Companies Act 1989

• (4) Where a charge is granted partly for the purpose specified in subsection (2) and partly for other purposes, the power conferred by this section is exercisable in relation to the charge so far as it has effect for that purpose.

• (5) The regulations may—

• (a) make the same or similar provision in relation to the charges to which they apply as is made by or under sections 174 and 175 in relation to market charges, or

• (b) apply any of those provisions with such exceptions, additions or adaptations as are specified in the regulations.

• (6) Before making regulations under this section relating to a description of charges defined by reference to their being granted in favour of a person included in the list maintained by the . . . Bank of England for the purposes of section 301 of the Financial Services and Markets Act 2000, or in connection with exchange facilities or clearing services or settlement arrangements provided by a person included in that list, the Secretary of State and the Treasury shall consult the FCA and the Bank of England.

• (6A) Before making regulations under this section relating to a description of charges defined by reference to their being granted in favour of the Bank of England, or in connection with settlement arrangements provided by the Bank, the Secretary of State and the Treasury shall consult the Bank.

• (7) Regulations under this section may provide that they apply or do not apply to a charge if or to the extent that it secures obligations of a specified description, is a charge over property of a specified description or contains provisions of a specified description.

• (8) For the purposes of subsection (2)(d), “relevant regulated activity” means—

• (a) dealing in investments as principal or as agent;

• (b) arranging deals in investments;

• (ba) operating a multilateral trading facility;

• (bb) operating an organised trading facility;

• (c) managing investments;

• (d) safeguarding and administering investments;

• (e) sending dematerialised instructions; ...

• (ea) managing a UCITS;

• (eb) acting as trustee or depositary of a UCITS;

• (ec) managing an AIF;

• (ed) acting as trustee or depositary of an AIF; or

• (f) establishing etc. a collective investment scheme.

• (9) Subsection (8) must be read with—

• (a) section 22 of the Financial Services and Markets Act 2000;

• (b) any relevant order under that section; and

• (c) Schedule 2 to that Act.

Market property

Application of margin or default fund contribution not affected by certain other interests.

177

• (1) The following provisions have effect with respect to the application by a recognised body of property (other than land) held by the recognised body as margin in relation to a market contract or as default fund contribution.

• (2) So far as necessary to enable the property to be applied in accordance with the rules of the recognised body , it may be so applied notwithstanding any prior equitable interest or right, or any right or remedy arising from a breach of fiduciary duty, unless the recognised body had notice of the interest, right or breach of duty at the time the property was provided as margin or as default fund contribution.

• (3) No right or remedy arising subsequently to the property being provided as margin or as default fund contribution may be enforced so as to prevent or interfere with the application of the property by the recognised body in accordance with its rules.

• (4) Where a recognised body has power by virtue of the above provisions to apply property notwithstanding an interest, right or remedy, a person to whom the recognised body disposes of the property in accordance with its rules takes free from that interest, right or remedy.

Priority of floating market charge over subsequent charges.

178

• (1) The Secretary of State may by regulations provide that a market charge which is a floating charge has priority over a charge subsequently created or arising, including a fixed charge.

• (2) The regulations may make different provision for cases defined, as regards the market charge or the subsequent charge, by reference to the description of charge, its terms, the circumstances in which it is created or arises, the nature of the charge, the person in favour of whom it is granted or arises or any other relevant factor.

Priority of market charge over unpaid vendor’s lien.

179

Where property subject to an unpaid vendor’s lien becomes subject to a market charge, the charge has priority over the lien unless the chargee had actual notice of the lien at the time the property became subject to the charge.

Proceedings against market property by unsecured creditors.

180

• (1) Where property (other than land) is held by a recognised body as margin in relation to market contracts or as default fund contribution, or is subject to a market charge, no execution or other legal process for the enforcement of a judgment or order may be commenced or continued, and no distress may be levied, and no power to use the procedure in Schedule 12 to the Tribunals, Courts and Enforcement Act 2007 (taking control of goods) may be exercised, against the property by a person not seeking to enforce any interest in or security over the property, except with the consent of—

• (a) in the case of property provided as cover for margin or as default fund contribution, the recognised body in question, or

• (b) in the case of property subject to a market charge, the person in whose favour the charge was granted.

• (2) Where consent is given the proceedings may be commenced or continued notwithstanding any provision of the Insolvency Act 1986 or the Bankruptcy (Scotland) Act 2016.

• (3) Where by virtue of this section a person would not be entitled to enforce a judgment or order against any property, any injunction or other remedy granted with a view to facilitating the enforcement of any such judgment or order shall not extend to that property.

• (4) In the application of this section 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.

Power to apply provisions to other cases.

181

• (1) A power to which this subsection applies includes the power to apply sections 177 to 180 to any description of property provided as cover for margin in relation to contracts in relation to which the power is exercised or, as the case may be, property subject to charges in relation to which the power is exercised.

• (2) The regulations may provide that those sections apply with such exceptions, additions and adaptations as may be specified in the regulations.

• (3) Subsection (1) applies to the powers of the Secretary of State and the Treasury to act jointly under—

• (a) sections 170, 172 and 176 of this Act; and

• (b) section 301 of the Financial Services and Markets Act 2000 (supervision of certain contracts).

Supplementary provisions

Powers of court in relation to certain proceedings begun before commencement.

182

• (1) The powers conferred by this section are exercisable by the court where insolvency proceedings in respect of—

• (a) a member of a recognised investment exchange or a recognised clearing house, or

• (b) a person by whom a market charge has been granted,

are begun on or after 22nd December 1988 and before the commencement of this section.

That person is referred to in this section as “the relevant person”.

• (2) For the purposes of this section “insolvency proceedings” means proceedings under Part II, IV, V or IX of the Insolvency Act 1986 (administration, winding up and bankruptcy) or under the Bankruptcy (Scotland) Act 2016; and references in this section to the beginning of such proceedings are to—

• (za) the making of a bankruptcy application on which a bankruptcy order is made,

• (a) the presentation of a petition on which an administration order, winding-up order, bankruptcy order or award of sequestration is made, or

• (b) the passing of a resolution for voluntary winding up.

• (3) This section applies in relation to—

• (a) in England and Wales, the administration of the insolvent estate of a deceased person, and

• (b) in Scotland, the administration by a judicial factor appointed under section 11A of the Judicial Factors (Scotland) Act 1889 of the insolvent estate of a deceased person,

as it applies in relation to insolvency proceedings.

In such a case references to the beginning of the proceedings shall be construed as references to the death of the relevant person.

• (4) The court may on an application made, within three months after the commencement of this section, by—

• (a) a recognised investment exchange or recognised clearing house, or

• (b) a person in whose favour a market charge has been granted,

make such order as it thinks fit for achieving, except so far as assets of the relevant person have been distributed before the making of the application, the same result as if the provisions of Schedule 22 had come into force on 22nd December 1988.

