Scottish Law Commission (Discussion Papers)

Part 7




Part 7 Substantive Improvements 4: Disclosure of Transactions in which Directors and their Connected Persons are Interested in the Annual Accounts (Schedule 6, Part II) and the Special Provisions for Banks (Sections 343 and 344)

Introduction

7.1      This part deals with the disclosure which the Act requires in the annual accounts and elsewhere of the transactions and arrangements in which directors or their connected persons are interested. In Part 2, we provisionally identified a general principle of ample but efficient disclosure.^[1] Disclosure is a crucial part of the Act's system of regulating these transactions. The fact that self-dealing transactions have to be disclosed will often act as a brake on directors entering into them or approving them. Their disclosure also enables shareholders to assess the actions of management and to take action against them, whether by removing them as directors or pursing legal remedies against them or, in the case of annual accounts, declining to approve the accounts. As Part 3 states,^[2] subject to questions of cost and confidentiality,^[3] it is important that each organ in the company receives the information which it needs to perform its role in the company properly.
7.2      The requirements for disclosure in the annual accounts are underpinned by a range of differing sanctions in the Act. Section 232(1) states that the information specified in Schedule 6 must be given in notes to the company's annual accounts. Section 233(5) states that if annual accounts are approved which do not comply with the requirements of the Act, every director of the company who was party to their approval and knew that they did not comply, or is reckless as to whether they comply, is guilty of an offence and liable to a fine. There are provisions which enable the Secretary of State to request a company to revise accounts which do not comply with the Act and whereby the court can order accounts to be revised.^[4]
7.3      The notes to a company's annual accounts must give extensive information about directors' and related party benefits. The Act's requirements are to be found in section 232 of the Companies Act 1985, and Schedule 6. We are not here concerned with Part I of that Schedule (which deals with emoluments, compensation for loss of office and pension payments) or with Part III of the Schedule (which deals with the disclosure of transactions in which officers other than directors are interested). Directors have an obligation to provide information required by Part I of Schedule 6, but not, it appears, that required by Part II of the Schedule.^[5]
7.4      The regime regarding disclosure is different in relation to authorised banking institutions and their holding companies. This is dealt with by sections 343 and 345. In this part we look first at Schedule 6, Part II and then go on to consider sections 343-344.

Schedule 6, Part II: Disclosure in annual accounts of transactions in which directors are interested

[15.] [The group accounts of a holding company, or if it is not required to prepare group accounts its individual accounts,] shall contain the particulars required by this Schedule of...

(a) any transaction or arrangement of a kind described in section 330 entered into by the company or by a subsidiary of the company for a person who at any time during the financial year was a director of the company or its holding company, or was connected with such a director;

(b) an agreement by the company or by a subsidiary of the company to enter into any such transaction or arrangement for a person who was at any time during the financial year a director of the company or its holding company, or was connected with such a director; and

(c) any other transaction or arrangement with the company or a subsidiary of it in which a person who at any time during the financial year was a director of the company or its holding company had, directly or indirectly, a material interest.

[16.] The accounts prepared by a company other than a holding company shall contain the particulars required by this Schedule of—

(a) any transaction or arrangement of a kind described in section 330 entered into by the company for a person who at any time during the financial year was a director of it or of its holding company or was connected with such a director;

(b) an agreement by the company to enter into any such transaction or arrangement for a person who at any time during the financial year was a director of the company or its holding company or was connected with such a director; and

(c) any other transaction or arrangement with the company in which a person who at any time during the financial year was a director of the company or of its holding company had, directly or indirectly, a material interest.

[17.] (1) For purposes of paragraphs [15](c) and [16](c), a transaction or arrangement between a company and a director of it or of its holding company, or a person connected with such a director, is to be treated (if it would not otherwise be so) as a transaction, arrangement or agreement in which that director is interested.

(2) An interest in such a transaction or arrangement is not "material" for purposes of those sub-paragraphs if in the board's opinion it is not so; but this is without prejudice to the question whether or not such an interest is material in a case where the board have not considered the matter.

"The board" here means the directors of the company preparing the accounts, or a majority of those directors, but excluding in either case the director whose interest it is.

[18.] Paragraphs [15] and [16] do not apply in relation to the following transactions, arrangements and agreements...

(a) a transaction, arrangement or agreement between one company and another in which a director of the former or of its subsidiary or holding company is interested only by virtue of his being a director of the latter;

(b) a contract of service between a company and one of its directors or a director of its holding company, or between a director of a company and any of that company's subsidiaries;

(c) a transaction, arrangement or agreement which was not entered into during the financial year and which did not subsist at any time during that year.

