The Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996

• (2) The right to attend and be heard at a meeting is exercisable in the case of a body corporate or partnership by an individual authorised by it in writing to act as its representative at the meeting.

Remuneration

10

• (1) The remuneration of auditors of a company who are appointed by the company in general meeting shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine.

• (2) The remuneration of auditors who are appointed by the directors or SIB shall, as the case may be, be fixed by the directors or SIB (and shall be payable by the company even where it is fixed by SIB).

11

• (1) Subject to sub-paragraph (2) below, the power of the Secretary of State to make regulations under section 390B of the 1985 Act[^f00036] (remuneration of auditors and their associates for non-audit work) in relation to company auditors shall be exercisable in relation to auditors of investment companies with variable capital—

• (a) for like purposes; and

• (b) subject to the same conditions.

• (2) For the purposes of the exercise of the power to make regulations under section 390B of the 1985 Act, as extended by sub-paragraph (1) above, the reference in section 390B(3) to a note to a company’s accounts shall be taken to be a reference to the annual report of an investment company with variable capital.

Removal

12

• (1) A company may by resolution remove an auditor from office notwithstanding anything in any agreement between it and him.

• (2) Where a resolution removing an auditor is passed at a general meeting of a company, the company shall not later than 14 days after the holding of the meeting notify SIB of the passing of the resolution.

• (3) Nothing in this paragraph shall be taken as depriving a person removed under it of compensation or damages payable to him in respect of the termination of his appointment as auditor or of any appointment terminating with that as auditor.

Rights on removal or non-reappointment

13

• (1) A resolution at a general meeting of a company—

• (a) removing an auditor before the expiration of his period of office; or

• (b) appointing as auditor a person other than the retiring auditor;

is not effective unless notice of the intention to move it has been given to the investment company with variable capital at least 28 days before the meeting at which it is moved.

• (2) On receipt of notice of such an intended resolution, the company shall forthwith send a copy to the person proposed to be removed or, as the case may be, to the person proposed to be appointed and to the retiring auditor.

• (3) The auditor proposed to be removed or, as the case may be, the retiring auditor may make with respect to the intended resolution representations in writing to the company (not exceeding a reasonable length) and request their notification to the shareholders of the company.

• (4) The company shall (unless the representations are received by the company too late for it to do so)—

• (a) in any notice of the resolution given to the shareholders of the company, state the fact of the representations having been made;

• (b) send a copy of the representations to each of the shareholders whose name appears on the register of shareholders (other than the person who is designated in the company’s instrument of incorporation for the purposes of paragraph 4 of Schedule 5 to these Regulations) and to whom notice of the meeting is or has been sent;

• (c) take such steps as SIB regulations may require for the purpose of bringing the fact that the representations have been made to the attention of the holders of any bearer shares; and

• (d) at the request of any holder of bearer shares, provide a copy of the representations.

• (5) If a copy of any such representations is not sent out as required because they were received too late or because of the company’s default or if, for either of those reasons, any steps required by sub-paragraph (4)(c) or (d) above are not taken, the auditor may (without prejudice to his right to be heard orally) require that the representations be read out at the meeting.

• (6) Copies of the representations need not be sent out, the steps required by sub-paragraph (4)(c) or (d) above need not be taken and the representations need not be read out at the meeting if, on the application of the company or any other person claiming to be aggrieved, the court is satisfied that the rights conferred by this paragraph are being abused to secure needless publicity for defamatory matter; and the court may order the costs of the company on such an application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application.

14

• (1) An auditor who has been removed from office has, notwithstanding his removal, the rights conferred by paragraph 9 above in relation to any general meeting of the company at which his term of office would otherwise have expired or at which it is proposed to fill the vacancy caused by his removal.

• (2) Any reference in paragraph 9 above to business concerning the auditors as auditors shall be construed in relation to an auditor who has been removed from office as a reference to business concerning him as former auditor.

Resignation

15

• (1) An auditor of a company may resign his office by depositing a notice in writing to that effect at the company’s head office.

• (2) Such a notice is not effective unless it is accompanied by the statement required by paragraph 18 below.

• (3) An effective notice of resignation operates to bring the auditor’s term of office to an end as of the date on which the notice is deposited or on such later date as may be specified in it.

• (4) The company shall not later than 14 days after the deposit of a notice of resignation send a copy of the notice to SIB.

16

• (1) This paragraph applies where a notice of resignation of an auditor is accompanied by a statement of circumstances which he considers ought to be brought to the attention of the shareholders or creditors of the company.