• (5) The provisions of that Schedule (“the relevant provisions”) reproduce the effect of certain provisions of this Part as they appeared in the Bill for this Act as introduced into the House of Lords and published on that date.

• (6) The court may in particular—

• (a) require the relevant person or a relevant office-holder—

• (i) to return property provided as cover for margin or which was subject to a market charge, or to pay to the applicant or any other person the proceeds of realisation of such property, or

• (ii) to pay to the applicant or any other person such amount as the court estimates would have been payable to that person if the relevant provisions had come into force on 22nd December 1988 and market contracts had been settled in accordance with the rules of the recognised investment exchange or recognised clearing house, or a proportion of that amount if the property of the relevant person or relevant office-holder is not sufficient to meet the amount in full;

• (b) provide that contracts, rules and dispositions shall be treated as not having been void;

• (c) modify the functions of a relevant office-holder, or the duties of the applicant or any other person, in relation to the insolvency proceedings, or indemnify any such person in respect of acts or omissions which would have been proper if the relevant provisions had been in force;

• (d) provide that conduct which constituted an offence be treated as not having done so;

• (e) dismiss proceedings which could not have been brought if the relevant provisions had come into force on 22nd December 1988, and reverse the effect of any order of a court which could not, or would not, have been made if those provisions had come into force on that date.

• (7) An order under this section shall not be made against a relevant office-holder if the effect would be that his remuneration, costs and expenses could not be met.

Recognised central counterparties: disapplication of provisions on mutual credit and set-off

182A

• (1) Nothing in the law of insolvency shall enable the setting off against each other of—

• (a) positions and assets recorded in an account at a recognised central counterparty and held for the account of a client, an indirect client or a group of clients or indirect clients in accordance with Article 39 of the EMIR Level 1 Regulation , Article 3(1) of the EMIR Level 2 Regulation or Article 3(1) of the MIFIR Level 2 Regulation; and

• (b) positions and assets recorded in any other account at the recognised central counterparty.

• (2) Nothing in the law of insolvency shall enable the setting off against each other of—

• (a) positions and assets recorded in an account at a clearing member and held for the account of an indirect client or a group of indirect clients in accordance with Article 4(2) of the EMIR Level 2 Regulation or Article 4(2) of the MIFIR Level 2 Regulation; and

• (b) positions and assets recorded in any other account at the clearing member.

Insolvency proceedings in other jurisdictions.

183

• (1) The references to insolvency law in section 426 of the Insolvency Act 1986 (co-operation with courts exercising insolvency jurisdiction in other jurisdictions) include, in relation to a part of the United Kingdom, the provisions made by or under this Part and, in relation to a relevant country or territory within the meaning of that section, so much of the law of that country or territory as corresponds to any provisions made by or under this Part.

• (2) A court shall not, in pursuance of that section or any other enactment or rule of law, recognise or give effect to—

• (a) any order of a court exercising jurisdiction in relation to insolvency law in a country or territory outside the United Kingdom, or

• (b) any act of a person appointed in such a country or territory to discharge any functions under insolvency law,

in so far as the making of the order or the doing of the act would be prohibited in the case of a court in the United Kingdom or a relevant office-holder by provisions made by or under this Part.

• (3) Subsection (2) does not affect the recognition or enforcement of a judgment required to be recognised or enforced under or by virtue of the Civil Jurisdiction and Judgments Act 1982....

Indemnity for certain acts, &c.

184

• (1) Where a relevant office-holder takes any action in relation to property of a defaulter which is liable to be dealt with in accordance with the default rules of a recognised body, and believes and has reasonable grounds for believing that he is entitled to take that action, he is not liable to any person in respect of any loss or damage resulting from his action except in so far as the loss or damage is caused by the office-holder’s own negligence.

• (2) Any failure by a recognised body to comply with its own rules in respect of any matter shall not prevent that matter being treated for the purposes of this Part as done in accordance with those rules so long as the failure does not substantially affect the rights of any person entitled to require compliance with the rules.

• (3) No recognised body, nor any officer or servant or member of the governing body of a recognised body, shall be liable in damages for anything done or omitted in the discharge or purported discharge of any functions to which this subsection applies unless the act or omission is shown to have been in bad faith.

• (4) The functions to which subsection (3) applies are the functions of the recognised body so far as relating to, or to matters arising out of—

• (a) its default rules, or

• (b) any obligations to which it is subject by virtue of this Part.

• (5) No person to whom the exercise of any function of a recognised body is delegated under its default rules, nor any officer or servant of such a person, shall be liable in damages for anything done or omitted in the discharge or purported discharge of those functions unless the act or omission is shown to have been in bad faith.

Power to make further provision by regulations.

185

• (1) The Secretary of State may by regulations make such further provision as appears to him necessary or expedient for the purposes of this Part.

• (2) Provision may, in particular, be made—

• (a) for integrating the provisions of this Part with the general law of insolvency, and

• (b) for adapting the provisions of this Part in their application to overseas investment exchanges and clearing houses.

• (3) Regulations under this section may add to, amend or repeal any of the provisions of this Part or provide that those provisions have effect subject to such additions, exceptions or adaptations as are specified in the regulations.

• (4) References in this section to the provisions of this Part include any provision made under section 301 of the Financial Services and Markets Act 2000.

Supplementary provisions as to regulations.

186

• (1) Regulations under this Part may make different provision for different cases and may contain such incidental, transitional and other supplementary provisions as appear to the Secretary of State to be necessary or expedient.

• (2) Regulations under this Part shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Construction of references to parties to market contracts.

187

• (1) Where a person enters into market contracts in more than one capacity, the provisions of this Part apply (subject as follows) as if the contracts entered into in each different capacity were entered into by different persons.

• (2) References in this Part to a market contract to which a person is a party include (subject as follows, and unless the context otherwise requires) contracts to which he is party as agent.

• (2A) Subsections (1) and (2) do not apply to market contracts to which this Part applies by virtue of section 155(2B).

• (3) The Secretary of State may by regulations—

• (a) modify or exclude the operation of subsections (1) and (2), and

• (b) make provision as to the circumstances in which a person is to be regarded for the purposes of those provisions as acting in different capacities.

Meaning of “default rules” and related expressions.

188

• (1) In this Part “default rules” means rules of a recognised body which provide for the taking of action in the event of a person (including another recognised body) appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts connected with the recognised body, ....

