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126 | Environmental and social transparency under the Companies Act 2006Annex 5: Regulatory implementation and compliance: the FRRP | 127A.5.4.3Panel enquiryIf the Chairmen form the view that there may have been a breach ofrequirements worthy of investigation and correction, they will open anenquiry, and form a ‘group’ of FRRP members to conduct the enquiry.The company / entity under enquiry will be formally notified of the specificsof the enquiry and the members of the appointed group, and will begiven the chance to raise any perceived conflicts of interest in the group,and comment on the matters raised by the enquiry.The group will proceed to put its concerns to the company directors incorrespondence and at meetings. The FRRP encourages directors to consulttheir auditors, to involve their audit committee and to take any otheradvice they feel they need.The initial process is primarily informal, and the group aims to reachagreement with the directors of the company by persuasion. 323 It seeksto achieve voluntary revision of reports where they are non-compliant.However, if agreement cannot be reached (the group having formed aview that the report is in breach of requirements and the company beingunwilling to voluntarily revise the report), the group may decide to seek acourt order for compliance, at which point they will inform the company/ entity of their intention and offer a final opportunity to voluntarily reachagreement.A.5.4.4RevisionsThe FRRP exercises discretion over how accounts or reports must berevised, having regard to the context. Factors it will take into account are:nature and effect of the defect; the need to protect users of accounts; theneed to correct / prevent a false market operating; timing of the entity’sreporting cycle).Depending on context, voluntary revision may be effected by way of:- full revision and reissue of reports;- supplementary note to the reports; or- corrective statement issued separately or in the next interim report,along with a corrective statement issued in the following annualreport.If an order is to be made by a court, the court has broad powers, and discretionas to the form of revisory action it may take.s456 Application to court in respect of defective accounts or reports(1) An application may be made to the court—(a) by the Secretary of State, after having complied with section 455, or(b) by a person authorised by the Secretary of State for the purposes of thissection,for a declaration (in Scotland, a declarator) that the annual accounts of a companydo not comply, or a directors’ report does not comply, with the requirements ofthis Act (or, where applicable, of Article 4 of the IAS Regulation) and for an orderrequiring the directors of the company to prepare revised accounts or a revisedreport.(2) Notice of the application, together with a general statement of the matters at issuein the proceedings, shall be given by the applicant to the registrar for registration.(3) If the court orders the preparation of revised accounts, it may give directions asto—(a) the auditing of the accounts,(b) the revision of any directors’ remuneration report, directors’ report orsummary financial statement, and(c) the taking of steps by the directors to bring the making of the order to thenotice of persons likely to rely on the previous accounts,and such other matters as the court thinks fit.(4) If the court orders the preparation of a revised directors’ report it may give directionsas to—(a) the review of the report by the auditors,(b) the revision of any summary financial statement,(c) the taking of steps by the directors to bring the making of the order to thenotice of persons likely to rely on the previous report, and(d) such other matters as the court thinks fit.(5) If the court finds that the accounts or report did not comply with the requirementsof this Act (or, where applicable, of Article 4 of the IAS Regulation) it mayorder that all or part of—(a)(b)the costs (in Scotland, expenses) of and incidental to the application, andany reasonable expenses incurred by the company in connection with or inconsequence of the preparation of revised accounts or a revised report,are to be borne by such of the directors as were party to the approval of the defectiveaccounts or report.For this purpose every director of the company at the time of the approval of theaccounts or report shall be taken to have been a party to the approval unless heshows that he took all reasonable steps to prevent that approval.(6) Where the court makes an order under subsection (5) it shall have regard towhether the directors party to the approval of the defective accounts or reportknew or ought to have known that the accounts or report did not comply with therequirements of this Act (or, where applicable, of Article 4 of the IAS Regulation),and it may exclude one or more directors from the order or order the payment of
