfer order transferring any legislative functions to a transferee body unless—
(a) the body has furnished him and the Secretary of State with a copy of the instruments it proposes to issue or make in the exercise of those functions, and
(b) they are both satisfied that those instruments will—
(i) afford investors an adequate level of protection,
(ii) in the case of provisions corresponding to those mentioned in Schedule 8 to this Act, comply with the principles set out in that Schedule, and
(iii) take proper account of the supervision of friendly societies by the Registrar under the enactments relating to friendly societies.
(2) In this paragraph “legislative functions” means the functions of issuing or making statements of principle, rules, regulations or codes of practice.
.
38 In paragraph 30(2), for “rules or regulations made” substitute “statements of principle, rules, regulations or codes of practice issued or made”.
39 In paragraph 31(6)(c), for “as if the reference to section 205(2) were a reference to paragraph 45(1) below” substitute “as if the reference to section 205A were a reference to paragraph 45(1) and (3) below”.
40 For paragraph 34 substitute—
34 (1) A transferee body to which the Registrar has transferred any legislative functions may exercise those functions without the consent of the Secretary of State.
(2) In this paragraph “legislative functions” means the functions of issuing or making statements of principle, rules, regulations or codes of practice.
.
41 In paragraph 36 (competition scrutiny: transferee bodies) in sub-paragraphs (1) and (3)(b) for “rules, regulations” substitute “statements of principle, rules, regulations, codes of practice”.
42 In paragraph 38(1) (publication of information and advice)—
(a) in paragraph (a), for “rules and regulations made” substitute “statements of principle, rules, regulations and codes of practice issued or made”, and
(b) in paragraph (b) for “rules or regulations” substitute “statements of principle, rules, regulations or codes of practice”.
43 In paragraph 45—
(a) in sub-paragraph (1) for “make regulations, rules or orders” substitute “issue or make statements of principle, rules, regulations, orders or codes of practice”, and
(b) in sub-paragraph (3) for “regulations, rules or orders” substitute “statements of principle, rules, regulations, orders or codes of practice.”.
Section 212.
Chapter | Short title | Extent of repeal
1964 c. 40. | Harbours Act 1964. | In section 42(6), the words “required to be attached to a company’s balance sheet”.
1973 c. 41. | Fair Trading Act 1973. | Section 46(3).
In section 71, in subsection (1) the words “made under section 69(4) of this Act” and subsection (2).
In section 74(1), the words from “and does not” to “section 69(4) of this Act”.
In section 85, subsection (5) and, in subsection (6), paragraph (b) and the word “or” preceding it.
In section 88(6), the words from “the relevant parties” to the “and” immediately following paragraph (c).
In section 89(2), the words “Part II of”.
In Schedule 9, in paragraph 4 the words from “either” to the end.
1985 c. 6. | Companies Act 1985. | Section 160(3).
1985 c. 6—cont. | Companies Act 1985—cont. | In section 169(5), the words from “, during business hours” to “for inspection)”.
In section 175(6)(b), the words from “during business hours” to “period”.
In section 191—
(a) in subsection (1), the words from “(but” to “for inspection)”;
(b) in subsection (3), paragraphs (a) and (b).
Section 201.
In section 202(1), the words “(except where section 201(3) applies)”.
Section 209(1)(j).
In section 219(1), the words from “during” to “for inspection)”.
In section 288(3), the words from “during” to “for inspection)”.
In section 318(7), the words from “during” to “for inspection)”.
In section 356—
(a) in subsection (1), the words “during business hours”;
(b) subsections (2) and (4).
In section 383—
(a) in subsection (1), the words “during business hours”;
(b) subsection (2);
(c) in subsection (3), the words from “at a charge” to the end.
Section 389.
Section 435.
Section 440.
Section 443(4).
In section 446—
(a) in subsection (3), paragraph (b) and the word “and” preceding it;
(b) subsection (7).
Section 447(1).
In section 449(1)—
(a) the words “or 448”;
(b) paragraph (e).
Section 452(1)(b).
In section 460(1), the words “(inspection of company’s books and papers)” and “under section 440”.
1985 c. 6—cont. | Companies Act 1985—cont. | In section 464(5), at the end of paragraph (c), the word “and”.
In section 466—
(a) in subsection (2), paragraph (a) and (d) and the word “or” preceding the latter;
(b) subsections (4) and (5);
(c) in subsection (6), the words “falling under subsection (4) of this section”.
In section 651(1), the words “at any time within 2 years of the date of the dissolution”.
In section 708(1)(b), the words “or other material”.
Sections 712 and 715.
In section 716(2), the words following paragraph (c).
In section 717(1), the words following paragraph (c).
In section 733(3), the words from “then” to “216(3)”.
In section 735A(1), the words “440, 449(1)(a) and (d)”.
In section 744, the definitions of “annual return”, “authorised institution”, “authorised minimum”, “expert”, “floating charge”, “joint stock company” and “undistributable reserves”.
In section 746, the words “Except as provided by section 243(6),”.