• (1A) In the case of a recognised central counterparty, “default rules” includes—

• (a) the default procedures referred to in Article 48 of the EMIR Level 1 Regulation; and

• (b) any rules of the recognised central counterparty which provide for the taking of action in accordance with a request or instruction from a clearing member under the default procedures referred to in Article 4(6) and (7) of the EMIR Level 2 Regulation or Article 4(6) and (7) of the MIFIR Level 2 Regulation in respect of assets or positions held by the recognised central counterparty for the account of an indirect client or group of indirect clients.

• (1B) In the case of a recognised CSD, “default rules” includes the default rules and procedures referred to in Article 41 of the CSD regulation.

• (2) References in this Part to a “defaulter” are to a person in respect of whom action has been taken by a recognised body under its default rules, whether by declaring him to be a defaulter or otherwise; and references in this Part to “default”, “defaulting” and “non-defaulting” shall be construed accordingly.

• (2A) For the purposes of subsection (2), where a recognised central counterparty takes action under the rules referred to in subsection (1A)(b), the action is to be treated as taken in respect of the client providing the indirect clearing services.

• (3) In this Part “default proceedings” means proceedings taken by a recognised body under its default rules.

• (3A) In this Part “default fund contribution” means—

• (a) contribution by a member or designated non-member of a recognised investment exchange to a fund which—

• (i) is maintained by that exchange for the purpose of covering losses arising in connection with defaults by any of the members of the exchange, or defaults by any of the members or designated non-members of the exchange, and

• (ii) may be applied for that purpose under the default rules of the exchange;

• (b) contribution by a member of a recognised clearing house to a fund which—

• (i) is maintained by that clearing house for the purpose of covering losses arising in connection with defaults by any of the members of the clearing house, and

• (ii) may be applied for that purpose under the default rules of the clearing house;

• (c) contribution by a recognised clearing house to a fund which—

• (i) is maintained by another recognised body (A) for the purpose of covering losses arising in connection with defaults by recognised bodies other than A or by any of their members, and

• (ii) may be applied for that purpose under A’s default rules; ...

• (d) contribution by a recognised investment exchange to a fund which—

• (i) is maintained by another recognised body (A) for the purpose of covering losses arising in connection with defaults by recognised bodies other than A or by any of their members, and

• (ii) may be applied for that purpose under A’s default rules.

• (e) contribution by a member of a recognised CSD to a fund which—

• (i) is maintained by that central securities depository for the purpose of covering losses arising in connection with defaults by any of the members of the central securities depository, and

• (ii) may be applied for that purpose under the default rules of the central securities depository; or

• (f) contribution by a recognised CSD to a fund which—

• (i) is maintained by another recognised body (A) for the purpose of covering losses arising in connection with defaults by recognised bodies other than A or by any of their members, and

• (ii) may be applied for that purpose under A’s default rules.

• (4) If a recognised body takes action under its default rules in respect of a person, all subsequent proceedings under its rules for the purposes of or in connection with the settlement of market contracts to which the defaulter is a party shall be treated as done under its default rules.

Meaning of “relevant office-holder”.

189

• (1) The following are relevant office-holders for the purposes of this Part—

• (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, any debtor within the meaning of the Bankruptcy (Scotland) Act 2016) as his trustee in bankruptcy or interim receiver of his property or as trustee or interim trustee in the sequestration of his estate,

• (d) any person acting as administrator of an insolvent estate of a deceased person.

• (2) In subsection (1)(b) “company” means any company, society, association, partnership or other body which may be wound up under the Insolvency Act 1986.

Meaning of “transfer”

189A

• (1) In this Part, a reference to a transfer of a clearing member client contract, a client trade or a qualifying collateral arrangement shall be interpreted in accordance with this section.

• (2) A transfer of a clearing member client contract or client trade includes—

• (a) an assignment;

• (b) a novation; and

• (c) terminating or closing out the clearing member client contract or client trade and establishing an equivalent position between different parties.

• (3) Where a clearing member client contract is recorded in the accounts of a recognised central counterparty as a position held for the account of an indirect client or group of indirect clients, the clearing member client contract is to be treated as having been transferred if the position is transferred to a different account at the recognised central counterparty.

• (4) A reference to a transfer of a qualifying collateral arrangement includes an assignment or a novation.

Minor definitions.

190

• (1) In this Part—

• “administrative receiver” has the meaning given by section 251 of the Insolvency Act 1986;

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .“charge” means any form of security, including a mortgage and, in Scotland, a heritable security;

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “clearing member”, in relation to a recognised central counterparty, has the meaning given by Article 2(14) of the EMIR Level 1 Regulation;

• “client” has the meaning given by Article 2(15) of the EMIR Level 1 Regulation;

• “CSD regulation” means Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories;

• “EMIR Level 1 Regulation” means Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories;

• “EMIR Level 2 Regulation” means Commission Delegated Regulation (EU) No 149/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 with regard to regulatory technical standards on indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, risk mitigation for OTC derivatives contracts not cleared by a CCP as amended by Commission Delegated Regulation (EU) 2017/2155 of 22 September 2017;

• “the FCA” means the Financial Conduct Authority;

• “indirect clearing services” has the same meaning as in the EMIR Level 2 Regulation;

• “indirect client” has the meaning given by Article 1(a) of the EMIR Level 2 Regulation;

• “interim trustee” has the same meaning as in the Bankruptcy (Scotland) Act2016

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “member”, in relation to a central securities depository, means a participant of that central securities depository as defined in Article 2(1)(19) of the CSD regulation;

• “member of a clearing house” includes a clearing member of a recognised central counterparty;

• “MIFIR Level 2 Regulation” means Commission Delegated Regulation (EU) 2017/2154 of 22 September 2017 supplementing Regulation (EU) No. 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards on indirect clearing arrangements;

• “overseas”, in relation to an investment exchange or clearing house or central securities depository , means having its head office outside the United Kingdom;

• “position” has the same meaning as in the EMIR Level 1 Regulation;

• “the PRA” means the Prudential Regulation Authority;

• “recognised body” has the same meaning as in section 313 of the Financial Services and Markets Act 2000;

• ...“recognised central counterparty”, “recognised CSD”, “recognised clearing house”, “recognised investment exchange” , “third country central counterparty” and “third country CSD” have the same meaning as in the Financial Services and Markets Act 2000 (see section 285 of that Act);

• “sequestration” means sequestration under the Bankruptcy (Scotland) Act 2016;

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “set-off”, in relation to Scotland, includes compensation;

• “The Stock Exchange” means the London Stock Exchange Limited;

• “UK”, in relation to an investment exchange, means having its head office in the United Kingdom.

• (2) References in this Part to settlement—

• (a) mean, in relation to a market contract, the discharge of the rights and liabilities of the parties to the contract, whether by performance, compromise or otherwise;

• (b) include, in relation to a clearing member client contract or a clearing member house contract, a reference to its liquidation for the purposes of Article 48 of the EMIR Level 1 Regulation.

