Section 1198: Name giving misleading indication of activities
1529. This section makes it an offence to use a business name that gives so misleading an indication of the nature of the activities of the business as to be likely to cause harm to the public. This section complements section 76 which gives the Secretary of State power to direct a company to change its registered name in these circumstances.
Section 1199: Savings for existing lawful business names
1530. This section provides exemptions for those continuing to use a name that was lawful before the Act comes into force. The exemption is both from the requirement for prior approval and from using names that include a protected indicator of company status. It also retains the existing provision for when a business is transferred: providing the name was previously lawful, the business may continue under that name for 12 months even if otherwise it would not be lawful for whoever is now carrying on the business (see subsection (3)).
CHAPTER 2: DISCLOSURE REQUIRED IN CASE OF INDIVIDUAL OR PARTNERSHIP
1531. This Chapter re-enacts for individuals and partnerships the Business Names Act provisions relating to information which must be displayed at places of business and in correspondence. These sections ensure that a business’s suppliers and customers can discover the legal identity of the person with whom they are doing business and can serve documents upon it. Section 1203 makes special provision for large partnerships so that not all the partners’ names are required in all business documents, provided certain conditions are met.
Section 1200: Application of this Chapter
1532. This section partly replaces section 1 of the Business Names Act 1985. It provides that Chapter 2 applies to:
• sole traders if they trade under any name other than their true surnames augmented only by their forenames and/or initials. (Section 1208 defines initial to include any recognised abbreviation of a name);
• partnerships unless their name is the surnames of all its human partners (augmented only by their forenames and/or initials) and the registered names of its other partners.
1533. It also excludes sole traders and partnerships if the only addition to their name shows the business’s previous ownership.
1534. This section ensures that the coverage of this Chapter is the same as the Business Names Act except that, unlike that Act, it does not apply to any companies. The comparable requirements for companies are in Part 5, Chapter 6.
Section 1201: Information required to be disclosed
1535. This section replaces section 4(1)(a)(i), (ii) and (iv) of the Business Names Act 1985. It specifies the information that is to be the subject of disclosure under this Chapter (ie names and addresses for service).
Sections 1202 to 1204: Disclosure requirements
1536. Sections 1202 and 1203 replace section 4(1)(a) and (2) to (7) of the Business Names Act 1985. They are designed to ensure that customers and suppliers:
• of sole traders know the true identity of the person with whom they are dealing and have an address for him/her which is effective for the service of documents relating to the business;
• of partnerships with 20 or fewer partners know the identity of every partner and the address which is effective for the service of documents relating to the business;
• of larger partnerships know the address which is effective for the service of documents relating to the business and either the identity of every partner or the address at which they can discover the identity of every partner.
1537. Large partnerships are not permitted to choose which partners’ names are included in documents: they must either include the names of all the partners or none (except in the text or as a signatory) (see subsection (2)(b)).
1538. Section 1202 also provides power for regulations relating to the form of a notice giving the trader’s or partners’ name(s) and address in response to any person who asks for the information in the course of business. For companies’ registered names, equivalent provision may be made in regulations under section 82.
1539. Section 1204 replaces section 4(1)(b) of the Business Names Act 1985 so far as it applies to sole traders and partnerships. It makes provision to enable customers and suppliers to discover the name(s) and the address for service of documents when visiting any business premises of the trader or partners.
Section 1205: Criminal consequences of failure to make required disclosure
1540. This section provides that certain provisions in Part 36 (offences under the Companies Acts) also apply to offences under this Part. It replaces and expands upon section 7 of the Business Names Act 1985 so far as it applies to sole traders and partnerships. It retains the existing offences of failure to comply with the requirements relating to disclosure of name and address in documents and notices.
Section 1206: Civil consequences of failure to make required disclosure
1541. This section replaces section 5 of the Business Names Act 1985 so far as it applies to sole traders and partnerships. It provides legal rights to anyone who has sustained losses as a result of failure to comply with this Chapter’s requirements by a sole trader or partnership.