• (2) An auditor may deposit with the notice a signed requisition that a general meeting of the company be convened forthwith for the purpose of receiving and considering such explanation of the circumstances connected with his resignation as he may wish to place before the meeting.

• (3) The company shall, not later than 21 days after the date of the deposit of a requisition under this paragraph, proceed to convene a meeting for a day not more than 28 days after the date on which the notice convening the meeting is given.

• (4) The auditor may request the company to circulate to the shareholders of the company whose name appears on the register of shareholders (other than the person who is designated in the company’s instrument of incorporation for the purposes of paragraph 4 of Schedule 5 to these Regulations)—

• (a) before the meeting convened on his requisition; or

• (b) before any general meeting at which his term of office would otherwise have expired or at which it is proposed to fill the vacancy caused by his resignation;

a statement in writing (not exceeding a reasonable length) of the circumstances connected with his resignation.

• (5) The company shall (unless the statement is received by it too late for it to do so)—

• (a) in any notice or advertisement of the meeting given or made to shareholders of the company, state the fact of the statement having been made;

• (b) send a copy of the statement to every shareholder of the company to whom notice of the meeting is or has been sent; and

• (c) at the request of any holder of bearer shares, provide a copy of the statement.

• (6) If a copy of the statement is not sent out or provided as required because it was received too late or because of the company’s default the auditor may (without prejudice to his right to be heard orally) require that the statement be read out at the meeting.

• (7) Copies of a statement need not be sent out or provided and the statement need not be read out at the meeting if, on the application of the company or any other person claiming to be aggrieved, the court is satisfied that the rights conferred by this paragraph are being abused to secure needless publicity for defamatory matter; and the court may order the costs of the company on such an application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application.

17

• (1) An auditor who has resigned has, notwithstanding his removal, the rights conferred by paragraph 9 above in relation to any such general meeting of the company as is mentioned in paragraph 16(4)(a) or (b) above.

• (2) The reference in paragraph 9 above to business concerning the auditors as auditors shall be construed in relation to an auditor who has resigned as a reference to business concerning him as former auditor.

Statement by auditor ceasing to hold office

18

• (1) Where an auditor ceases for any reason to hold office, he shall deposit at the head office of the company a statement of any circumstances connected with his ceasing to hold office which he considers should be brought to the attention of the shareholders or creditors of the company or, if he considers that there are no such circumstances, a statement that there are none.

• (2) The statement shall be deposited—

• (a) in the case of resignation, along with the notice of resignation;

• (b) in the case of failure to seek re-appointment, not less than 14 days before the end of the time allowed for next appointing auditors; and

• (c) in any other case, not later than the end of the period of 14 days beginning with the date on which he ceases to hold office.

• (3) If the statement is of circumstances which the auditor considers should be brought to the attention of the shareholders or creditors of the company, the company shall not later than 14 days after the deposit of the statement either—

• (a) send a copy of the statement to each of the shareholders whose name appears on the register of shareholders (other than the person who is designated in the company’s instrument of incorporation for the purposes of paragraph 4 of Schedule 5 to these Regulations) and take such steps as SIB regulations may require for the purpose of bringing the fact that the statement has been made to the attention of the holders of any bearer shares; or

• (b) apply to the court;

and, where an application is made under paragraph (b) above, the company shall notify the auditor.

• (4) Unless the auditor receives notice of an application to the court before the end of the period of 21 days beginning with the day on which he deposited the statement, he shall not later than seven days after the end of that period send a copy of the statement to each of the registrar of companies and SIB.

• (5) If the court is satisfied that the auditor is using the statement to secure needless publicity for defamatory matter—

• (a) it shall direct that copies of the statement need not be sent out and that the steps required by SIB regulations need not be taken; and

• (b) it may further order the company’s costs on the application to be paid in whole or in part by the auditor notwithstanding that he is not a party to the application;

and the company shall not later than 14 days after the court’s decision take such steps in relation to a statement setting out the effect of the order as are required by sub-paragraph (3)(a) above in relation to the statement deposited under sub-paragraph (1) above.

• (6) If the court is not so satisfied, the company shall not later than 14 days after the court’s decision send to each of the shareholders a copy of the auditor’s statement and notify the auditor of the court’s decision.

• (7) The auditor shall not later than seven days after receiving such a notice send a copy of the statement to each of the registrar of companies and SIB.

• (8) Where a notice of appeal is filed not later than 14 days after the court’s decision, any reference to that decision in sub-paragraphs (5) and (6) above shall be construed as a reference to the final determination or withdrawal of that appeal, as the case may be.

