Environmental and social transparency under the ... - ClientEarth

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174 | Environmental and social transparency under the Companies Act 2006Notes | 175216Metrics used to help an organization define and measure progress toward organisationalgoals.217BERR, ‘Companies Act 2006 Table of Commencement Dates’.218Specifically in exercise of 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 2006.219The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 SI2008/409, apply to ‘small companies’ (see note 49) in the UK.220In exercise of powers under section 416(4) Companies Act 2006. Requirements includeto disclose matters: of a general nature (relating to asset values, political donations andexpenditure, charitable donations, financial instruments, R&D); regarding acquisition ofits own shares; concerning employment of disabled persons; employee involvement; policyand practice on payment of creditors; specific to certain publicly traded companies.221s 85 Climate Change Act 2008. The precise scope of these reporting requirements was yetto be decided at time of writing.222We will also see below that listed companies in the EU are required to prepare theirconsolidated accounts in accordance with IAS.223Council Regulation (EC) 1606/2002 of 19 July 2002 on the application of internationalaccounting standards [2002] OJ L243/1.224See Annex 1.2.1.225IAS 1 Presentation of Financial Statements, Paragraph 89.226Europa Press Release, ‘Accounting standards: Commission adopts consolidated text ofIFRS applicable in the EU’ (5 November 2008).227Ibid. At time of writing the full text was in force, but had not yet been published; onlythe accepted draft was available.228IAS 1 Presentation of Financial Statements, Paragraph 1.229Under section 74(4) Financial Services and Markets Act 2000, as the competent authorityunder Part VI of that Act.230It is also authorised by section 1269 Companies Act 2006 to make rules relating to theimplementation of European Community obligations of companies wishing to be tradedin the UK.231The DTRs implement the requirements of a range of EU directives, most notably the EU‘Transparency Directive’ (Council Directive (EC) 2004/109 on the harmonisation of transparencyrequirements in relation to information about issuers whose securities are admittedto trading on a regulated market and amending Directive 2001/34/EC [2004] L390/38),and (in the context of environmental and social reporting), the ‘Accounts ModernisationDirective’ (Council Directive (EC) 2003/51 amending Directives 78/660/EEC, 83/349/EEC,86/635/EEC and 91/674/EEC on the annual and consolidated accounts of certain typesof companies, banks and other financial institutions and insurance undertakings [2003]L178/16). These will be examined in considerable detail in Annex 3 below.232Financial Services Authority, ‘Disclosure Rules and Transparency Rules’, DTR TP1, p.1.233DTR 4.1.1. Broadly, this is the State in which the company has its head or registeredoffice. See the FSA Handbook Glossary for further detail.234Within the rules, R denotes a binding rule, while G denotes guidance (which replaces allprevious FSA guidance on the issues).235DTR 4.1.6(1)(b).236DTR 4.1.6(1)(a).237s 417(5) Companies Act 2006.238In any case, the requirements of the two regimes are identical, so it is of little bearing.239s 385 Companies Act 2006 provides that a ‘quoted’ company for its purposes is anyUK-based company that is (i) quoted on the official list of the London Stock Exchange, (ii)officially listed in an EEA State, or (iii) admitted to dealing on either the New York StockExchange or the National Association of Securities Dealers Automated Quotations.240London Stock Exchange Website, ‘About AIM’ (accessed Nov 2009) .241Ibid.242AIM companies incorporated in an EEA country are required to use IAS.243London Stock Exchange, ‘Aim Rules for Companies’ (February 2007), Rule 19.244The London Stock Exchange have, however, published Guidance for mining, oil and gascompanies, reportedly to address any concerns that such companies on the AIM are toospeculative (Charles Russell LLP, ‘AIM Rules for Companies: Guidance for Mining, Oil andGas Companies’ (March 2006)). In particular, this guidance sets out expectations for ongoingprovision of ‘exploration drilling updates’, to keep investors updated of the prospectsfor the company.245Unless they are classed as ‘small’ and therefore subject to the Small Companies Regime.246s 417 Companies Act 2006.247For the purposes of this review the full text of these exemptions is disproportionatelylong, so it will instead be summarised.248European Economic Area.
