Environmental and social transparency under the ... - ClientEarth

More documents

Recommendations

Info

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.
164 | Environmental and social transparency under the Companies Act 2006Notes | 16566Accounting Standards Board, ‘Reporting Standard (RS) 1 The Operating and FinancialReview’ (May 2005).67Companies exist as legal ‘persons’. The fundamental idea is that a company has a separatelegal existence to its shareholders. Thus a shareholding company has a separate legal personalityto the company in which it holds shares.68s 1162 Companies Act 2006 defines a company as a parent company if it fulfils one of thefollowing criteria: it holds a majority of the voting rights in the company; it is a member ofthe company and has the right to appoint or remove a majority of its board of directors; ithas the right to exercise a dominant influence over the company (i) by virtue of provisionscontained in the undertaking’s articles of association, or (ii) by virtue of a control contract;it is a member of the company and controls alone, pursuant to an agreement with othershareholders or members, a majority of the voting rights in the undertaking.69The doctrinal position is that as all shareholders have ‘limited liability’ in relation to acompany, thus parent companies (as shareholders of the subsidiary) are subject to limitedliability in relation to the subsidiary’s activities. This ‘limited liability’ of shareholdersapplies to shareholding by companies (parents in subsidiaries); therefore in most cases parentcompanies are not liable for the debts and responsibilities of its subsidiaries in law.Exceptions to the rule are as yet few and far between.70s 399 Companies Act 2006. Companies that are publicly listed in the European Communityare required to prepare their Group Accounts in accordance with InternationalAccounting Standards (IAS), under s 403 Companies Act 2006 and Article 4 of the ‘IASRegulation’ (Council Regulation (EC) 1606/2002 of 19 July 2002 on the application of internationalaccounting standards [2002] OJ L243/1). See Annex 1 for further detail.71s 415(2) Companies Act 2006.72The exemptions are, broadly, if (a) they are subsidiaries of a larger group who have preparedgroup reports (to a certain standard) which include that company, and a numberof procedural conditions are satisfied ; (b) all subsidiaries may be excluded under s 405Companies Act 2006 , by virtue of (i) the subsidiaries’ inclusion being immaterial to givinga ‘true and fair’ view of the company , (ii) severe long-term restrictions on the parent’sexercise of control over the subsidiary , (iii) disproportionate expense or delay , or (iv) theinterest held in the subsidiary being held exclusively with a view to resale . Unless one ofthese exemptions applies, parent companies must produce annual accounts for their companygroup as a whole. See Annex 1 for further detail.73Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations2008 Schedule 4 also provide certain specific accounting requirements relating to ‘significant’shareholdings, and other contractual relationships.74s 417(5)(c) Companies Act 2006.75Linklaters, ‘The Companies Act 2006: A Guide to the Reforms: Part 2: Narrative reporting,liability and auditors’ (December 2006), p. 5.76Hansard HL vol 686 col 453 (2 November 2006).77s 417(11) Companies Act 2006.78Linklaters, ‘The Companies Act 2006: A Guide to the Reforms: Part 2: Narrative reporting,liability and auditors’, p. 5.79s 423(1) Companies Act 2006.80As required to be included in the directors’ report by paragraph 14 of the Large andMedium-sized Companies and Groups (Accounts and Reports) Regulations 2008: “anynecessary explanatory material” with regard to specific aspects of the requirements of s416 Companies Act 2006. Broadly, these relate to the company’s capital structure; securitiestransfer restrictions; details of significant direct or indirect holdings; details of specialrights of control; rights of control of any employees’ share schemes; restrictions on votingrights; restrictions on the transfer of securities or on voting rights; rules that the companyhas about appointment and replacement of directors, or amendment of the company’sarticles of association; powers of the company’s directors; information relating to takeoverbids.81Regulation 5(2) Companies (Summary Financial Statement) Regulations 2008 SI2008/374.82Regulation 5(1) Companies (Summary Financial Statement) Regulations 2008.83s 430(1)(b) Companies Act 2006.84ss 475, 495, 496, 497 Companies Act 2006.85s 495(1) Companies Act 2006.86s 499(1)(a) Companies Act 2006.87s 499(1)(b) Companies Act 2006.88s 499(2) Companies Act 2006. Such persons are: any officer or employee of the company;any person holding or accountable for any of the company’s books, accounts or vouchers;any subsidiary undertaking of the company incorporated in the UK; any officer, employeeor auditor of any such subsidiary undertaking or any person holding or accountable forany books, accounts or vouchers of any such subsidiary undertaking; any person who fellwithin any of the above at a time to which the information or explanations required by theauditor relates or relate. Auditors also have the right to oblige parent companies to takeall steps that are ‘reasonably open to it’ to secure any information or explanations that arenecessary for the purposes of the audit from a subsidiary (or employee of that subsidiary)not subject to UK law (Section 500 Companies Act 2006).89s 495(2)(b) Companies Act 2006.90s 495(4)(a) Companies Act 2006.91s 495(3)(c) Companies Act 2006. Also, where applicable, in accordance with Article 4 ofthe IAS Regulation.
Page 2 and 3:
About this bookSince the Companies
Page 4 and 5:
ClientEarthBen Bundock | Tim Malloc
Page 6 and 7:
| Environmental and social transpar
Page 8 and 9:
iv | Environmental and social trans
Page 10 and 11:
viii| Environmental and social tran
Page 12 and 13:
2 | Environmental and social transp
Page 14:
6 | Environmental and social transp
Page 17 and 18:
12 | Environmental and social trans
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42: 60 | Environmental and social trans
Page 61 and 62: 100 | Environmental and social tran
Page 91: 160 | Environmental and social tran
Page 109: 196 | Environmental and social tran
show all

Environmental and social transparency under the ... - ClientEarth

Create successful ePaper yourself

Delete template?

Save as template?