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Companies (Audit, Investigations and Community Enterprise) Act 2004

Section 13 - Power to specify bodies who may issue reporting standards

77.Section 13 amends section 257 of the Companies Act 1985 which confers power on the Secretary of State to amend the accounting and audit provisions in Part 7 of the Act. It is primarily intended as a paving device to allow a specified body to issue a standard in relation to a new report, the operating and financial review, which it is proposed to require of directors in due course by regulations under section 257.

78.New subsection (4A)(a) inserted by section 13 into section 257 gives the Secretary of State the power to specify a body to issue standards relating to reports which the directors are required to prepare under Part 7 of the Companies Act 1985.  Directors are currently required to prepare a directors’ report and, for the directors of a quoted company, the directors’ remuneration report.  This provision allows standards to be drawn up for these reports, and reports such as the operating and financial review, which are not covered by the "accounting standards" issued by bodies prescribed under section 256 of the Companies Act 1985. Such reporting standards would not have the “true and fair” authority of accounting standards. In order to confer statutory authority, new subsection (4A)(b) confers power on the Secretary of State to provide in regulations that compliance with the reporting standards will be presumed, unless the contrary is proved in civil or criminal proceedings for breach of the Act's requirements, to be compliance with the Act’s requirements in respect of the report to which it relates.

79.Regulations under section 257 introducing the new requirement for an operating and financial review will be subject to affirmative resolution.  New subsection (4B) inserted into section 257 stipulates that the order to be made by the Secretary of State specifying the body or bodies authorised to issue the new reporting standards will be subject to negative resolution.

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