CHAPTER 3: SUPPLEMENTARY
Section 1207: Application of general provisions about offences
1542. This section replaces section 7(6) of the Business Names Act 1985.
Section 1208: Interpretation
1543. This section replaces section 8 of the Business Names Act 1985. In particular, the definition of “initial” means that the restrictions on names in Chapter 1 not only would not apply to James Alexander Scotland if he were to trade as “James Alexander Scotland” or “J. A. Scotland” but also if he were to trade as “Jimmy Scotland” or “Jim A. Scotland”. However, the restrictions would apply if he were to trade as “Scotland Bakers” or “John Scotland”.
PART 42: STATUTORY AUDITORS
1544. The provisions of this Part concern the regulation of auditors. The effects of this Part are:
• To replace Part 2 of the 1989 Act and equivalent Northern Ireland provisions, by restating those provisions with some modifications.
• To extend the category of auditors that are subject to regulation and to make provision for the registration and regulation of auditors (whether based in the UK or not) who audit companies which are incorporated outside the EU but listed in the UK;
• To provide that the Comptroller and Auditor General and the regional Auditors General are eligible to be appointed to perform statutory audits and provide a mechanism for the regulation and supervision of their functions as statutory auditor.
1545. Many of the provisions in this Part implement obligations contained in the Updated Eighth Company Law Directive on Audit (2006/43/EC) that was published on 9 June 2006. The provisions relating to Auditors General implement recommendations contained in Lord Sharman’s report, “Holding to Account, The Review of Audit and Accountability for Central Government”, published in 2001.
CHAPTER 1: INTRODUCTORY
Sections 1209 to 1211: Introductory
1546. Part 2 of the 1989 Act regulates only the auditors of companies. Section 1210(1) defines the meaning of statutory auditor more broadly. Persons within subsection (1)(a) to (g) are ‘statutory auditors’. This list includes those persons who audit companies (as required under Part 16 of the Act) and those who audit building societies, insurers and banks. In addition, the Secretary of State has a power to add auditors of other persons to this list. Section 1211 cross-refers the eligibility for appointment as a statutory auditor to the requirements contained in Chapter 2 or Chapter 3 of this Part of the Act.
CHAPTER 2: INDIVIDUALS AND FIRMS
Sections 1212 and 1213: Eligibility for appointment
1547. These sections are restatements of sections 25 and 28 of the 1989 Act adapted so as to apply in relation to statutory auditors. The sections provide that for a person or firm (defined in section 1261) to be eligible for appointment as a statutory auditor, the person must be a member of a recognised supervisory body and be eligible for appointment under the rules of that body. Section 1217(2) clarifies that references to such members include references to persons who are not members but who are subject to the body’s rules. (Section 1217 and Schedule 10 address the recognition of supervisory bodies, and lay down the requirements they must meet to be recognised.)
1548. Section 1213 provides that no person may act as a statutory auditor if he is ineligible. It specifies that, on becoming ineligible, the auditor must resign his office and give notice in writing. Failure to comply with this requirement is an offence, conviction of which can result in a fine (subsections (3) and (4)). If the auditor continues to act as a statutory auditor after conviction (subsection (5)), or continues to fail to give notice that he is ineligible for appointment as a statutory auditor (subsection (6)), he commits a further offence for which a daily fine may be imposed after conviction (subsection (7)). Subsection (8) provides a defence if the person did not know or had no reason to believe that he was, or had become, ineligible.
Section 1214: Independence requirement
1549. This section restates section 27 of the 1989 Act and indicates circumstances where a person may not act as a statutory auditor on grounds of lack of independence. Under subsection (2) this includes persons who are officers or employees of the audited entity, or the partner or employee of such a person. Under subsection (3), this includes where the person is an officer or employee of a subsidiary of the audited entity. Subsection (4) allows the Secretary of State to make regulations regarding other connections between the audited entity and the statutory auditor by virtue of which a person will be regarded as lacking independence.
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