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NEWS ROUND-UP |
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Companies House policy on informal corrections to the register See CLM ¶4080 Since 1 October 2009 Companies House has had the power to informally correct any document filed which is incomplete or internally inconsistent (s 1075 CA 2006). It has announced that, initially, this power will only be used to correct certain forms submitted to it to register a charge (CLM ¶3979+). A full list of the relevant documents to which Companies House will initially apply this power is available on the Companies House website. However, Companies House will not use this power to informally correct a document where: » the company name is incorrect on, or missing from, the charge document; » the charge document has not been signed; and/or » the charge document is otherwise incorrect or incomplete in any way. Companies can give their consent to instructions being given under this power using the notice of consent, which can be downloaded from the Companies House website. On receiving this consent, Companies House will issue the company with a unique authorisation code, which must be used when giving any instructions to Companies House in response to an enquiry relating to an informal correction. Instructions must be given on a pro-forma document, which can also be downloaded from the Companies House website. Once the document has been corrected, it is treated as having been properly delivered when the correction is made. Companies should therefore bear this in mind to ensure that the charge is properly registered within the 21-day time limit (CLM ¶4639). Removal of 14-day concession for re-filing company accounts See CLM ¶4279, ¶4281 Under CA 1985, if a company's accounts were rejected by Companies House, the company had 14 days’ grace from the date of any rejection letter within which to amend the accounts and re-file them (s 706 CA 1985). This even applied in cases where accounts were filed (and rejected) in one penalty band, and later re-filed in a higher penalty band. There is no equivalent provision under CA 2006 and therefore the 14-day concession for rejected accounts ceased to apply on 1 October 2009. Any accounts which are rejected and returned to the company for amendment will now incur the penalty relevant to the date on which the accounts are re-filed in an acceptable format (even if this takes them into a higher penalty band than the original filing). Proposals to simplify notices of auditors leaving office See CLM ¶4339+ The Government has published a consultation paper seeking comments on several proposals for simplifying the arrangements for notifying the shareholders, creditors, appropriate audit authorities and Companies House when an auditor leaves his office. Currently, when an auditor ceases to hold office, for whatever reason, he is required to issue the company with a statement of any connected circumstances which he considers should be brought to the attention of the company’s shareholders or creditors (or, if there are no such circumstances, a statement to that effect). Various notices must then be given, as summarised (for non-listed companies) in the table below.
The system is complex and can result in the duplication of notices being given to the authorities and/or Companies House. The Government proposes to streamline the requirements, to make them easier to understand and to reduce the administrative burden, by: » removing the requirement for companies to notify Companies House when an auditor resigns or is removed by ordinary resolution; » removing the requirement to notify auditors’ departures for certain specified reasons, which are of little regulatory interest; » removing the requirement for the audit authorities to notify the accounting authorities of all notices received; » introducing a uniform format for statements; » clarifying the definitions used in the legislation; and » adjusting the requirements for notifications when auditors leave listed companies. The consultation paper is available from BIS’ website at: http://www.berr.gov.uk/consultations/page53696.html. Responses are requested by 20 January 2010. EC consultation on IFRS for SMEs See CLM ¶4360+ The European Commission is seeking the views of stakeholders on the new International Accounting Standards for small and medium-sized companies to assist in its ongoing review of the Fourth and Seventh Company Law Directives with the objective of reducing the administrative burden on SMEs (EC Directive 1978/660; EC Directive 1983/349). It is especially interested to receive comments from the users of accounts, such as business, banks and investors. The consultation paper and questionnaire are available to download from the European Commission’s website: http://ec.europa.eu/internal_market/consultations/2009/ifrs_for_sme_en.htm. Responses are requested by 12 March 2010.