19

• (1) If a person ceasing to hold office as auditor fails to comply with paragraph 18 above, he is guilty of an offence and liable—

• (a) on conviction on indictment, to a fine;

• (b) on summary conviction, to a fine not exceeding the statutory maximum.

• (2) In proceedings for an offence under sub-paragraph (1) above, it is a defence for the person charged to show that he took all reasonable steps and exercised all due diligence to avoid the commission of the offence.

SCHEDULE 7 — MERGERS AND DIVISIONS

1

This Schedule applies to any reconstruction or amalgamation involving an investment company with variable capital which takes the form of a scheme described in paragraph 4 below.

2

An investment company with variable capital may apply to the court under section 425 of the 1985 Act[^f00037] (power of company to compromise with creditors or members) for an order sanctioning a scheme falling within any of paragraphs (a) to (c) of paragraph 4(1) below where—

• (a) the scheme in question involves a compromise or arrangement with its shareholders or creditors or any class of its shareholders or creditors; and

• (b) the consideration for the transfer or each of the transfers envisaged by the scheme is to be—

• (i) shares in the transferee company receivable by shareholders of the transferor company; or

• (ii) where there is more than one transferor company and any one or more of them is a public company, shares in the transferee company receivable by shareholders or members of the transferor companies (as the case may be);

in each case with or without any cash payment to shareholders.

3

A public company may apply to the court under section 425 of the 1985 Act for an order sanctioning a scheme falling within any of paragraph (b) or (c) of paragraph 4(1) below where—

• (a) the scheme in question involves a compromise or arrangement with its members or creditors or any class of its members or creditors; and

• (b) the consideration for the transfer or each of the transfers envisaged by the scheme is to be—

• (i) shares in the transferee company receivable by members of the transfesor company; or

• (ii) where there is more than one transferor company and any one or more of them is an investment company with variable capital, shares in the transferee company receivable by members or shareholders of the transferor companies (as the case may be);

in each case with or without any cash payment to shareholders.

4

• (1) The schemes falling within this paragraph are—

• (a) any scheme under which the undertaking, property and liabilities of an investment company with variable capital are to be transferred to another such company, other than one formed for the purpose of, or in connection with, the scheme;

• (b) any scheme under which the undertaking, property and liabilities of two or more bodies corporate, each of which is either—

• (i) an investment company with variable capital; or

• (ii) a public company;

are to be transferred to an investment company with variable capital formed for the purpose of, or in connection with, the scheme;

• (c) any scheme under which the undertaking, property and liabilities of an investment company with variable capital or a public company are to be divided among and transferred to two or more investment companies with variable capital whether or not formed for the purpose of, or in connection with, the scheme.

• (2) Nothing in this Schedule shall be taken as enabling the court to sanction a scheme under which the whole or any part of the undertaking, property or liabilities of an investment company with variable capital may be transferred to any person other than an investment company with variable capital.

5

For the purposes of this Schedule, sections 425 to 427 of the 1985 Act shall, subject to paragraph 6 below, have effect in respect of any application made by virtue of paragraph 2 or 3 above as they have effect in respect of applications falling within section 427A(1) of that Act (that is to say, subject to the provisions of section 427A of, and Schedule 15B to, that Act (mergers and divisions of public companies))[^f00038].

6

• (1) All the provisions of the 1985 Act referred to in paragraph 5 above shall have effect with such modifications as are necessary or appropriate for the purposes of this Schedule.

• (2) In particular, any reference in those provisions to a Case 1 Scheme, a Case 2 Scheme or a Case 3 Scheme shall be taken to be a reference to a scheme falling within paragraph (a), (b) or (c) of paragraph 4(1) above.

• (3) Without prejudice to the generality of sub-paragraph (1) above, the following references in those provisions shall, unless the context otherwise requires, have effect as indicated below, that is to say—

• (a) any reference to a scheme shall be taken to be a reference to a scheme falling within any of paragraphs (a) to (c) of paragraph 4(1) above;

• (b) any reference to a company shall be taken to be a reference to an investment company with variable capital;

• (c) any reference to members shall be taken to be a reference to shareholders of an investment company with variable capital;

• (d) any reference to the registered office of a company shall be taken to be a reference to the head office of an investment company with variable capital;

• (e) any reference to the memorandum and articles of a company shall be taken to be a reference to the instrument of incorporation of an investment company with variable capital;

• (f) any reference to a report under section 103 of the 1985 Act shall be taken to be a reference to any report with respect to the valuation of any non-cash consideration given for shares in an investment company with variable capital which may be required by SIB regulations;

• (g) any reference to annual accounts shall be taken to be a reference to the accounts contained in the annual report of an investment company with variable capital;

• (h) any reference to a directors' report, in relation to a company’s annual accounts, shall be taken to be a reference to any report of the directors of an investment company with variable capital that is contained in the company’s annual report;

• (i) any reference to the requirements of the 1985 Act as to balance sheets forming part of a company’s annual accounts shall be taken to be a reference to any requirements arising by virtue of SIB regulations as to balance sheets drawn up for the purposes of the accounts contained in the annual report of an investment company with variable capital;

• (j) any reference to paid up capital shall be taken to be a reference to the share capital of an investment company with variable capital.

