Companies Act 2006 – Section 1276
Application of provisions to Scotland and Northern Ireland
1683. This section amends the C(AICE) Act 2004 as regards the application of certain
provisions to Scotland and Northern Ireland.
1684. Subsection (2) amends section 16 of that Act so that paragraphs (a) to (t) of subsection
(2) of that section, which list matters carried on by bodies eligible for grants, only apply to
Scotland insofar as they relate to matters for which provision would be outside the legislative
competence of the Scottish Parliament. This is necessary because, whilst section 16 and the
provisions of this Act amending it extend to Scotland, some of the matters listed in
paragraphs (a) to (t) are not reserved matters for the purposes of section 30 of the Scotland
Act 1998 and are therefore within the legislative competence of the Scottish Parliament.
1685. Subsections (3) to (5) amend section 16(2) and (5) and section 66(2) of the C(AICE)
Act 2004 so that sections 16 and 18, as well as section 17, of that Act extend to Northern
Ireland.
Exercise of voting rights by institutional investors
1686. Institutional investors own and manage assets on behalf of and for the benefit of
clients or members and have an obligation to manage those assets in their interests. In some
cases there is a trustee-beneficiary relationship between the institution and the client, and in
all cases there are contractual and regulatory requirements imposing duties of asset
management on the institution. Voting is central to the exercise of ownership control.
However, the ability of ultimate beneficiaries (e.g. members of a pension fund) to monitor the
way in which institutional investors exercise voting rights is limited in practice.
1687. The CLR (Final Report, paragraph 6.39) concluded that disclosure of voting by
institutional shareholders was a desirable objective. There has been a growing trend
internationally to require disclosure. There has also been an increasing trend by UK fund
managers towards voluntary disclosure.
Section 1277: Power to require information about exercise of voting rights
1688. This section confers a power on the Secretary of State and the Treasury to make
regulations requiring certain categories of institutional investor to provide information about
the exercise of their voting rights. The power is drawn intentionally widely to enable any
mandatory disclosure regime to respond to varied corporate governance arrangements and to
capture a range of institutions investing in different markets. Exercise of the power is subject
to affirmative resolution procedure.
1689. Subsection (4) provides that the obligation imposed by regulations under this section
is enforceable by civil proceedings brought either by the person to whom the information
should have been provided or by a regulatory authority specified in the regulations (which
could, for example, be the FSA).
Section 1278: Institutions to which information provisions apply
1690. This section lists the categories of institutions in relation to which the power
conferred by section 1277 is exercisable. Subsection (2) enables the Treasury or Secretary of
State to add to or amend the categories. Subsection (3) requires that the regulations specify by
whom the duty imposed by the regulations is to be fulfilled.
Section 1279: Shares to which the information provisions apply
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1691. This section confers power to specify by regulations the descriptions of shares in
relation to which the information provisions apply. They will apply wherever a listed institution has
an interest in such shares. Subsections (2) to (4) provide that an institution is taken to have an
interest in shares in certain cases.
Section 1280: Obligations with respect to provision of information
1692. This section specifies the information that can be required. This covers the exercise or
non-exercise of voting rights, instructions given by the institution and any delegation of a function
related to the exercise or non-exercise of voting rights.
1693. Subsection (1) contains a power to require institutional investors to procure disclosure
of voting or of any instructions given by any person acting on the institution’s behalf.
Institutional investors would need to make sure that their investment contracts required such
information to be passed on to them or disclosed on their behalf.
1694. Under subsection (4), the regulations may specify how and to whom the disclosure is
to be made. This would allow the regulations to both specify the manner of disclosure and
require disclosure to (for example) clients and members only, or to the public generally.
Disclosure of information under the Enterprise Act 2002
1695. Part 9 of the Enterprise Act applies to information which public authorities receive in
connection with competition and consumer functions under certain Parts of the Enterprise Act
2002 and under other specified competition and consumer protection legislation. Information
relating to the affairs of an individual or business must be kept confidential unless Part 9
permits its disclosure.
1696. This provision amends Part 9 so as to enable public authorities to disclose information
for the purposes of civil proceedings or otherwise for the purpose of establishing, enforcing
or defending legal rights.
Section 1281: Disclosure of information under the Enterprise Act 2002
1697. The new section 241A allows a public authority to disclose prescribed information to
any person for the purposes of prescribed civil proceedings in the United Kingdom or
elsewhere. Prescribed means prescribed by the Secretary of State by order. The new
provision extends to prospective proceedings, taking legal advice about proceedings and
other ways of establishing, enforcing or defending legal rights (such as alternative dispute
resolution schemes).
1698. Information obtained by a public authority in connection with competition functions
is excluded from the new provision.
Expenses of winding up
1699. The House of Lords decided in Buchler and another v Talbot and others, in re
Leyland Daf [2004] UKHL 9 that property subject to a floating charge is not available to fund
the general expenses of winding up. This provision is intended to reverse that decision.
Section 1282: Payment of expenses of winding up (England and Wales)
1700. Subsection (1) inserts a new section 176ZA in the Insolvency Act 1986 under which
property subject to a floating charge may, where necessary, be used to fund the general
expenses of winding up in priority to the floating charge holder and to any preferential
creditors entitled to be paid out of that property. There is power to make provision by rules
requiring the authorisation or approval of the floating charge holder, or any preferential
creditors, or the court, in certain circumstances.
1701. Subsection (2) makes a corresponding amendment of the Insolvency (Northern
Ireland) Order 1989 (S.I. 1989/2405 (N.I.19)).
Commonhold associations
1702. Commonhold associations are a new form of company limited by guarantee
established under the Commonhold and Leasehold Reform Act 2002. Commonhold
associations must register their memorandum and articles of association both with Companies
House (on formation) and with HM Land Registry (on registration of the commonhold).
1703. At present paragraph 3(1) of Schedule 3 to the Commonhold and Leasehold Reform
Act 2002 provides that an alteration of a commonhold association’s memorandum or articles
is of no effect if it is not registered with the Land Registry. The purpose of the provision is to
ensure that the version of those documents held by the Land Registry is up to date. An
unintended consequence of it, however, is that it effectively prohibits any change of an
association’s memorandum or articles before the land which the commonhold association is
established to manage is registered as commonhold land or after it has stopped being
commonhold land.
Section 1283: Amendment of memorandum or articles of commonhold association
1704. This section amends paragraph 3(1) of Schedule 3 to the Commonhold and Leasehold
Reform Act 2002 so as to limit the application of the provision to alterations made at a time
when the land the association is established to manage is commonhold land.