The IFRS for SMEs are tailored to the needs of smaller businesses and can be used by any entity that does not have public accountability. They are available to download free of charge from the IASB’s website: http://www.iasb.org/Current+Projects/IASB+Projects/Small+and+Medium-sized+Entities/Small+and+Medium-sized+Entities.htm. EC proposes changes to the Prospectus Directive See CLM ¶4845+ Following the European Commission’s consultation carried out earlier this year (see CLM 2009 Newsletter Issue 1), a draft Directive has now been published to implement the proposed amendments to the Prospectus Directive (EC Directive 2003/71). The changes suggested as part of the consultation have all been included in the proposed amendments, together with the following additional amendments: » increasing the validity period of a prospectus, a base prospectus and a registration document from 12 months to 24 months, provided that it is regularly supplemented, as required; » amendments in relation to both the content of a summary of the prospectus and the liability that attaches to it; and » amendments to the passport notification procedures, so that the competent authority of the home member state would notify the issuer of the certificate of approval in addition to, and at the same time as, the competent authority of the host member state. The proposal now passes to the European Parliament and the EU Council of Ministers for consideration. It is available from the European Commission website at: http://ec.europa.eu/internal_market/securities/prospectus/index_en.htm. New sentencing guidelines for corporate manslaughter proposed See CLM ¶7178, ¶7180 Companies found guilty of corporate manslaughter offences (and health and safety offences causing death) are likely to face high fines under consultation guidelines published by the Sentencing Guidelines Council (SGC) (“Corporate Manslaughter and Health and Safety Offences Causing Death - Consultation Guidelines”, October 2009). The SGC has not followed the formulaic approach in relation to the level of fines to be imposed (using a percentage of a company's average annual turnover as a starting point), which was recommended by the Sentencing Advisory Panel. Instead the SGC proposes that the appropriate fine for: » a corporate manslaughter offence would not normally be expected to be less than £500,000 and may be millions of pounds; and » a health and safety offence which is shown to have caused death would not normally be expected to be less than £100,000 and may be hundreds of thousands of pounds. Fines will be increased to take into account factors which aggravate or increase the seriousness of the offence, or decreased to take into account mitigating factors. In addition, the SGC proposes that the court should consider the financial consequences of a fine, including the means of the defendant. Fines should be punitive but must be capable of being paid, even if over a number of years (where appropriate). Although in very serious cases, the fact that a fine will put a company out of business will be considered to be an acceptable consequence. The SGC is seeking views on these new guidelines by 5 January 2010. Full details of the proposed guidelines can be found on the SGC’s website: http://www.sentencing-guidelines.gov.uk. Insolvency consolidation and modernisation project moves forward See ¶7365 The Insolvency Service has issued an update on its consolidation and modernisation project. Some additional detail of proposed changes has been included in this update: » as part of the proposals to facilitate electronic communication (including remote attendance at meetings and the use of websites to provide information to creditors), provision will be made for the authentication of documents provided electronically; » creditors are to have more options as to the basis on which they can fix insolvency practitioners’ remuneration; » where a company enters administration, creditors will be able to approve pre-appointment fees and expenses retrospectively as a cost of the administration; » the format of Gazette notices and other advertisements is to be standardised to make it easier for the readers of such publicity to obtain the information they need; and » the occasions on which documents in insolvency proceedings will have to be filed at court will be reduced. Some of these changes are to be introduced next year, when a Legislative Reform Order (see CLM 2009 Newsletter Issue 3) and associated changes to the Rules will be introduced. The Insolvency Service has recently published a draft of the amendments to the Rules for the first time (not for consultation, although it is inviting stakeholders to draw any drafting errors to its attention) (draft Insolvency (Amendment) (No. 3) Rules 2009). The draft amendment Rules are still a work in progress, and therefore are subject to change. The draft amendment Rules are intended to work with the Legislative Reform Order to: » implement the new procedures of remote attendance at meetings and the ability for insolvency practitioners to post information during insolvency proceedings on websites; » remove the unnecessary burdens of the requirements to hold annual meetings in CVL and MVL, report to court at various intervals during CVA and for the liquidator to obtain sanction for some acts; and » remove inconsistencies between the Insolvency Act and the Rules by allowing things that have to be provided in writing to be in electronic form and replacing the use of affidavits with statements of truth. The amendment Rules also modernise the Rules more generally, for example by updating the language used (e.g. replacing “ex parte” with “without notice to any other party”, and “leave” with “permission” in the context of seeking the court’s consent for something). They also seek to harmonise procedures, for example by setting out standard contents for Gazette and non-Gazette notices (the latter being a simplified version of the former) and allowing resolutions at meetings during liquidation to be adopted in writing, as they can be during administration. These amendment Rules will therefore be a significant stepping stone towards the new version of the Rules that is anticipated to be implemented in April 2011. Readers will be kept informed of the precise changes via the online updates for the next edition of Company Law Memo (due to be published in January 2010). A copy of the draft amendment Rules can be found on the Insolvency Service’s website: http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/consolidation/updateNov09.htm.