SCHEDULE 8 — MINOR AND CONSEQUENTIAL AMENDMENTS

PART I — PRIMARY LEGISLATION

Trustee Investments Act 1961 (c. 62)

1

In Part III of Schedule 1 to the Trustee Investments Act 1961 (wider-range investments), after paragraph 2 there shall be inserted the following paragraph—

(2A) In any shares in an investment company with variable capital within the meaning of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996.

Stock Transfer Act 1963 (c. 18)

2

In section 1(4) of the Stock Transfer Act 1963 (registered securities to which section 1 applies), after paragraph (e) there shall be inserted the following paragraph—

(f) shares issued by an investment company with variable capital within the meaning of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996.

Data Protection Act 1984 (c. 35)

3

Section 30 of the Data Protection Act 1984 (exemption for regulation of financial services etc) shall have effect as if the reference in subsection (2) to any enactment included these Regulations.

Companies Act 1985 (c. 6)

4

In section 26 of the 1985 Act (prohibition on registration of certain names)—

• (a) in subsection (1) after paragraph (b) there shall be inserted the following paragraph—

(bb) which includes, at any place in the name, the expression “investment company with variable capital” or its Welsh equivalent (“cwmni buddsoddi â chyfalaf newidiol”);

• (b) in subsection (3)(b) the word “and” after “(“anghyfyngedig”)” shall be omitted and at the end there shall be inserted

and investment company with variable capital

5

In section 199(2A)[^f00039] of the 1985 Act (interests to be disregarded in determining whether a person holds a material interest in shares), after paragraph (b) there shall be inserted the following paragraph—

(bb) an interest belonging to an investment company with variable capital;

6

In section 209(1)(h) of the 1985 Act[^f00040] (interests to be disregarded for purposes of obligation to disclose interests in shares) the word “or” at the end of sub-paragraph (i) shall be omitted and, after sub-paragraph (ii), there shall be inserted

or (iii) by virtue of his being a depositary, within the meaning of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996, of an investment company with variable capital.

7

In section 220(1) of the 1985 Act[^f00041] (definitions for Part VI of the Act), after the definition of “designated agency” there shall be inserted the following definition—

• “investment company with variable capital” has the same meaning as in the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996;

8

In section 716(2) of the 1985 Act[^f00042] (exemptions from prohibition on formation of any company, association or partnership with more than 20 members), after paragraph (d) there shall be inserted the following paragraph—

(e) of an investment company with variable capital within the meaning of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996.

9

In section 718(2) of the 1985 Act (exemptions from application of Act to unregistered companies), after paragraph (c) there shall be inserted the following paragraph—

(d) any investment company with variable capital within the meaning of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996.

Company Directors Disqualification Act 1986 (c. 46)

10

In Schedule 1 to the Company Directors Disqualification Act 1986[^f00043] (matters for determining unfitness of directors), after paragraph 5 there shall be inserted the following paragraph—

(5A) In the application of this Part of this Schedule in relation to any person who is a director of an investment company with variable capital, any reference to a provision of the Companies Act shall be taken to be a reference to the corresponding provision of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996 or of any regulations made under regulation 6 of those Regulations (SIB regulations).

Financial Services Act 1986 (c. 60)

11

After section 24 of the 1986 Act (operators and trustees of recognised schemes) there shall be inserted the following section—

(24A) An investment company with variable capital is an authorised person as respects— (a) investment business which consists in operating the collective investment scheme constituted by the company; and (b) any investment business which is carried on by the company in connection with or for the purposes of operating that scheme.

12

In section 47A(4) of the 1986 Act[^f00044] (disciplinary action which may be taken in respect of failure to comply with statements of principle) the word “or” at the end of paragraph (c) shall be omitted and after paragraph (d) there shall be inserted

or (e) the giving of a direction under regulation 18 of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996 (directions) or the making of an application for an order under regulation 20 of those Regulations (application to court to remove director or depositary);

13

In section 72 of the 1986 Act (winding up orders), at the end of subsection (5) (petition to wind up members of recognised self-regulating organisation) there shall be inserted the following subsection—

(6) Subsection (5) above does not apply to the presentation of a petition under subsection (1) above for the winding up of an investment company with variable capital.