• (3) In this Part the expressions “margin” and “cover for margin” have the same meaning.

• (3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) For the purposes of this Part a person shall be taken to have notice of a matter if he deliberately failed to make enquiries as to that matter in circumstances in which a reasonable and honest person would have done so.

This does not apply for the purposes of a provision requiring “actual notice”.

• (6) References in this Part to the law of insolvency—

• (a) include references to every provision made by or under the Insolvency Act 1986 or the Bankruptcy (Scotland) Act 2016; and in relation to a building society references to insolvency law or to any provision of the Insolvency Act 1986 are to that law or provision as modified by the Building Societies Act 1986;

• (b) are also to be interpreted in accordance with the modifications made by the enactments mentioned in subsection (6B).

• (6A) For the avoidance of doubt, references in this Part to administration, administrator, liquidator and winding up are to be interpreted in accordance with the modifications made by the enactments mentioned in subsection (6B).

• (6B) The enactments referred to in subsections (6)(b) and (6A) are—

• (a) article 3 of, and the Schedule to, the Banking Act 2009 (Parts 2 and 3 Consequential Amendments) Order 2009;

• (b) article 18 of, and paragraphs 1(a), (2) and (3) of Schedule 2 to, the Building Societies (Insolvency and Special Administration) Order 2009; and

• (c) regulation 27 of, and Schedule 6 to, the Investment Bank Special Administration Regulations 2011.

• (7) In relation to Scotland, references in this Part—

• (a) to sequestration include references to the administration by a judicial factor of the insolvent estate of a deceased person, and

• (b) to an interim trustee or to a trustee in the sequestration of an estate include references to a judicial factor on the insolvent estate of a deceased person,

unless the context otherwise requires.

Index of defined expressions.

191

The following Table shows provisions defining or otherwise explaining expressions used in this Part (other than provisions defining or explaining an expression used only in the same section or paragraph)—

Part VIII — Amendments of the Financial Services Act 1986

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192

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193

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194

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195

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196

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197

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198

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199

Jurisdiction of High Court and Court of Session.

200

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) In Schedule 5 to the Civil Jurisdiction and Judgments Act 1982 (proceedings excluded from general provisions as to allocation of jurisdiction within the United Kingdom), for paragraph 10 substitute—

(10) Proceedings such as are mentioned in section 188 of the Financial Services Act 1986.

.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

201

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202

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203

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204

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205

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206

Part IX — Transfer of Securities

Transfer of securities.

207

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Part X — Miscellaneous and General Provisions

Miscellaneous

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

208

In section 21 of the Company Directors Disqualification Act 1986 (application of provisions of the Insolvency Act 1986), after subsection (3) add—

(4) For the purposes of summary proceedings in Scotland, section 431 of that Act applies to summary proceedings for an offence under section 11 or 13 of this Act as it applies to summary proceedings for an offence under Parts I to VII of that Act.

.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

209

Restriction of duty to supply statements of premium income.

210

• (1) Schedule 3 to the Policyholders Protection Act 1975 (provisions with respect to levies on authorised insurance companies) is amended as follows.

• (2) For paragraph 4 (statements of premium income to be sent to Secretary of State) substitute—

(4) (1) The Secretary of State may by notice in writing require an authorised insurance company to send him a statement of— (a) any income of the company for the year preceding that in which the notice is received by the company which is income liable to the general business levy, and (b) any income of the company for that year which is income liable to the long term business levy. (2) An authorised insurance company which receives a notice under this paragraph shall send the statement required by the notice to the Secretary of State within three months of receiving the notice. (3) Where an authorised insurance company is required under this paragraph to send a statement to the Secretary of State in respect of income of both descriptions mentioned in sub-paragraph (1)(a) and (b) above it shall send a separate statement in respect of income of each description.

.

• (3) In paragraph 5(3) (application of provisions of the Insurance Companies Act 1982 to failure to meet obligation imposed by paragraph 4) for “the obligation imposed on an insurance company by paragraph 4” substitute “an obligation imposed on an insurance company under paragraph 4”.

• (4) In paragraph 6 (declaration and enforcement of levies) omitsub-paragraph (4) (provision about notices).

• (5) After paragraph 7 insert—

(8) A notice under paragraph 4 or 6 above may be sent by post, and a letter containing such a notice shall be deemed to be properly addressed if it is addressed to the insurance company to which it is sent at its last known place of business in the United Kingdom.

.

Building societies: miscellaneous amendments.

211

• (1) In section 104 of the Building Societies Act 1986 (power to assimilate law relating to building societies and law relating to companies), in subsection (2) (relevant provisions of that Act), omit the word “and” before paragraph (d) and after that paragraph add—

; and (e) section 110 (provisions exempting officers and auditors from liability).

.

• (2) In Schedule 15 to the Building Societies Act 1986 (application of companies winding-up legislation)—

• (a) in paragraph 1(a) (provisions of Insolvency Act 1986 applied) for “and XII” substitute “ , XII and XIII ”;

• (b) in paragraph 3(2)(b) (adaptations: references to be omitted), omit “, a shadow director”.

• (3) In the Company Directors Disqualification Act 1986, after section 22 insert—

(22A) (1) This Act applies to building societies as it applies to companies. (2) References in this Act to a company, or to a director or an officer of a company include, respectively, references to a building society within the meaning of the Building Societies Act 1986 or to a director or officer, within the meaning of that Act, of a building society. (3) In relation to a building society the definition of “shadow director” in section 22(5) applies with the substitution of “building society” for “company”. (4) In the application of Schedule 1 to the directors of a building society, references to provisions of the Insolvency Act or the Companies Act include references to the corresponding provisions of the Building Societies Act 1986.

.

General

“Bank of England”

211A

In this Act references to the Bank of England do not include the Bank acting in its capacity as the Prudential Regulation Authority.

Repeals.

212

The enactments mentioned in Schedule 24 are repealed to the extent specified there.

Provisions extending to Northern Ireland.

213

• (1) The provisions of this Act extend to Northern Ireland so far as they amend, or provide for the amendment of, an enactment which so extends.

• (2) So far as any provision of this Act amends the ... the Insolvency Act 1986, its application to companies registered or incorporated in Northern Ireland is subject to ... section 441(2) of the Insolvency Act 1986....

• (3) In Part III (investigations and powers to obtain information), sections 82 to 91, (powers exercisable to assist overseas regulatory authorities) extend to Northern Ireland.

• (4) Part VI (mergers and related matters) extends to Northern Ireland.