176 | Environmental and social transparency under the Companies Act 2006Notes | 177249Other than those subject to the small companies regime.250Council Regulation (EC) 1606/2002 of 19 July 2002 on the application of internationalaccounting standards [2002] OJ L243/1.251Provided that those holdings are required to deliver their balance sheets under the CompaniesAct, or otherwise publish them in the UK (reg 6(2)).252Quoted companies only.253Sch 4, Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations2008.254IAS 24 Related Party Disclosures.255With reference to the Large and Medium-sized Companies and Groups (Accounts andReports) Regulations 2008 and the Small Companies (Accounts and Directors’ Report)Regulations 2008. Under section 426(1) Companies Act 2006 the Secretary of State hasauthority to issue regulations which set out when companies can and cannot circulate a‘Summary Financial Statement’ in lieu of the annual accounts and reports, and what informationthese Summary Financial Statements must contain.256s 426(2) Companies Act 2006.257reg 5-7, Companies (Summary Financial Statement) Regulations 2008. Other key exceptionsinclude where no auditor’s report has been made in respect of any aspect of the annualreports; where the period for filing accounts has expired; where the summary financialstatement has not been approved by the board of directors; where company articles of associationprohibit them from doing so; where an individual debenture prohibits them fromdoing so in relation to a specific debenture holder (reg 4, Companies (Summary FinancialStatement) Regulations 2008).258For these purposes, a company which has securities carrying voting rights admitted totrading on a regulated market (para 13, sch 7, Large and Medium-sized Companies andGroups (Accounts and Reports) Regulations 2008).259reg 10(1)(b) Companies (Summary Financial Statement) Regulations 2008.260para 13, sch 7, Large and Medium-sized Companies and Groups (Accounts and Reports)Regulations 2008.261Pinsent Masons, ‘Companies – The basics: Company Meetings’ (August 2008).Annex 2262EASC, ‘Operating and Financial Review (OFR) Regulations: Proposal to roll-back toEU minima: Note to Chancellor’ (11 November 2005) .263A committee chaired by Adrian Cadbury, which produced the first UK Code of BestPractice on corporate governance. Its stated objective was ‘to help raise the standards ofcorporate governance and the level of confidence in financial reporting and auditing bysetting out clearly what it sees as the respective responsibilities of those involved and whatit believes is expected of them’.264Committee on the Financial Aspects of Corporate Governance, ‘Report of the Committeeon The Financial Aspects of Corporate Governance’ (December 1992), p. 16.265Accounting Standards Board, ‘Reporting Statement: Operating and Financial Review’(January 2006), p. 3.266Ibid.267The Companies Act 1985 (Operating and Financial Review and Directors’ Report etc)Regulations 2005 SI 2005/1011.268Example 12 related to spillage for a company involved in the transportation of hazardousmaterials; Example 13 related to CO2 emissions for a company involved in energy production;Example 14 related to waste monitoring for a retail group that promotes its ‘greencredentials’.269Example 17 related to social risks in the supply chain for companies selling brandedproducts; Example 18 related to noise infringements for an airport operator.270HM Treasury, ‘Pre-Budget Report: Britain meeting the global challenge: Enterprise, fairnessand responsibility’ (December 2005). It was announced on 28 November 2005.271The Companies Act 1985 (Operating and Financial Review) (Repeal) Regulations 2005SI 2005/3442.272RS 1 and the accompanying implementation guidance was subsequently re-worded andnow stands as ‘best practice guidance’ for companies reporting under section 417 CompaniesAct 2006 (see Chapter 1.3.1 for further detail).273HM Treasury Press Notice, ‘PBR 2005: Britain meeting the global challenge: Enterprise,fairness and responsibility’ (5 December 2005).274Accounting Standards Board, ‘A Review of Narrative Reporting by UK Listed Companiesin 2006’ (January 2007), p. 33. See Annex 3 for detail on EU minimum requirements.275Toby Webb, ‘What will the UK government do about its new reporting proposals?’ EthicalCorporation (16 September 2004).276Jo Sheldon, ’British business leaders split over support for Operating and FinancialReview (OFR)’ Edelman News (24 May 2005). It is, however, worth noting that 43% supportedthe requirements as they stood. This issue is considered further below.277EASC, ‘Operating and Financial Review (OFR) Regulations: Proposal to roll-back to EUminima: Note to Chancellor’, 11 November 2005. Also see Toby Webb, ‘What will the UKgovernment do about its new reporting proposals?’.
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ClientEarthBen Bundock | Tim Malloc
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