14

In section 76(1) of the 1986 Act (restrictions on promotion of collective investment schemes), after the words “authorised unit trust scheme” there shall be inserted the words “or an investment company with variable capital”.

15

In section 83(2) of the 1986 Act (activities in which manager of authorised unit trust scheme may engage)—

• (a) after paragraph (a) there shall be inserted—

(aa) acting as a director of an investment company with variable capital;

• (b) in paragraph (b), after the words “mentioned in paragraph (a)” there shall be inserted the words “or (aa)”.

16

In section 87 of the 1986 Act (schemes authorised in designated countries or territories)—

• (a) at the beginning of subsection (2) there shall be inserted “Subject to subsection (2A) below,”; and

• (b) at the end of subsection (2) there shall be inserted the following subsection—

(2A) Nothing in subsection (2) above shall require the comparison set out in that subsection to be made where— (a) the class of collective investment schemes to be specified in an order includes schemes having characteristics corresponding to those of an investment company with variable capital; and (b) having regard to the characteristics of such schemes, it appears more appropriate to consider whether investors in the United Kingdom are afforded protection at least equivalent to that provided for them by the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996; and, to the extent that the requirements of paragraph (b) above are met, the relevant comparison shall be between the protection afforded to investors in the United Kingdom by the law under which collective investment schemes of the class to be specified in the order are authorised and supervised in the country or territory concerned and the protection provided for such investors by the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996.

17

In section 102 of the 1986 Act (register of authorised persons etc)—

• (a) in subsection (2), after paragraph (b) there shall be inserted the following paragraph—

(bb) in the case of an investment company with variable capital which is an authorised person by virtue of section 24A above, the name of the company, the address of the company’s head office and the names and addresses of the directors and depositary of the company;

• (b) in subsection (6), for the words “or (b)” there shall be substituted the words “, (b) or (bb)”.

18

In section 104(1) of the 1986 Act (power to call for information) after “24,” there shall be inserted “24A,”.

19

In section 108(1) of the 1986 Act (power to require second audit), after the words “by virtue of section” there shall be inserted “24A,”.

20

In section 205A of the 1986 Act[^f00045] (supplementary provisions with respect to subordinate legislation)—

• (a) in subsection (1) for “The following provisions” there shall be substituted “Subsections (2) to (4) below”; and

• (b) after subsection (1) there shall be inserted the following subsection

(1A) Subsections (2) to (4) below also apply to any power to make regulations by virtue of regulation 6 of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996 in the event that that power becomes exercisable by the Treasury by virtue of an order under section 115 above.

21

In section 206(1) of the 1986 Act[^f00046] (publication of information and advice), after paragraph (b) there shall be inserted the following paragraphs—

(bb) the operation of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996 and any regulations made by virtue of regulation 6 of those Regulations; (cc) any matters relating to the functions to which regulation 73 of those Regulations relates;

22

In section 207(1) of the 1986 Act (interpretation) after the definition of “investment agreement” there shall be inserted the following definition—

• “investment company with variable capital” and, in relation to such a company, “depositary” have the same meaning as in the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996;

23

In Schedule 8 to the 1986 Act[^f00047] (principles applicable to designated agency’s legislative provisions), at the end of paragraph 1(1) there shall be inserted the words “and the provisions of regulations made under regulation 6 of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996”.

24

In paragraph 7 of Schedule 9 to the 1986 Act (designated agencies; status and exercise of transferred functions), after “this Act” there shall be inserted “or, as the case may be, the provision of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996,”.

Pension Schemes Act 1993 (c. 48)

25

In section 38(6) (permitted forms for appropriate schemes), after paragraph (c) there shall be inserted the following paragraph—

(d) an investment company with variable capital within the meaning of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996.

