Companies Act 1989

• (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.

SCHEDULE 7

Preliminary

Schedule 9 to the Companies Act 1985 is amended in accordance with this Schedule, as follows—

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—

(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).

.

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.

.

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.

.

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]

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]

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]

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.

SCHEDULE 8

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.

SCHEDULE 9

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.

SCHEDULE 10

Part I — Amendments of the Companies Act 1985

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Part II — Amendments of Other Enactments

Betting, Gaming and Lotteries Act 1963 (c.2)

25

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Harbours Act 1964 (c.40)

26

• (1) Section 42 of the Harbours Act 1964 (accounts and reports of statutory harbour undertakers) is amended as follows.

• (2) For subsection (2) substitute—

(2) Where a statutory harbour undertaker is a parent undertaking with subsidiary undertakings which carry on harbour activities or any associated activities, then, it shall be the duty of the company also to prepare group accounts relating to the harbour activities and associated activities carried on by it and its subsidiary undertakings.

• (3) In subsection (6) (application of provisions of the Companies Act 1985)—

• (a) in paragraph (a) for “company accounts” substitute “ individual company accounts ”;

• (b) in paragraph (c) omit the words “required to be attached to a company’s balance sheet”.

• (4) In subsection (9), for the definition of “holding company” and “subsidiary” substitute—

“parent undertaking” and “subsidiary undertaking” have the same meaning as in Part VII of the Companies Act 1985;

.

Coal Industry Act 1971 (c.16)

27

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Aircraft and Shipbuilding Industries Act 1977 (c.3)

28

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Crown Agents Act 1979 (c.43)

29

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British Telecommunications Act 1981 (c.38)

30

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Transport Act 1981 (c.56)

31

In section 11(4) of the Transport Act 1981, for “section 235” substitute “ section 234 ”.

Iron and Steel Act 1982 (c.25)

32

In section 24(5) of the Iron and Steel Act 1982 (meaning of “directors’ report”) for the words from “which, under section 235” to the end substitute “ which is required to be prepared under section 234 of the Companies Act 1985 ”.

Oil and Pipelines Act 1985 (c.62)

33

In Schedule 3 to the Oil and Pipelines Act 1985 (Oil and Pipelines Agency: financial and other provisions), in paragraph 9(2) (duty to prepare consolidated accounts) for “subsidiaries” (three times) substitute “ subsidiary undertakings ”, and at the end of that sub-paragraph add—

In this sub-paragraph “subsidiary undertaking” has the same meaning as in Part VII of the Companies Act 1985.

.

Patents, Designs and Marks Act 1986 (c.39)

34

In Schedule 2 to the Patents, Designs and Marks Act 1986 (service marks), in paragraph 1(2) (provisions in which reference to trade mark includes service mark) for sub-paragraph (ii) substitute—

(ii) Part I of Schedule 4 and paragraphs 5(2)(d) and 10(1)(b) and (2) of Schedule 9 (form of company balance sheets); and

.

Company Directors Disqualification Act 1986 (c.46)

35

• (1) The Company Directors Disqualification Act 1986 is amended as follows.

• (2) In section 3(3)(b) (default orders)—

• (a) in sub-paragraph (i) for “section 244” substitute “ section 242(4) ”, and

• (b) after that sub-paragraph insert—

(ia) section 245B of that Act (order requiring preparation of revised accounts),

.

• (3) In Schedule 1, for paragraph 5 substitute—

(5) The extent of the director’s responsibility for any failure by the directors of the company to comply with— (a) section 226 or 227 of the Companies Act (duty to prepare annual accounts), or (b) section 233 of that Act (approval and signature of accounts).

.

Financial Services Act 1986 (c.60)

36

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Banking Act 1987 (c.22)

37

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Income and Corporation Taxes Act 1988 (c.1)

38

• (1) The Income and Corporation Taxes Act 1988 is amended as follows.

• (2) In section 180 (annual return of registered profit-related pay scheme), in subsection (3) for “section 242(3)” substitute “ section 244(3) ”.

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

Dartford–Thurrock Crossing Act 1988 (c.20)

39

In section 33 of the Dartford–Thurrock Crossing Act 1988 (duty to lay before Parliament copies of accounts of persons appointed to levy tolls), for subsection (2) substitute—

(2) In relation to a company “accounts” in subsection (1) means the company’s annual accounts for a financial year, together with the relevant directors’ report and the auditors’ report on those accounts. Expressions used in this subsection have the same meaning as in Part VII of the Companies Act 1985.

.

SCHEDULE 11

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), orany 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.

SCHEDULE 12

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.

SCHEDULE 13

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

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—