In Schedule 2—
(a) in paragraph 1(1), the words “paragraph 60(2) of Schedule 4 or paragraph 19(3) of Schedule 9”;
(b) paragraph 1(5);
(c) in paragraph 2(1), the word “23,”;
(d) paragraph 2(2);
(e) in paragraph 3(1), the words “paragraph 60(2) of Schedule 4 or paragraph 19(3) of Schedule 9”;
(f) paragraph 3(3);
1985 c. 6—cont. | Companies Act 1985—cont. | (g) in paragraph 4(1), the words “(whether as personal representative or otherwise)”;
(h) in paragraph 4(2), the words “paragraph 60(2) of Schedule 4 or paragraph 19(3) of Schedule 9”.
In Schedule 4, paragraphs 50(6), 53(7), 60 to 70, 74, 75, 77 to 81, 87, 90 to 92 and 95.
In Schedule 9—
(a) paragraphs 1, 13(3) and (18), 16, 18(5), 19(3) to (7) and 21 to 26;
(b) in paragraph 27(4), the words “of the said Part I”;
(c) in paragraph 28, in sub-paragraph (1) the words “to which Part II of the Insurance Companies Act 1982 applies” and in sub-paragraph (2) the words “of Part I of this Schedule”;
(d) paragraphs 29 to 31.
In Schedule 11—
(a) paragraph 4(b) and (c);
(b) paragraph 5(b).
In Schedule 13, in paragraph 25, the words from “during” to “for inspection)”.
Schedule 15.
In Schedule 22—
(a) the entry relating to section 36(4);
(b) in the entry relating to sections 363 to 365, the words “(with Schedule 15)”;
(c) in the entry relating to sections 384 to 393, in column 2, the word “qualifications”.
In Schedule 24, the entries relating to sections 245(1), 245(2), 255(5), 260(3), 287(3), 365(3), 384(5), 386(2), 389(10), 390(7), 391(4), 392(2) and 393.
1985 c. 65. | Insolvency Act 1985. | In Schedule 6, paragraphs 7(3), 23 and 45.
1986 c. 45. | Insolvency Act 1986. | In sections 45(5), 53(2), 54(3) and 62(5), the words “and, for continued contravention, to a daily default fine”.
1986 c. 45—cont. | Insolvency Act 1986—cont. | In Schedule 10, the entries in column 5 relating to sections 45(5), 53(2), 54(3) and 62(5).
In Part I of Schedule 13, the entries relating to sections 222(4), 225 and 733(3).
1986 c. 46. | Company Directors Disqualification Act 1986. | In section 21(2), the words “and section 431 (summary proceedings)”.
1986 c. 53. | Building Societies Act 1986. | In Schedule 15, in paragraph 3(2)(b), the words “, a shadow director”.
In Schedule 18, paragraphs 16 and 17.
1986 c. 60. | Financial Services Act 1986. | In section 13—
(a) subsection (1);
(b) subsections (4) to (6).
In section 48(1), the words “members of a recognised self-regulating organisation or” and “organisation o r”.
In section 55—
(a) in subsection (2)(b) and (e), the words “a member of a recognised self-regulating organisation or” and “organisation or”;
(b) in subsection (3), the words “organisation or”.
In section 94—
(a) in subsection (3), the words “except section 435(1)(a) and (b) and (2)”;
(b) in subsection (4), the words “or its affairs”, “and the affairs mentioned in subsection (1) or (2) above” and “or director”.
Section 105(7).
In section 119(5), the words from “and the practices referred to in paragraph (c)” to the end.
In sections 159(1) and 160(1), the words from the beginning to “section 161 below”.
In section 179(3), the word “and” preceding paragraph (i).
Section 180(6).
Section 196(3).
Section 198(1).
1986 c. 60—cont. | Financial Services Act 1986—cont. | In section 199(9), the words from “and, in relation” to the end.
In Schedule 11—
(a) paragraph 4(4)(b);
(b) paragraph 7;
(c) in paragraph 10(3), the words from “and the practices referred to in paragraph (c)” to the end;
(d) in paragraph 14(1), the words “other than a member society”;
(e) in paragraph 14(3), the word “and” after paragraph (a).
In Schedule 16, paragraph 22.
1987 c. 22. | Banking Act 1987. | In the Table in section 84(1), the entry relating to persons appointed under section 94, 106 or 177 of the Financial Services Act 1986.
Section 90(1).
In Schedule 6—
(a) paragraph 18(1) to (6);
(b) in paragraph 18(7), the words “and (1A)”;
(c) paragraph 18(8) and (9);
(d) in paragraph 27(3), the words “and (6)”.
1987 c. 41. | Criminal Justice (Scotland) Act 1987. | Section 55(a).
1988 c. 1. | Income and Corporation Taxes Act 1988. | Section 565(6)(b).
1988 c. 33. | Criminal Justice Act 1988. | Section 145(a).
1988 c. 48. | Copyright, Designs and Patents Act 1988. | In Schedule 7, paragraph 31.