• (5) In Part VII (financial markets and insolvency) the following provisions extend to Northern Ireland—

• (a) sections 154 and 155 (introductory provisions and definition of “market contract”),

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (c) sections 157, 160, 162, and 166 to 169 (provisions relating to recognised investment exchanges , recognised clearing houses and recognised CSDs),

• (d) sections 170 and 172 (power to extend provisions to other financial markets),

• (e) section 184 (indemnity for certain acts), and

• (f) sections 185 to 191 (supplementary provisions).

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) Part IX (transfer of securities) extends to Northern Ireland.

. . .

• (8) In Part X (miscellaneous and general provisions), section 211A, this section and sections 214 to 216 (general provisions) extend to Northern Ireland.

• (9) Except as mentioned above, the provisions of this Act do not extend to Northern Ireland.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

214

Commencement and transitional provisions.

215

• (1) The following provisions of this Act come into force on Royal Assent—

• (a) in Part V (amendments of company law), section 141 (application to declare dissolution of company void);

• (b) in Part VI (mergers)—

• (i) sections 147 to 150, and

• (ii) paragraphs 2 to 12, 14 to 16, 18 to 20, 22 to 25 of Schedule 20, and section 153 so far as relating to those paragraphs;

• (c) in Part VIII (amendments of the Financial Services Act 1986), section 202 (offers of short-dated debentures);

• (d) in Part X (miscellaneous and general provisions), the repeals made by Schedule 24 in sections 71, 74, 88 and 89 of, and Schedule 9 to, the Fair Trading Act 1973, and section 212 so far as relating to those repeals.

• (2) The other provisions of this Act come into force on such day as the Secretary of State may appoint by order made by statutory instrument; and different days may be appointed for different provisions and different purposes.

• (3) An order bringing into force any provision may contain such transitional provisions and savings as appear to the Secretary of State to be necessary or expedient.

• (4) The Secretary of State may also by order under this section amend any enactment which refers to the commencement of a provision brought into force by the order so as to substitute a reference to the actual date on which it comes into force.

Short title.

216

This Act may be cited as the Companies Act 1989.

SCHEDULE 1

1

Schedule 4 to the Companies Act 1985 (form and content of company accounts) is amended as follows.

Group undertakings

2

• (1) For “group companies”, wherever occurring, substitute “ group undertakings ”.

• (2) That expression occurs—

• (a) in Balance Sheet Format 1, in Items B.III.1 and 2, C.II.2, C.III.1, E.6 and H.6;

• (b) in Balance Sheet Format 2—

• (i) under the heading “ASSETS”, in Items B.III.1 and 2, C.II.2 and C.III.1;

• (ii) under the heading “LIABILITIES”, in Item C.6;

• (c) in the Profit and Loss Accounts Formats—

• (i) in Format 1, Item 7;

• (ii) in Format 2, Item 9;

• (iii) in Format 3, Item B.3;

• (iv) in Format 4, Item B.5;

• (d) in Notes (15) and (16) to the profit and loss account formats; and

• (e) in the second sentence of paragraph 53(2) (exclusion from requirement to state separately certain loans).

Participating interests

3

• (1) For “shares in related companies”, wherever occurring, substitute “ participating interests ”.

• (2) That expression occurs—

• (a) in Balance Sheet Format 1, Item B.III.3;

• (b) in Balance Sheet Format 2, under the heading “ASSETS”, in Item B.III.3;

• (c) in the Profit and Loss Accounts Formats—

• (i) in Format 1, Item 8;

• (ii) in Format 2, Item 10;

• (iii) in Format 3, Item B.4;

• (iv) in Format 4, Item B.6.

4

• (1) For “related companies”, wherever occurring in any other context, substitute “ undertakings in which the company has a participating interest ”.

• (2) Those contexts are—

• (a) in Balance Sheet Format 1, in Items B.III.4, C.II.3, E.7 and H.7;

• (b) in Balance Sheet Format 2—

• (i) under the heading “ASSETS”, in Items B.III.4 and C.II.3;

• (ii) under the heading “LIABILITIES”, in Item C.7.

Consistency of accounting policies

5

For paragraph 11 (consistency of accounting policy from one year to the next) substitute—

(11) Accounting policies shall be applied consistently within the same accounts and from one financial year to the next.

.

Revaluation reserve

6

In paragraph 34 (revaluation reserve), for sub-paragraph (3) (circumstances in which reduction of reserve required or permitted) substitute—

(3) An amount may be transferred from the revaluation reserve— (a) to the profit and loss account, if the amount was previously charged to that account or represents realised profit, or (b) on capitalisation; and the revaluation reserve shall be reduced to the extent that the amounts transferred to it are no longer necessary for the purposes of the valuation method used. (3A) In sub-paragraph (3)(b) “capitalisation”, in relation to an amount standing to the credit of the revaluation reserve, means applying it in wholly or partly paying up unissued shares in the company to be allotted to members of the company as fully or partly paid shares. (3B) The revaluation reserve shall not be reduced except as mentioned in this paragraph.

.

Compliance with accounting standards

7

After paragraph 36 (disclosure of accounting policies) insert—

(36A) 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.

.

Provision for taxation

8

For paragraph 47 (provision for taxation) substitute—

(47) The amount of any provision for deferred taxation shall be stated separately from the amount of any provision for other taxation.

.

Loans in connection with assistance for purchase of company’s own shares

9

In paragraph 51(2) (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) ”.

Obligation to show corresponding amounts for previous financial year

10

In paragraph 58(3) (exceptions from obligation to show corresponding amount for previous financial year), for paragraphs (a) to (c) substitute—

(a) paragraph 13 of Schedule 4A (details of accounting treatment of acquisitions), (b) paragraphs 2, 8(3), 16, 21(1)(d), 22(4) and (5), 24(3) and (4) and 27(3) and (4) of Schedule 5 (shareholdings in other undertakings), (c) Parts II and III of Schedule 6 (loans and other dealings in favour of directors and others), and (d) paragraphs 42 and 46 above (fixed assets and reserves and provisions).

.

Special provisions where company is parent company or subsidiary undertaking

11

• (1) For the heading to Part IV (special provisions where the company is a holding or subsidiary company) substitute—

.

• (2) In that Part for paragraph 59 substitute—

(59) Where a company is a parent company or a subsidiary undertaking and any item required by Part I of this Schedule to be shown in the company’s balance sheet in relation to group undertakings includes— (a) amounts attributable to dealings with or interests in any parent undertaking or fellow subsidiary undertaking, or (b) amounts attributable to dealings with or interests in any subsidiary undertaking of the company, the aggregate amounts within paragraphs (a) and (b) respectively shall be shown as separate items, either by way of subdivision of the relevant item in the balance sheet or in a note to the company’s accounts.

.