PART II — SUBORDINATE LEGISLATION

The Data Protection (Regulation of Financial Services etc) (Subject Access Exemption) Order 1987 (S.I. 1987/1905)

26

Schedule 1 to the Data Protection (Regulation of Financial Services etc) (Subject Access Exemption) Order 1987[^f00048] (functions designated for purposes of section 30 of Data Protection Act 1984) shall have effect as if at the end there were inserted the following entry—

Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996	Functions of the Securities and Investments Board under Regulations

The Uncertificated Securities Regulations 1995 (S.I. 1995/3272)

27

In regulation 3(1) of the Uncertificated Securities Regulations 1995 (interpretation) in the definition of “unit of security”, after the words “(for example a single share)” there shall be inserted

and, in the case of any share— (a) which is issued by an investment company with variable capital (within the meaning of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996) which is a participating issuer; and (b) to which are attached rights expressed in two denominations; it includes any smaller denomination share and any larger denomination share (within the meaning, in the case of each such share, of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996)

28

In regulation 19 of those Regulations (entries on registers), after paragraph (8) there shall be inserted the following paragraph—

(9) This regulation shall not apply to a participating issuer which is an investment company with variable capital (within the meaning of the Open-Ended Investment Companies (Investment Companies with Variable Capital) Regulations 1996).

Signed

Patrick McLoughlin — Richard Ottaway — Two of the Lords Commissioners of Her Majesty’s Treasury — 11th November 1996

Explanatory note

(This note is not part of the Regulations)

The Regulations make provision for the formation in Great Britain of a class of body corporate referred to in the Regulations as an investment company with variable capital. The Regulations also make provision for the authorisation of investment companies with variable capital and for their subsequent supervision.

An investment company with variable capital formed under the Regulations will be a collective investment scheme within the meaning of section 75 of the Financial Services Act 1986 (c. 60) the object of which is investment in a limited class of investments (referred to in the Regulations as “transferable securities”). It will also be an open-ended investment company within the meaning of section 75(8) of that Act. In addition an investment company with variable capital will be an undertaking for collective investment in transferable securities to which Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (“the UCITS Directive”) applies. As such, it will be able to take advantage of the rights which that Directive confers in relation to the undertakings to which it applies to market their shares in other States of the European Economic Area. At present, the only undertakings formed in Great Britain which are able to take advantage of the rights conferred by the UCITS Directive are authorised unit trust schemes the object of which is investment in transferable securities.

Part I of the Regulations is general and contains definitions of certain of the terms used in the Regulations.

Part II of, and Schedules 1 to 3 to, the Regulations are concerned with the formation and the subsequent control and supervision of an investment company with variable capital. Regulations 3 and 4 and Schedule 1 concern the formation of a company and the registration of certain details relating to it with the registrar of companies. Regulation 5 and Schedule 2 are concerned with the custody of the company’s property and with the company’s depositary who is the person to whom the property will be entrusted for safekeeping. Regulation 6 extends certain legislative powers under the Financial Services Act 1986 so as to be exercisable in relation to investment companies with variable capital. The powers are vested in the Securities and Investments Board (“SIB”). (Regulation 73 makes provision as to SIB’s functions under the Regulations.)

Regulations 7 to 12 of the Regulations contain provisions as to the authorisation by SIB of an investment company with variable capital. Schedule 3 contains provisions concerning the contents of a company’s instrument of incorporation.

An application for authorisation will be required and SIB must be satisfied that the company will, if formed and authorised, meet certain criteria (set out in regulation 10). There is provision for representations to be made against any refusal to authorise a company and there is also provision for a company to be issued with a certificate which is a necessary prerequisite to it being able to enjoy the rights conferred by the UCITS Directive. Regulations 13 and 14 contain provisions relating to the name which may be used by an investment company with variable capital and regulation 15 contains provisions requiring a company to seek prior approval from SIB for certain changes, including changes to the company’s instrument of incorporation. Regulations 16 to 20 confer powers on SIB to intervene in the affairs of a company once it has been authorised. The powers in question are powers to revoke authorisation, to give directions and to make applications to the court. Regulat! ions 2 1 to 24 confer concurrent powers on the Secretary of State and SIB to appoint inspectors to investigate the affairs of an investment company with variable capital. Regulations 25 to 27 contain provisions as to the winding up and dissolution of an investment company with variable capital.

