Part 39: Companies: Minor Amendments
Section 1175 and Schedule 9: Removal of special provisions about accounts and audit of charitable companies
1492.This section and Schedule remove from company law special rules about the audit of companies that are charities. Under section 249A of the 1985 Act, certain companies are subject to audit, or to an accountant’s report, because they are charities, when they would be exempt as small companies if they were not charities.
1493.This section is part of achieving the objective of changing the treatment of small charitable companies so that, as far as their accounts scrutiny is concerned, they will be required to comply with the requirements of charity law rather than those of company law. The Charities Act 2006 introduced a power (section 77 of that Act) to enable the Office of the Third Sector to bring forward regulations, subject to the affirmative resolution procedure, applying charity law rules about scrutiny of financial records to charitable companies.
Section 1176: Power of Secretary of State to bring civil proceedings on company’s behalf
1494.This section repeals the power of the Secretary of State, under section 438 of the 1985 Act, to bring civil proceedings on behalf of a company. Subsections (2) and (3) are consequential amendments to sections 439 and 453 of the 1985 Act respectively. This repeal does not affect any proceedings begun before this section comes into force.
Section 1177: Repeal of certain provisions about company directors
1495.This section repeals various provisions of Part 10 of the 1985 Act.
1496.Section 311 of the 1985 Act prohibits a company from paying director remuneration free of income tax. The Law Commissions recommended its repeal as the tax which the company agreed to pay is itself taxed as part of the emoluments of a director, and as the company is required to disclose in its annual accounts an estimate of the tax which it has undertaken to pay.
1497.Section 323 of the 1985 Act prohibits directors (including shadow directors) from buying “put” and “call” options in listed shares or debentures in the company or another in the same group. This prohibition is extended to spouses and minor children of directors by section 327 of the 1985 Act. The Law Commissions recommended its repeal.
1498.Sections 324 to 326 and 328 to 329 of, and Parts 2 to 4 of Schedule 13 to, the 1985 Act deal with the duty of a director to notify interests in shareholdings to his company and impose an obligation on the company to record those interests in a register and to disclose them to the relevant exchanges. They are repealed.
1499.Sections 343 and 344 of the 1985 Act make special provision for banking companies and the holding companies of credit institutions, allowing them to disclose in their annual accounts abbreviated particulars of loans, quasi-loans and credit transactions with directors or their connected persons. Section 413 of the Act, which replaces the annual accounts disclosure requirements of the 1985 Act in respect of loans, quasi-loans and credit transactions, makes its own special provision in subsection (8) of that section for banking companies and the holding companies of credit institutions.
Section 1178: Repeal of requirement that certain companies publish periodical statement
1500.This section repeals section 720 of, and the related Schedule 23 to, the 1985 Act. Section 720 requires certain insurers and deposit, provident or benefit societies to publish a periodical statement in the form set out in the Schedule. The statement contains basic information about certain liabilities and assets and, in the case of a company with shares, basic information about its share capital and issued shares. This general disclosure requirement has been superseded by specialised regulatory developments in particular fields of financial services. The application of the section is now very limited as it does not apply to any UK insurance company which is regulated by the FSA under FSMA and which complies with its rules as to the publication of annual accounts and balance sheet. Nor does it apply to any insurer authorised in any other EEA State carrying on business in the UK if it complies with equivalent rules of its home State.
Section 1179: Repeal of requirement that Secretary of State prepare annual report
1501.This section repeals the requirement, under section 729 of the 1985 Act, for the Secretary of State to cause a “general annual report on matters within the Companies Acts” to be prepared and laid before both Houses of Parliament.
Section 1180: Repeal of certain provisions about company charges
1502.This section repeals the provisions in Part 4 of the 1989 Act relating to company charges. These provisions have not been brought into force.
Section 1181: Access to constitutional documents of RTE and RTM companies
1503.This section enables the Secretary of State to make an order amending certain provisions of the Commonhold and Leasehold Reform Act 2002 and the Leasehold Reform, Housing and Urban Development Act 1993 so as to make it easier to ascertain the contents of the articles and other constitutional documents of Right To Manage (“RTM”) and Right to Enfranchise (“RTE”) companies (two new types of company provided for in the 2002 Act – in the case of RTE companies, by amendment to the 1993 Act).
1504.Under the Commonhold and Leasehold Reform Act 2002 and the Leasehold Reform, Housing and Urban Development Act 1993 as amended by it, the Secretary of State may make regulations prescribing model memoranda and articles of association for RTM and RTE companies, and the provisions of the model memoranda and articles so prescribed may have effect notwithstanding contrary provision in the memoranda and articles of such companies as registered at Companies House. As the legislation stands currently, a person consulting the Companies House record of an RTM or RTE company’s memorandum or articles may not be aware of the company’s RTM or RTE status, and therefore may also be unaware that its registered memorandum and articles have to be read in the light of any relevant regulations prescribing model memoranda and articles for RTM or RTE companies. Since the prescribed memoranda and articles may invalidate provisions of the registered documents and apply in place of them, this may cause problems.
1505.The RTM and RTE legislation is likely to be adjusted to reflect the new status of the memorandum under sections 8 and 28 in particular. Reference is made to “other constitutional documents” because it is possible that under the new constitutional arrangements, the RTM and RTE legislation should make provision about the contents of constitutional documents other than articles.