Environmental and social transparency under the ... - ClientEarth

162 | Environmental and social transparency under the Companies Act 2006Notes | 16341As a rule, without implementation at Member State level, EU Directives can only everhave legal direct effect by creating rights for individuals against the State, never againstprivate parties. This distinction is referred to in terms of ‘vertical’ direct effect (againstthe State) and ‘horizontal’ direct effect (against a private party). For explanation of whyhorizontal direct effect has not been accepted by the courts, see Case 152/84 Marshall vSouthampton and South West Hampshire AHA [1986] IRLR 140.42The extent to which a private individual could enforce rights provided by the AccountsModernisation Directive against the State is not a simple issue, although the EuropeanCommission can bring legal action against Member States for failing to implement therequirements of a Directive within the required time limit.43s 395 Companies Act 2006. The IAS system was created by the European Union, pursuantto the ongoing objectives of the European single market. It was initiated by EuropeanRegulation in 2002. Quoted companies are required to prepare their consolidated accountsin accordance with IAS standards, but in the case of individual accounts they have thechoice of Companies Act 2006 or IAS standards. Where the directors of a company prepareIAS individual accounts, they must state as such in the notes to the accounts (s 397Companies Act 2006).44As made by the Secretary of State in exercise of their powers under sections 396(3), 404(3),409(1) to (3), 412(1) to (3), 416(4), 421(1) and (2), 445(3)(a) and (b), 677(3)(a), 712(2)(b)(i),831(3)(a), 832(4)(a), 836(1)(b)(i) and 1292(1)(a) and (c) Companies Act 2006. See also SmallCompanies and Groups (Accounts and Directors’ Report) Regulations 2008 SI 2008/409,applying to small companies in the UK.45Soon to be incorporated into a single European Commission Regulation.46See Chapter 3 for further discussion.47See IAS 37 Provisions, Contingent Liabilities and Contingent Assets (1998), Paragraph 14.48Under either the Large and Medium-sized Companies and Groups (Accounts and Reports)Regulations 2008 SI 2008/410 Schedule 9, Part 1, Section 2, or IAS 37 Provisions, ContingentLiabilities and Contingent Assets, Paragraph 14.49Unless the company is subject to the small companies’ regime: if it qualifies as ‘small’, orif it is a parent if its group qualifies as ‘small’, so long as specific exceptions do not apply(s 381 Companies Act 2006). A company is ‘small’ if it satisfies 2 of the following conditions:turnover not more than £5.6 million; balance sheet total not more than £2.8 million;number of employees not more than 50 (s 382 Companies Act 2006). A parent companyis ‘small’ if its group satisfies two of the following conditions: aggregate turnover not morethan £5.6 million net (or £6.72 million gross); aggregate balance sheet total not more than£2.8 million net (or £3.36 million gross); aggregate number of employees not more than 50(s 383 Companies Act 2006). However, no company can be subject to the small companiesregime if it is a: public company; insurance, banking, e-money, ISD investment or UCITSmanagement company; or a member of an ineligible group of companies (s 384 CompaniesAct 2006).50s 385 Companies Act 2006 defines ‘quoted company’, for these purposes, as a companywhose equity share capital (a) has been included in the official list [i.e. the London StockExchange], or (b) is officially listed in an EEA State, or (c) is admitted to dealing on eitherthe New York Stock Exchange or the exchange known as Nasdaq [the major US stock markets].51s 417(5)(b) Companies Act 2006.52In this context, metrics used to help define and measure the development, performanceor position of the company in relation to environmental or social issues (for example, CO2emissions).53s 417(6) Companies Act 2006.54s 417(3)(a) Companies Act 2006.55s 417(3)(b) Companies Act 2006. For example, companies listed on the AIM (AlternativeInvestment Market) are classed as ‘unquoted’ for these purposes, but an AIM-listedmid-size mining company based in the UK might well face a ‘principal risk or uncertainty’relating to community opposition or forthcoming environmental regulation in a key areaof operations, in which case they would be required to report the issue in accordance withsection 417(3) Companies Act 2006.56s 417(4)(a) Companies Act 2006.57s 417(4)(b) Companies Act 2006.58Department for Business Enterprise and Regulatory Reform, ‘Companies Act 2006 Tableof Commencement Dates’ (December 2007).59s 324(1) Companies Act 1985.60s 324(3) Companies Act 1985.61These included details of: matters of a general nature (changes in asset values, directors’shareholdings, political and charitable contributions); the employment, training andadvancement of disabled people; the health, safety and welfare at work of the company’semployees; the involvement of employees in the affairs, policy and performance of thecompany.62Company Law Review Steering Group, ‘Modern Law for a Competitive Economy: TheStrategic Framework’, pp. 120-121.63Accounting Standards Board, ‘Reporting Statement: Operating and Financial Review’(January 2006) p. 3.64The OFR was developed by the Accounting Standards Board (ASB), an operating body ofthe Financial Reporting Council. The ASB’s specific role is to issue accounting standards.It is a sister body to the FRRP (see Chapter 1.2.2 and Annex 5).65The Companies Act 1985 (Operating and Financial Review and Directors’ Report etc)Regulations 2005 SI 2005/1011.