Part III of, and Schedules 4 to 7 to, the Regulations set out the corporate framework within which an investment company with variable capital will operate. This framework will be supplemented by regulations made by SIB under the provisions of regulation 6 of the Regulations. Regulations 28 to 30 contain provisions concerning the directors of an investment company with variable capital and the inspection of their service contracts. Regulation 31 makes provisions as to general meetings of the company and regulations 32 to 38 make provision as to the capacity of a company and the validity of certain transactions involving its directors. Regulations 39 to 46 contain provision about the nature of the shares that an investment company with variable capital may issue, about share certificates and (together with Schedule 5 to the Regulations) share transfers and about the maintenance, closure and rectification of a register of shareholders which an investment company with varia! ble capital will be required to keep in accordance with Schedule 4. By virtue of regulation 42, an investment company with variable capital will be able to issue bearer shares. Regulations 47 to 59 contain various provision s that are relevant to the operation of an investment company with variable capital. The provisions in question are ones about the powers which a company enjoys incidental to the carrying on of its business (regulation 47), the details which must be included in its correspondence (regulations 48 and 49), the execution and authentication of documents (regulations 50 to 54), liability and exemptions from liability (regulations 55 to 57), fraudulent trading (regulation 58) and the powers which the company has to make provision for its employees on the cessation or transfer of its business (regulation 59). Regulations 60 to 63 and Schedule 6 make provision as to reports containing accounts which must be prepared by an investment company with variable capital, as to the audit of the reports and as to auditors. Regulation 64 of, and Schedule 7 to, the Regulations contain provisions concerning the merger and division of investment companies with variable capital.

Part IV of the Regulations contains miscellaneous provisions, including provisions about notifications to the registrar of companies, prosecutions and service of documents. Part IV (regulation 74) also contains provisions extending the powers that SIB has under the Financial Services Act 1986 to raise fees in relation to the authorisation and supervision of authorised unit trust schemes so as to be exercisable for like purposes in relation to the authorisation and supervision of investment companies with variable capital. In addition, Part IV of and Schedule 8 to the Regulations make various minor and consequential amendments to other enactments including an amendment which has the effect that an investment company with variable capital will be an authorised person under the Financial Services Act 1986 (paragraph 11 of Schedule 8) and an amendment which excludes such a company from the provisions of section 716 of the Companies Act 1985 (paragraph 8 of Schedule 8).

A compliance cost assessment relating to the Regulations has been prepared and a copy may be obtained from Mrs Janet Robbins, Financial Services, HM Treasury, Parliament Street, London, SW1P 3AG. Tel: 0171 270 5294. Fax: 0171 270 4694.

Footnotes

[^f00001]: S.I. 1988/2240 designates the Secretary of State; the Treasury is designated in place of the Secretary of State by virtue of article 9(b) of the Transfer of Functions (Financial Services) Order 1992 (S.I. 1992/1315).

[^f00002]: 1972 c. 68. By virtue of the amendment of section 1(2) of the European Communities Act 1972 by section 1 of the European Economic Area Act 1993 (c. 51), regulations may be made under section 2(2) of the European Communities Act for the purpose of implementing rights, powers, liabilities, obligations and restrictions of the United Kingdom created or arising by or under the agreement on the European Economic Area signed at Oporto on 2nd May 1992 (Cm 2073) as adjusted by the Protocol signed at Brussels on 17th March 1993 (Cm 2183).

[^f00003]: 1985 c. 6.

[^f00004]: 1986 c. 60; various functions of the Secretary of State under the Financial Services Act 1986 have been transferred to the Treasury by the Transfer of Functions (Financial Services) Order 1992 (S.I. 1992/1315).

[^f00005]: S.I. 1995/3272.

[^f00006]: Various functions under the Financial Services Act 1986 have been transferred to the Securities and Investments Board by the Financial Services Act 1986 (Delegation) Order 1987 (S.I. 1987/942), the Financial Services Act 1986 (Delegation) (No. 2) Order 1988 (S.I. 1988/738), the Companies Act 1989 (Commencement No. 3, Transitional Provisions and Transfer of Functions under the Financial Services Act 1986) Order 1990 (S.I. 1990/354), the Financial Services Act 1986 (Delegation) Order 1991 (S.I. 1991/200) and the Financial Services Act 1986 (Delegation) (No. 2) Order 1991 (S.I. 1991/1256).

[^f00007]: OJ No. L 375, 31.12.1985, p. 3—18, as amended by Council Directive 88/220/EEC (OJ No. L 100, 19.04.1988, p. 31—32).

[^f00008]: Sections 81 and 85 conferred power to make regulations on the Secretary of State. Most of these powers have been transferred to the Securities and Investments Board by the Financial Services Act 1986 (Delegation) (No. 2) Order 1988 (S.I. 1988/738) and the Financial Services Act 1986 (Delegation) (No. 2) Order 1991 (S.I. 1991/1256). The regulations made by the Board which are in force (July 1996) are The Financial Services (Regulated Schemes) Regulations 1991 (Release 148). The remaining functions of the Secretary of State have been transferred to the Treasury by the Transfer of Functions (Financial Services) Order 1992 (S.I. 1992/1315).

[^f00009]: Section 250 was substituted by section 14 of the Companies Act 1989 (c. 40).