• (3) After that paragraph insert—

(59A) Commitments within any of sub-paragraphs (1) to (5) of paragraph 50 (guarantees and other financial commitments) which are undertaken on behalf of or for the benefit of— (a) any parent undertaking or fellow subsidiary undertaking, or (b) any subsidiary undertaking of the company, shall be stated separately from the other commitments within that sub-paragraph, and commitments within paragraph (a) shall also be stated separately from those within paragraph (b).

.

SCHEDULE 2

General rules

1

• (1) Group accounts shall comply so far as practicable with the provisions of Schedule 4 as if the undertakings included in the consolidation (“the group”) were a single company.

• (2) In particular, for the purposes of paragraph 59 of that Schedule (dealings with or interests in group undertakings) as it applies to group accounts—

• (a) any subsidiary undertakings of the parent company not included in the consolidation shall be treated as subsidiary undertakings of the group, and

• (b) if the parent company is itself a subsidiary undertaking, the group shall be treated as a subsidiary undertaking of any parent undertaking of that company, and the reference to fellow-subsidiary undertakings shall be construed accordingly.

• (3) Where the parent company is treated as an investment company for the purposes of Part V of that Schedule (special provisions for investment companies) the group shall be similarly treated.

2

• (1) The consolidated balance sheet and profit and loss account shall incorporate in full the information contained in the individual accounts of the undertakings included in the consolidation, subject to the adjustments authorised or required by the following provisions of this Schedule and to such other adjustments (if any) as may be appropriate in accordance with generally accepted accounting principles or practice.

• (2) If the financial year of a subsidiary undertaking included in the consolidation differs from that of the parent company, the group accounts shall be made up—

• (a) from the accounts of the subsidiary undertaking for its financial year last ending before the end of the parent company’s financial year, provided that year ended no more than three months before that of the parent company, or

• (b) from interim accounts prepared by the subsidiary undertaking as at the end of the parent company’s financial year.

3

• (1) Where assets and liabilities to be included in the group accounts have been valued or otherwise determined by undertakings according to accounting rules differing from those used for the group accounts, the values or amounts shall be adjusted so as to accord with the rules used for the group accounts.

• (2) If it appears to the directors of the parent company that there are special reasons for departing from sub-paragraph (1) they may do so, but particulars of any such departure, the reasons for it and its effect shall be given in a note to the accounts.

• (3) The adjustments referred to in this paragraph need not be made if they are not material for the purpose of giving a true and fair view.

4

Any differences of accounting rules as between a parent company’s individual accounts for a financial year and its group accounts shall be disclosed in a note to the latter accounts and the reasons for the difference given.

5

Amounts which in the particular context of any provision of this Schedule are not material may be disregarded for the purposes of that provision.

Elimination of group transactions

6

• (1) Debts and claims between undertakings included in the consolidation, and income and expenditure relating to transactions between such undertakings, shall be eliminated in preparing the group accounts.

• (2) Where profits and losses resulting from transactions between undertakings included in the consolidation are included in the book value of assets, they shall be eliminated in preparing the group accounts.

• (3) The elimination required by sub-paragraph (2) may be effected in proportion to the group’s interest in the shares of the undertakings.

• (4) Sub-paragraphs (1) and (2) need not be complied with if the amounts concerned are not material for the purpose of giving a true and fair view.

Acquisition and merger accounting

7

• (1) The following provisions apply where an undertaking becomes a subsidiary undertaking of the parent company.

• (2) That event is referred to in those provisions as an “acquisition”, and references to the “undertaking acquired” shall be construed accordingly.

8

An acquisition shall be accounted for by the acquisition method of accounting unless the conditions for accounting for it as a merger are met and the merger method of accounting is adopted.

9

• (1) The acquisition method of accounting is as follows.

• (2) The identifiable assets and liabilities of the undertaking acquired shall be included in the consolidated balance sheet at their fair values as at the date of acquisition.

In this paragraph the “identifiable” assets or liabilities of the undertaking acquired means the assets or liabilities which are capable of being disposed of or discharged separately, without disposing of a business of the undertaking.

• (3) The income and expenditure of the undertaking acquired shall be brought into the group accounts only as from the date of the acquisition.

• (4) There shall be set off against the acquisition cost of the interest in the shares of the undertaking held by the parent company and its subsidiary undertakings the interest of the parent company and its subsidiary undertakings in the adjusted capital and reserves of the undertaking acquired.

For this purpose—

• “the acquisition cost” means the amount of any cash consideration and the fair value of any other consideration, together with such amount (if any) in respect of fees and other expenses of the acquisition as the company may determine, and

• “the adjusted capital and reserves” of the undertaking acquired means its capital and reserves at the date of the acquisition after adjusting the identifiable assets and liabilities of the undertaking to fair values as at that date.

• (5) The resulting amount if positive shall be treated as goodwill, and if negative as a negative consolidation difference.

10

• (1) The conditions for accounting for an acquisition as a merger are—

• (a) that at least 90 per cent. of the nominal value of the relevant shares in the undertaking acquired is held by or on behalf of the parent company and its subsidiary undertakings,

• (b) that the proportion referred to in paragraph (a) was attained pursuant to an arrangement providing for the issue of equity shares by the parent company or one or more of its subsidiary undertakings,

• (c) that the fair value of any consideration other than the issue of equity shares given pursuant to the arrangement by the parent company and its subsidiary undertakings did not exceed 10 per cent. of the nominal value of the equity shares issued, and

• (d) that adoption of the merger method of accounting accords with generally accepted accounting principles or practice.

• (2) The reference in sub-paragraph (1)(a) to the “relevant shares” in an undertaking acquired is to those carrying unrestricted rights to participate both in distributions and in the assets of the undertaking upon liquidation.

11

• (1) The merger method of accounting is as follows.

• (2) The assets and liabilities of the undertaking acquired shall be brought into the group accounts at the figures at which they stand in the undertaking’s accounts, subject to any adjustment authorised or required by this Schedule.

• (3) The income and expenditure of the undertaking acquired shall be included in the group accounts for the entire financial year, including the period before the acquisition.

• (4) The group accounts shall show corresponding amounts relating to the previous financial year as if the undertaking acquired had been included in the consolidation throughout that year.

• (5) There shall be set off against the aggregate of—

• (a) the appropriate amount in respect of qualifying shares issued by the parent company or its subsidiary undertakings in consideration for the acquisition of shares in the undertaking acquired, and

• (b) the fair value of any other consideration for the acquisition of shares in the undertaking acquired, determined as at the date when those shares were acquired,

the nominal value of the issued share capital of the undertaking acquired held by the parent company and its subsidiary undertakings.

• (6) The resulting amount shall be shown as an adjustment to the consolidated reserves.

