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86 | Environmental and social transparency under the Companies Act 2006Annex 1: UK law governing company environmental and social accounting and reporting | 87(b)the proportion of the nominal value of the shares of that classrepresented by those shares.6.— (1) Subject to paragraph 14, there must also be stated—(a) the aggregate amount of the capital and reserves of the undertakingas at the end of its relevant financial year, and(b) its profit or loss for that year.(2) That information need not be given in respect of an undertaking if—(a) the undertaking is not required by any provision of the 2006 Actto deliver a copy of its balance sheet for its relevant financial yearand does not otherwise publish that balance sheet in theUnited Kingdom or elsewhere, and(b) the company’s holding is less than 50% of the nominal value of theshares in the undertaking.(3) Information otherwise required by this paragraph need not be given if it isnot material.(4) For the purposes of this paragraph the “relevant financial year” of an undertakingis—(a) if its financial year ends with that of the company, that year, and(b) if not, its financial year ending last before the end of the company’sfinancial year.The Large and Medium-sized Companies and Groups (Accounts andReports) Regulations 2008 provide certain accounting requirements relatingto ‘significant’ holdings other than subsidiaries. A holding above 20%of total nominal value of any class of share of a company is ‘significant’ forthese purposes. Companies must report basic identification and financialdetails about such ‘significant holdings’. 251The provisions of the directors’ report also require reporting of these shareholdingsin some circumstances, under both the general requirements ofsection 417 Companies Act 2006 and specifically of section 417(5)(c). 252A.1.2.3Annual accountingContractual or ‘other’ relationshipsAgain, the Large and Medium-sized Companies and Groups (Accounts andReports) Regulations 2008, 253 and International Accounting Standards, 254set out requirements under the broad framework of the Companies Act2006 as to what financial details must be accounted relating to contractualrelationships.Annual reportingCompanies Act 2006s417 Contents of directors’ report: business review(5) In the case of a quoted company the business review must, to the extent necessaryfor an understanding of the development, performance or position of thecompany’s business, include—(c) subject to subsection (11), information about persons with whom thecompany has contractual or other arrangements which are essential to thebusiness of the company.If the review does not contain information of each kind mentioned in paragraphs(b)(i), (ii) and (iii) and (c), it must state which of those kinds of information itdoes not contain.(11) Nothing in subsection (5)(c) requires the disclosure of information about a personif the disclosure would, in the opinion of the directors, be seriously prejudicialto that person and contrary to the public interest.The Companies Act 2006 explicitly provides that companies must reportinformation in the directors’ report about persons with whom the companyhas contractual or other arrangements which are essential to thebusiness of the company, to the extent necessary for an understanding ofthe development, performance or position of the company’s business.There is a limited exemption to this requirement, whereby reporting isnot required where it would, in the opinion of the directors, be seriouslyprejudicial to that person and contrary to the public interest.A.1.3A.1.3.1How must the accounts and reports be circulated andpublished?Who are the directors required to circulate hard copies ofthe reports to?s423 Duty to circulate copies of annual accounts and reports(1) Every company must send a copy of its annual accounts and reports for eachfinancial year to—(a) every member of the company,(b) every holder of the company’s debentures, and(c) every person who is entitled to receive notice of general meetings.(6) This section has effect subject to section 426 (option to provide summaryfinancial statement).
88 | Environmental and social transparency under the Companies Act 2006Annex 1: UK law governing company environmental and social accounting and reporting | 89s426 Option to provide summary financial statement(1) A company may—(a) in such cases as may be specified by regulations made by the Secretary ofState, and(b) provided any conditions so specified are complied with,provide a summary financial statement instead of copies of the accounts andreports required to be sent out in accordance with section 423.The annual accounts and reports must, as default, be circulated to everymember of the company, every holder of the company’s debentures, andevery person entitled to receive notice of general meetings. However, insome circumstances the company may be allowed to send a ‘summaryfinancial statement’ instead of the full annual accounts and reports.‘Summary financial statements’The Companies (Summary Financial Statement) Regulations 2008 set outthe rules relating to summary financial statements. 255 Subject to a numberof conditions, a company may send a summary financial statement insteadof full annual accounts and reports. The most important condition is that ifany individual shareholder wishes to receive the full accounts and reports,the company is obliged to send them to that individual. 256 Companies arealso obliged to undertake a process to give notice to shareholders of theirintention to send a summary financial statement, and to ascertain theirwishes in that regard. 257In the circumstance that a publicly-traded company 258 may send a summaryfinancial statement, they must also send (at the same time) the explanatorymaterial relating to the directors’ report 259 required by paragraph 14 of theLarge and Medium-sized Companies and Groups (Accounts and Reports)Regulations 2008. The required material, to summarise, is “any necessaryexplanatory material” with regard to: securities transfer restrictions;details of significant direct or indirect holdings; details of special rights ofcontrol; rights of control of any employees’ share schemes; restrictions onvoting rights; restrictions on the transfer of securities or on voting rights;rules that the company has about appointment and replacement of directors,or amendment of the company’s articles of association; powers of thecompany’s directors; information relating to takeover bids. 260 None of thisrequired explanatory material relates to environmental or social matters.Therefore in the circumstances that a company sends out a ‘summaryfinancial statement’ in lieu of its full annual accounts and reports, there isno explicit requirement to send any materials relating to the environmentalor social matters.A.1.3.2The role of Annual General Meetingss437 Public companies: laying of accounts and reports before general meeting(1) The directors of a public company must lay before the company in generalmeeting copies of its annual accounts and reports.(2) This section must be complied with not later than the end of the period forfiling the accounts and reports in question.(3) In the Companies Acts “accounts meeting”, in relation to a public company,means a general meeting of the company at which the company’s annual accountsand reports are (or are to be) laid in accordance with this section.Company accounts and reports, including the directors’ report, must be‘laid’ before the company in general meeting. In practice, there will usuallybe the opportunity for discussion of the reports in the general meeting,when they are laid before it. However, this is not explicitly requiredby law. Neither is there legal requirement that the annual reports needthe shareholders’ approval or acceptance; shareholders have no ability toreject them. 261A.1.3.3How are companies required to publish their accounts andreports?s430 Quoted companies: annual accounts and reports to be made available onwebsite(1) A quoted company must ensure that its annual accounts and reports—(a)(b)are made available on a website, andremain so available until the annual accounts and reports for the company’snext financial year are made available in accordance with this section.(2) The annual accounts and reports must be made available on a website that—(a) is maintained by or on behalf of the company, and(b) identifies the company in question.(3) Access to the annual accounts and reports on the website, and the ability toobtain a hard copy of the annual accounts and reports from the website, mustnot be—(a)(b)conditional on the payment of a fee, orotherwise restricted, except so far as necessary to comply with any enactmentor regulatory requirement (in the United Kingdom or elsewhere).(4) The annual accounts and reports—(a) must be made available as soon as reasonably practicable, and
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