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Scotland Act 1998

Section C1: Business Associations
Purpose and Effect

This Section reserves business associations, subject to certain exceptions.

General

This reservation is designed to ensure the reservation of a common United Kingdom system for the regulation of companies and other business organisations in order to preserve a level playing field for business within the United Kingdom.

Parliamentary Consideration
StageDateColumn
CC30-Mar-98982
LC23-Jul-981089
Details of Provisions
Reservation

This Section reserves the creation, operation, regulation and dissolution of types of business association.

Business association is defined in the interpretation part as any person (other than an individual) established for the purpose of carrying on any kind of business, whether or not for profit; and “business” is defined as including the provision of benefits to the members of an association.  Accordingly, types of business associations will therefore include companies, whether or not registered under the companies legislation, partnerships, building societies, friendly societies, industrial and provident societies, European economic interest groupings (in terms of Article 1 of Council Regulation (EEC) No. 2137/85).  This is not an exclusive list: any other type of business association which fell within this definition would be covered by the reservation.

The reserved matters are:

(a)

the creation of types of business associations, such as the manner in which limited liability companies are incorporated by registration under the Companies Act 1985 and matters relating to their constitution and membership;

(b)

the operation of types of business associations. This includes matters relating to the operation of the internal structure and organs of the type of business association, such as the appointment and powers of officers or boards of directors. It also includes matters such as the liability of members and officers of the association to the association and to its creditors;

(c)

the regulation of types of business association. This includes matters such as the authorisation, registration, supervision and investigation of business associations and their relationships and disqualification of persons from involvement in business associations and other civil or criminal sanctions; and

(d)

the dissolution of types of business associations. This includes the circumstances or procedures giving rise to the dissolution of a business association.

The reservation does not, of course, prevent the Scottish Ministers from establishing any business association, such as a company, for devolved purposes but any such company would require to comply with the relevant Act of the UK Parliament.  What is reserved is the legislative competence to provide how companies can be created, operated and regulated.

The reservation also does not prevent the Scottish Parliament from legislating on Scots private law matters which apply to business associations, such as applying some provision about contract or liability for damages to companies, as long as the law concerned affects devolved and reserved matters consistently, as provided in section 29(4) of the Act. If the Secretary of State considered that any such legislation would have an adverse effect on the operation of the law as it applies to reserved matters, such as companies legislation, he could make an order under section 35(1) preventing the Bill from being submitted for Royal Assent.

Exceptions

What is excepted from the reservation is the creation, operation, regulation and dissolution of:

(a)

particular public bodies or public bodies of a particular type established by or under any enactment.  This is to ensure that the Scottish Parliament is able by or under any enactment to create and provide for the operation, regulation and dissolution of any public bodies for devolved purposes.  These might include a particular statutory body, or types of statutory bodies, such as local authorities or other bodies required to carry on activities within a devolved area such as in the fields of health, education, the environment, legal aid, arts, sport, urban regeneration.  This exception therefore permits the Parliament to establish public bodies for devolved purposes only: it would not permit the Parliament to establish bodies for purposes relating to any of the reserved matters; and

(b)

charities. This exception is required because business associations are defined in such a way as to catch any association carrying on a business, whether or not for profit. It would therefore catch charities. However, it is intended that the Scottish Parliament should be able to legislate to provide for how charities may be created, operated, regulated and dissolved under Scots law.

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