• (7) In sub-paragraph (5)(a) “qualifying shares” means—

• (a) shares in relation to which section 131 (merger relief) applies, in respect of which the appropriate amount is the nominal value; or

• (b) shares in relation to which section 132 (relief in respect of group reconstructions) applies, in respect of which the appropriate amount is the nominal value together with any minimum premium value within the meaning of that section.

12

• (1) Where a group is acquired, paragraphs 9 to 11 apply with the following adaptations.

• (2) References to shares of the undertaking acquired shall be construed as references to shares of the parent undertaking of the group.

• (3) Other references to the undertaking acquired shall be construed as references to the group; and references to the assets and liabilities, income and expenditure and capital and reserves of the undertaking acquired shall be construed as references to the assets and liabilities, income and expenditure and capital and reserves of the group after making the set-offs and other adjustments required by this Schedule in the case of group accounts.

13

• (1) The following information with respect to acquisitions taking place in the financial year shall be given in a note to the accounts.

• (2) There shall be stated—

• (a) the name of the undertaking acquired or, where a group was acquired, the name of the parent undertaking of that group, and

• (b) whether the acquisition has been accounted for by the acquisition or the merger method of accounting;

and in relation to an acquisition which significantly affects the figures shown in the group accounts, the following further information shall be given.

• (3) The composition and fair value of the consideration for the acquisition given by the parent company and its subsidiary undertakings shall be stated.

• (4) The profit or loss of the undertaking or group acquired shall be stated—

• (a) for the period from the beginning of the financial year of the undertaking or, as the case may be, of the parent undertaking of the group, up to the date of the acquisition, and

• (b) for the previous financial year of that undertaking or parent undertaking;

and there shall also be stated the date on which the financial year referred to in paragraph (a) began.

• (5) Where the acquisition method of accounting has been adopted, the book values immediately prior to the acquisition, and the fair values at the date of acquisition, of each class of assets and liabilities of the undertaking or group acquired shall be stated in tabular form, including a statement of the amount of any goodwill or negative consolidation difference arising on the acquisition, together with an explanation of any significant adjustments made.

• (6) Where the merger method of accounting has been adopted, an explanation shall be given of any significant adjustments made in relation to the amounts of the assets and liabilities of the undertaking or group acquired, together with a statement of any resulting adjustment to the consolidated reserves (including the re-statement of opening consolidated reserves).

• (7) In ascertaining for the purposes of sub-paragraph (4), (5) or (6) the profit or loss of a group, the book values and fair values of assets and liabilities of a group or the amount of the assets and liabilities of a group, the set-offs and other adjustments required by this Schedule in the case of group accounts shall be made.

14

• (1) There shall also be stated in a note to the accounts the cumulative amount of goodwill resulting from acquisitions in that and earlier financial years which has been written off.

• (2) That figure shall be shown net of any goodwill attributable to subsidiary undertakings or businesses disposed of prior to the balance sheet date.

15

Where during the financial year there has been a disposal of an undertaking or group which significantly affects the figures shown in the group accounts, there shall be stated in a note to the accounts—

• (a) the name of that undertaking or, as the case may be, of the parent undertaking of that group, and

• (b) the extent to which the profit or loss shown in the group accounts is attributable to profit or loss of that undertaking or group.

16

The information required by paragraph 13, 14 or 15 above need not be disclosed with respect to an undertaking which—

• (a) is established under the law of a country outside the United Kingdom, or

• (b) carries on business outside the United Kingdom,

if in the opinion of the directors of the parent company the disclosure would be seriously prejudicial to the business of that undertaking or to the business of the parent company or any of its subsidiary undertakings and the Secretary of State agrees that the information should not be disclosed.

Minority interests

17

• (1) The formats set out in Schedule 4 have effect in relation to group accounts with the following additions.

• (2) In the Balance Sheet Formats a further item headed “Minority interests” shall be added—

• (a) in Format 1, either after item J or at the end (after item K), and

• (b) in Format 2, under the general heading “LIABILITIES”, between items A and B;

and under that item shall be shown the amount of capital and reserves attributable to shares in subsidiary undertakings included in the consolidation held by or on behalf of persons other than the parent company and its subsidiary undertakings.

• (3) In the Profit and Loss Account Formats a further item headed “Minority interests” shall be added—

• (a) in Format 1, between items 14 and 15,

• (b) in Format 2, between items 16 and 17,

• (c) in Format 3, between items 7 and 8 in both sections A and B, and

• (d) in Format 4, between items 9 and 10 in both sections A and B;

and under that item shall be shown the amount of any profit or loss on ordinary activities attributable to shares in subsidiary undertakings included in the consolidation held by or on behalf of persons other than the parent company and its subsidiary undertakings.

• (4) In the Profit and Loss Account Formats a further item headed “Minority interests” shall be added—

• (a) in Format 1, between items 18 and 19,

• (b) in Format 2, between items 20 and 21,

• (c) in Format 3, between items 9 and 10 in section A and between items 8 and 9 in section B, and

• (d) in Format 4, between items 11 and 12 in section A and between items 10 and 11 in section B;

and under that item shall be shown the amount of any profit or loss on extraordinary activities attributable to shares in subsidiary undertakings included in the consolidation held by or on behalf of persons other than the parent company and its subsidiary undertakings.

• (5) For the purposes of paragraph 3(3) and (4) of Schedule 4 (power to adapt or combine items)—

• (a) the additional item required by sub-paragraph (2) above shall be treated as one to which a letter is assigned, and

• (b) the additional items required by sub-paragraphs (3) and (4) above shall be treated as ones to which an Arabic number is assigned.

Interests in subsidiary undertakings excluded from consolidation

18

The interest of the group in subsidiary undertakings excluded from consolidation under section 229(4) (undertakings with activities different from those of undertakings included in the consolidation), and the amount of profit or loss attributable to such an interest, shall be shown in the consolidated balance sheet or, as the case may be, in the consolidated profit and loss account by the equity method of accounting (including dealing with any goodwill arising in accordance with paragraphs 17 to 19 and 21 of Schedule 4).

Joint ventures

19

• (1) Where an undertaking included in the consolidation manages another undertaking jointly with one or more undertakings not included in the consolidation, that other undertaking (“the joint venture”) may, if it is not—

• (a) a body corporate, or

• (b) a subsidiary undertaking of the parent company,

be dealt with in the group accounts by the method of proportional consolidation.

• (2) The provisions of this Part relating to the preparation of consolidated accounts apply, with any necessary modifications, to proportional consolidation under this paragraph.

Associated undertakings

20

• (1) An “associated undertaking” means an undertaking in which an undertaking included in the consolidation has a participating interest and over whose operating and financial policy it exercises a significant influence, and which is not—

• (a) a subsidiary undertaking of the parent company, or

• (b) a joint venture dealt with in accordance with paragraph 19.