A revised version of the draft Legislative Reform Order has been laid before Parliament. This version includes the requirement for the liquidator in a voluntary liquidation to provide progress reports to creditors and shareholders instead of holding annual meetings. Originally, it was intended to include this requirement in the amendment Rules, but Parliament felt that it was a sufficiently important safeguard for creditors and shareholders to be included in the primary legislation. Otherwise, as far as corporate insolvency is concerned, the draft Legislative Reform Order remains the same. A copy of the revised draft can be found on the Insolvency Service’s website: http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/insolvencylaw.htm. Verdict on consultation on measures to encourage company rescue The Government has issued its response to the consultation paper on proposals to encourage company rescue (reported on in CLM 2009 Newsletter Issue 4). The paper put forward proposals to extend the availability of the pre-CVA moratorium to all companies (rather than confining it to small companies, as at present) and to introduce measures to encourage lenders to extend finance to companies in CVA and administration. The respondents broadly supported the aim of the proposals, provided that any legislative changes that are made do not extend the life of companies that are not in fact viable. Some respondents pointed out the importance of processes that companies can use outside of the formal insolvency procedures in order to restructure, which avoid the inevitable stigma of insolvency. The proposal to extend the availability of the pre-CVA moratorium was broadly supported. There were differing views as to how long it should last and concerns over the nominee’s role during the moratorium (e.g. whether it was sufficient for him to simply monitor the moratorium, and what his exposure to liability would be). Some respondents suggested that the secured creditors should be consulted first. Others wanted the exercise of contractual termination rights to be included in the moratorium. The Government intends to consult on this proposal in more detail, in order to take the issue further. However, the Government will not be taking the rescue finance proposals forward for the time being. Some respondents queried whether these measures were necessary at all, although others expressed the view that improving access to rescue finance would be useful. The potential impact of these proposals on the behaviour of lenders towards businesses in general, not just those in insolvency, was seen by some respondents as a problem. A copy of the consultation paper and responses can be found on the Insolvency Service’s website: http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register /registerindex.htm. Cross-Border Insolvency Regulations 2006 under review See CLM ¶7377 The Cross-Border Insolvency Regulations 2006 (SI 2006/1030) were brought into force in April 2006 to improve cross-border co-operation in insolvency proceedings and make sure that creditors and debtors are dealt with fairly in insolvencies with a foreign element. They are based on the United Nations Commission on International Trade Law’s Model Law on the subject, and equivalent regimes have been introduced all over the world. The Insolvency Service has launched a review of the regulations to find out whether, in practitioners’ experiences so far, the regulations are achieving their objective of improving cross-border co-operation and protecting creditors and debtors involved in insolvencies with a foreign element. The questions are broad, inviting practitioners to comment on how well the regulations are working, whether there are any impediments to using it and what their experience of it has been like in practice. A copy of the questionnaire can be found on the Insolvency Service’s website: http://www.insolvency.gov.uk/index.htm. Responses are invited by 31 December. OFT study the insolvency services marketplace The OFT has launched a study of how insolvency work is carried out throughout the UK, investigating the structure of the market and issues such as the appointment of insolvency practitioners. It will particularly look at whether there is any unfairness in the system, such as higher fees for some creditors. Its initial investigations are expected to last for most of 2010. New guidance on SIP 16 See CLM ¶8904+ The Insolvency Service has issued guidance to insolvency practitioners to assist them with, and to improve, compliance with Statement of Insolvency Practice (SIP) 16 “Pre-packaged sales in administration”. This sets out the basic principles and essential procedures with which administrators engaged in pre-pack sales must comply (see CLM 2009 Newsletter Issue 1). The guidance has been produced in consultation with the Recognised Professional Bodies in the light of the Insolvency Service’s continuing review of information disclosed under SIP 16 during the course of 2009. The guidance focuses on the level of information that should be provided and confirms that a short response to the bullet point disclosure requirements listed in paragraph 9 of SIP 16 will not, alone, provide the detailed explanation and justification required. It gives further direction on: » the provision of background information about the trading activities and financial difficulties of the company; » the timing of the information being provided to creditors. In most cases the information should be sent to creditors within a few days of the administrator’s appointment or on completion of the sale; » the disclosure of the source of the administrator’s initial introduction to the company and/or its directors, along with the extent of his involvement prior to appointment; » giving details of the nature of any marketing activities carried out, or an explanation as to why it was decided not to carry out any marketing; and » the information that should be provided regarding valuations, details of the assets involved in the transaction and the consideration for it.
The guidance can be found on the Insolvency Service’s website (para 14, Chapter 1 Dear IP) at: http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/dearip/dearipmill/chapter1.htm. The Insolvency Service published a report on its first six months’ monitoring of compliance with SIP 16 in July 2009 (see CLM 2009 Newsletter Issue 4). The Insolvency Service's monitoring of SIP 16 information is continuing and a further report is expected to be published in the New Year. |
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