[^f00010]: Section 48 was amended by section 206 of, and paragraph 2 of Schedule 23 to, the Companies Act 1989 (c. 40); there are other amendments not relevant to these Regulations.

[^f00011]: Cm 2073.

[^f00012]: Cm 2183.

[^f00013]: S.I. 1989/638. The regulations were amended by virtue of section 2(1) of the European Economic Area Act 1994 (c. 51) so that, for any limitation in the Regulations that proceeds by reference to the Communities, there is substituted a corresponding limitation relating to the European Economic Area.

[^f00014]: Sections 434 and 436 were amended by section 56 of the Companies Act 1989 (c. 40).

[^f00015]: Section 205 was substituted by section 206(1) of, and paragraph 18 of Schedule 23 to, the Companies Act 1989 (c. 40) and amended by the Transfer of Functions (Financial Services) Order 1992 (S.I. 1992/1315).

[^f00016]: 1986 c. 45.

[^f00017]: 1985 c. 66; the definition of “appropriate bank or institution” was substituted by section 108(1) of, and paragraph 20 of Schedule 6 to, the Banking Act 1987 (c. 22).

[^f00018]: 1995 c. 7.

[^f00019]: S.I. 1995/3272.

[^f00020]: Section 705 was substituted by section 149 of, and paragraph 14 of Schedule 19 to, the Companies Act 1989 (c. 40).

[^f00021]: 1995 c. 7.

[^f00022]: 1980 c. 43.

[^f00023]: 1995 c. 46.

[^f00024]: 1925 c. 86.

[^f00025]: 1980 c. 43.

[^f00026]: 1995 c. 46.

[^f00027]: 1978 c. 30.

[^f00028]: S.I. 1992/1315.

[^f00029]: S.I. 1987/942.

[^f00030]: The functions under section 112 with respect to fees in respect of applications under section 77 of the 1986 Act, and the functions under section 113 with respect to periodical fees in respect of managers of authorised unit trust schemes and operators of recognised schemes (in so far as those functions are exercisable by virtue of subsection (8) of that section), were transferred to SIB by article 3 of the Financial Services Act 1986 (Delegation) (No. 2) Order 1988 (S.I. 1988/738).

[^f00031]: S.I. 1995/3272.

[^f00032]: S.I. 1995/3272.

[^f00033]: S.I. 1995/3272.

[^f00034]: 1963 c. 18.

[^f00035]: 1989 c. 40.

[^f00036]: Section 390B was inserted into the 1985 Act by section 121 of the Companies Act 1989 (c. 40).

[^f00037]: Section 425 was amended by section 109(i) of, and paragraph 11 of Schedule 6 to, the Insolvenct Act 1985 (c. 65).

[^f00038]: Section 427A of, and Schedule 15B to, the 1985 Act were inserted by the Companies (Mergers and Divisions) Regulations 1987 (S.I. 1987/1991).

[^f00039]: Subsection (2A) of section 199 of the 1985 Act was inserted by the Disclosure of Interests in Shares (Amendment) Regulations 1993 (S.I. 1993/1819).

[^f00040]: Section 209 of the 1985 Act was substituted by the Disclosure of Interests in Shares (Amendment) Regulations 1993 (S.I. 1993/1819).

[^f00041]: Subsection (1) of section 220 of the 1985 Act was substituted by the Disclosure of Interests in Shares (Amendment) Regulations 1993 (S.I. 1993/1819).

[^f00042]: Paragraph (d) of section 716(2) of the 1985 Act was inserted by section 145 of, and paragraph 15 of Schedule 19 to, the Companies Act 1989 (c. 40).

[^f00043]: Paragraph 5 of Schedule 1 was substituted by section 23 of, and paragraph 35 of Schedule 10 to, the Companies Act 1989 (c. 40).

[^f00044]: Section 47A was inserted into the 1986 Act by section 192 of the Companies Act 1989 (c. 40).

[^f00045]: Section 205A of the 1986 Act was inserted by section 206(1) of, and paragraph 18 of Schedule 23 to, the Companies Act 1980; subsection (1) was amended by paragraph 8 of Schedule 4 to the Transfer of Functions (Financial Services) Order 1992 (S.I. 1992/1315).

[^f00046]: Section 206 of the 1986 Act was amended by section 206 of, and paragraph 19 of Schedule 23 to, the Companies Act 1989 (c. 40).

[^f00047]: Paragraph 1 was substituted by section 206(1) of, and paragraph 23 of Schedule 23 to, the Companies Act 1989.

[^f00048]: There are amendments that are not relevant to these Regulations.