• (2) Where an undertaking holds 20 per cent. or more of the voting rights in another undertaking, it shall be presumed to exercise such an influence over it unless the contrary is shown.

• (3) The voting rights in an undertaking means 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.

• (4) The provisions of paragraphs 5 to 11 of Schedule 10A (rights to be taken into account and attribution of rights) apply in determining for the purposes of this paragraph whether an undertaking holds 20 per cent. or more of the voting rights in another undertaking.

21

• (1) The formats set out in Schedule 4 have effect in relation to group accounts with the following modifications.

• (2) In the Balance Sheet Formats the items headed “Participating interests”, that is—

• (a) in Format 1, item B.III.3, and

• (b) In Format 2, item B.III.3 under the heading “ASSETS”,

shall be replaced by two items, “Interests in associated undertakings” and “Other participating interests”.

• (3) In the Profit and Loss Account Formats, the items headed “Income from participating interests”, that is—

• (a) in Format 1, item 8,

• (b) in Format 2, item 10,

• (c) in Format 3, item B.4, and

• (d) in Format 4, item B.6,

shall be replaced by two items, “Income from interests in associated undertakings” and “Income from other participating interests”.

22

• (1) The interest of an undertaking in an associated undertaking, and the amount of profit or loss attributable to such an interest, shall be shown by the equity method of accounting (including dealing with any goodwill arising in accordance with paragraphs 17 to 19 and 21 of Schedule 4).

• (2) Where the associated undertaking is itself a parent undertaking, the net assets and profits or losses to be taken into account are those of the parent and its subsidiary undertakings (after making any consolidation adjustments).

• (3) The equity method of accounting need not be applied if the amounts in question are not material for the purpose of giving a true and fair view.

SCHEDULE 3

Part I — Companies not Required to Prepare Group Accounts

Subsidiary undertakings

1

• (1) The following information shall be given where at the end of the financial year the company has subsidiary undertakings.

• (2) The name of each subsidiary undertaking shall be stated.

• (3) There shall be stated with respect to each subsidiary undertaking—

• (a) if it is incorporated outside Great Britain, the country in which it is incorporated;

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

• (c) if it is unincorporated, the address of its principal place of business.

• (4) The reason why the company is not required to prepare group accounts shall be stated.

• (5) If the reason is that all the subsidiary undertakings of the company fall within the exclusions provided for in section 229, it shall be stated with respect to each subsidiary undertaking which of those exclusions applies.

Holdings in subsidiary undertakings

2

• (1) There shall be stated in relation to shares of each class held by the company in a subsidiary undertaking—

• (a) the identity of the class, and

• (b) the proportion of the nominal value of the shares of that class represented by those shares.

• (2) The shares held by or on behalf of the company itself shall be distinguished from those attributed to the company which are held by or on behalf of a subsidiary undertaking.

Financial information about subsidiary undertakings

3

• (1) There shall be disclosed with respect to each subsidiary undertaking—

• (a) the aggregate amount of its capital and reserves as at the end of its relevant financial year, and

• (b) its profit or loss for that year.

• (2) That information need not be given if the company is exempt by virtue of section 228 from the requirement to prepare group accounts (parent company included in accounts of larger group).

• (3) That information need not be given if—

• (a) the subsidiary undertaking is not required by any provision of this Act to deliver a copy of its balance sheet for its relevant financial year and does not otherwise publish that balance sheet in Great Britain or elsewhere, and

• (b) the company’s holding is less than 50 per cent. of the nominal value of the shares in the undertaking.

• (4) Information otherwise required by this paragraph need not be given if it is not material.

• (5) For the purposes of this paragraph the “relevant financial year” of a subsidiary undertaking is—

• (a) if its financial year ends with that of the company, that year, and

• (b) if not, its financial year ending last before the end of the company’s financial year.

Financial years of subsidiary undertakings

4

Where the financial year of one or more subsidiary undertakings did not end with that of the company, there shall be stated in relation to each such undertaking—

• (a) the reasons why the company’s directors consider that its financial year should not end with that of the company, and

• (b) the date on which its last financial year ended (last before the end of the company’s financial year).

Instead of the dates required by paragraph (b) being given for each subsidiary undertaking the earliest and latest of those dates may be given.

Further information about subsidiary undertakings

5

• (1) There shall be disclosed—

• (a) any qualifications contained in the auditors’ reports on the accounts of subsidiary undertakings for financial years ending with or during the financial year of the company, and

• (b) any note or saving contained in such accounts to call attention to a matter which, apart from the note or saving, would properly have been referred to in such a qualification,

in so far as the matter which is the subject of the qualification or note is not covered by the company’s own accounts and is material from the point of view of its members.

• (2) The aggregate amount of the total investment of the company in the shares of subsidiary undertakings shall be stated by way of the equity method of valuation, unless—

• (a) the company is exempt from the requirement to prepare group accounts by virtue of section 228 (parent company included in accounts of larger group), and

• (b) the directors state their opinion that the aggregate value of the assets of the company consisting of shares in, or amounts owing (whether on account of a loan or otherwise) from, the company’s subsidiary undertakings is not less than the aggregate of the amounts at which those assets are stated or included in the company’s balance sheet.

• (3) In so far as information required by this paragraph is not obtainable, a statement to that effect shall be given instead.

Shares and debentures of company held by subsidiary undertakings

6

• (1) The number, description and amount of the shares in and debentures of the company held by or on behalf of its subsidiary undertakings shall be disclosed.

• (2) Sub-paragraph (1) does not apply in relation to shares or debentures in the case of which the subsidiary undertaking is concerned as personal representative or, subject as follows, as trustee.

• (3) The exception for shares or debentures in relation to which the subsidiary undertaking is concerned as trustee does not apply if the company, or any subsidiary undertaking of the company, is beneficially interested under the trust, otherwise than by way of security only for the purposes of a transaction entered into by it in the ordinary course of a business which includes the lending of money.

• (4) Schedule 2 to this Act has effect for the interpretation of the reference in sub-paragraph (3) to a beneficial interest under a trust.

Significant holdings in undertakings other than subsidiary undertakings

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• (1) The information required by paragraphs 8 and 9 shall be given where at the end of the financial year the company has a significant holding in an undertaking which is not a subsidiary undertaking of the company.

• (2) A holding is significant for this purpose if—

• (a) it amounts to 10 per cent. or more of the nominal value of any class of shares in the undertaking, or

• (b) the amount of the holding (as stated or included in the company’s accounts) exceeds one-tenth of the amount (as so stated) of the company’s assets.

8

• (1) The name of the undertaking shall be stated.

• (2) There shall be stated—

• (a) if the undertaking is incorporated outside Great Britain, the country in which it is incorporated;