128 | Environmental and social transparency under the Companies Act 2006Annex 5: Regulatory implementation and compliance: the FRRP | 129different amounts by different directors.(7) On the conclusion of proceedings on an application under this section, the applicantmust send to the registrar for registration a copy of the court order or, as thecase may be, give notice to the registrar that the application has failed or beenwithdrawn.(8) The provisions of this section apply equally to revised annual accounts andrevised directors’ reports, in which case they have effect as if the referencesto revised accounts or reports were references to further revised accounts orreports.The court may make an order for the accounts or directors’ report of acompany to be revised. It may also give directions as to the audit of theaccounts or report, the revision of any summary financial statement, thetaking of steps by directors’ to bring the order to the attention of anyonelikely to have relied on the accounts or reports, or any other matters thatthe court thinks fit.If the court finds that the accounts or reports were not compliant, the costsof and incidental to the application, and any reasonable costs incurred bythe company in revising the accounts or reports must be borne by thedirectors who were party to the approval of the defective accounts orreports.A.5.5A.5.5.1Confidentiality and transparencyGeneralThe FRRP is subject to legal restrictions on disclosure and confidentiality.s460 Restrictions on disclosure of information obtained under compulsory powers(1) This section applies to information (in whatever form) obtained in pursuance ofa requirement or order under section 459 (power of authorised person to requiredocuments etc) that relates to the private affairs of an individual or to any particularbusiness.(2) No such information may, during the lifetime of that individual or so long asthat business continues to be carried on, be disclosed without the consent of thatindividual or the person for the time being carrying on that business.(3) This does not apply—(a) to disclosure permitted by section 461 (permitted disclosure of informationobtained under compulsory powers), or(b) to the disclosure of information that is or has been available to the publicfrom another source.(4) A person who discloses information in contravention of this section commits anoffence, unless—(a) he did not know, and had no reason to suspect, that the information hadbeen disclosed under section 459, or(b) he took all reasonable steps and exercised all due diligence to avoid thecommission of the offence.(5) A person guilty of an offence under this section is liable—(a) on conviction on indictment, to imprisonment for a term not exceedingtwo years or a fine (or both);(b) on summary conviction—(i) in England and Wales, to imprisonment for a term not exceedingtwelve months or to a fine not exceeding the statutory maximum (orboth);(ii) in Scotland or Northern Ireland, to imprisonment for a term notexceeding six months, or to a fine not exceeding the statutory maximum(or both).s461 Permitted disclosure of information obtained under compulsory powers(1) The prohibition in section 460 of the disclosure of information obtained in pursuanceof a requirement or order under section 459 (power of authorized personto require documents etc) that relates to the private affairs of an individual or toany particular business has effect subject to the following exceptions.(2) It does not apply to the disclosure of information for the purpose of facilitatingthe carrying out by the authorised person of his functions under section 456.(3) It does not apply to disclosure to—(a) the Secretary of State,(b) the Department of Enterprise, Trade and Investment for Northern Ireland,(c) the Treasury,(d) the Bank of England,(e) the Financial Services Authority, or(f) the Commissioners for Her Majesty’s Revenue and Customs.(4) It does not apply to disclosure—(a) for the purpose of assisting a body designated by an order under section 46of the Companies Act 1989 (c. 40) (delegation of functions of the Secretaryof State) to exercise its functions under Part 2 of that Act;(b) with a view to the institution of, or otherwise for the purposes of, disciplinaryproceedings relating to the performance by an accountant or auditorof his professional duties;(c) for the purpose of enabling or assisting the Secretary of State or the Treasuryto exercise any of their functions under any of the following—(i) the Companies Acts,(ii) Part 5 of the Criminal Justice Act 1993 (c. 36) (insider dealing),(iii) the Insolvency Act 1986 (c. 45) or the Insolvency (Northern Ireland)Order 1989 (S.I. 1989/2405 (N.I. 19)),(iv) the Company Directors Disqualification Act 1986 (c. 46) or theCompany Directors Disqualification (Northern Ireland) Order 2002(S.I. 2002/3150 (N.I. 4)),
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ClientEarthBen Bundock | Tim Malloc
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