[19.] Paragraphs [15] and [16] apply whether or not...

(a) the transaction or arrangement was prohibited by section 330;

(b) the person for whom it was made was a director of the company or was connected with a director of it at the time it was made;

(c) in the case of a transaction or arrangement made by a company which at any time during a financial year is a subsidiary of another company, it was a subsidiary of that other company at the time the transaction or arrangement was made.

[20.] Neither paragraph [15](c) nor paragraph [16](c) applies in relation to any transaction or arrangement if...

(a) each party to the transaction or arrangement which is a member of the same group of companies (meaning a holding company and its subsidiaries) as the company entered into the transaction or arrangement in the ordinary course of business, and

(b) the terms of the transaction or arrangement are not less favourable to any such party than it would be reasonable to expect if the interest mentioned in that sub-paragraph had not been an interest of a person who was a director of the company or of its holding company.

[21.] Neither paragraph [15](c) nor paragraph [16](c) applies in relation to any transaction or arrangement if...

(a) the company is a member of a group of companies (meaning a holding company and its subsidiaries), and

(b) either the company is a wholly-owned subsidiary or no body corporate (other than the company or a subsidiary of the company) which is a member of the group of companies which includes the company's ultimate holding company was a party to the transaction or arrangement, and

(c) the director in question was at some time during the relevant period associated with the company, and

(d) the material interest of the director in question in the transaction or arrangement would not have arisen if he had not been associated with the company at any time during the relevant period.

[22.] (1) Subject to the next paragraph, the particulars required by this Part are those of the principal terms of the transaction, arrangement or agreement.

(2) Without prejudice to the generality of sub-paragraph (1), the following particulars are required...

(a) a statement of the fact either that the transaction, arrangement or agreement was made or subsisted (as the case may be) during the financial year;

(b) the name of the person for whom it was made and, where that person is or was connected with a director of the company or of its holding company, the name of that director;

(c) in a case where paragraph [15](c) or [16](c) applies, the name of the director with the material interest and the nature of that interest;

(d) in the case of a loan or an agreement for a loan or an arrangement within section 330(6) or (7) of this Act relating to a loan...

(i) the amount of the liability of the person to whom the loan was or was agreed to be made, in respect of principal and interest, at the beginning and at the end of the financial year;

(ii) the maximum amount of that liability during that year;

(iii) the amount of any interest which, having fallen due, has not been paid; and

(iv) the amount of any provision (within the meaning of Schedule 4 to this Act) made in respect of any failure or anticipated failure by the borrower to repay the whole or part of the loan or to pay the whole or part of any interest on it;

(e) in the case of a guarantee or security or an arrangement within section 330(6) relating to a guarantee or security...

(i) the amount for which the company (or its subsidiary) was liable under the guarantee or in respect of the security both at the beginning and at the end of the financial year;

(ii) the maximum amount for which the company (or its subsidiary) may become so liable; and

(iii) any amount paid and any liability incurred by the company (or its subsidiary) for the purpose of fulfilling the guarantee or discharging the security (including any loss incurred by reason of the enforcement of the guarantee or security); and

(f) in the case of any transaction, arrangement or agreement other than those mentioned in sub-paragraphs (d) and (e), the value of the transaction or arrangement or (as the case may be) the value of the transaction or arrangement to which the agreement relates.

[23.] In paragraph [22](2) above, sub-paragraphs (c) to (f) do not apply in the case of a loan or quasi-loan made or agreed to be made by a company to or for a body corporate which is either...

(a) a body corporate of which that company is a wholly-owned subsidiary, or

(b) a wholly-owned subsidiary of a body corporate of which that company is a wholly-owned subsidiary, or

(c) a wholly-owned subsidiary of that company,

if particulars of that loan, quasi-loan or agreement for it would not have been required to be included in that company's annual accounts if the first-mentioned body corporate had not been associated with a director of that company at any time during the relevant period.

[24.] (1) In relation to a company's accounts for a financial year, compliance with this Part is not required in the case of transactions of a kind mentioned in the following sub-paragraph which are made by the company or a subsidiary of it for a person who at any time during that financial year was a director of the company or of its holding company, or was connected with such a director, if the aggregate of the values of each transaction, arrangement or agreement so made for that director or any person connected with him, less the amount (if any) by which the liabilities of the person for whom the transaction or arrangement was made has been reduced, did not at any time during the financial year exceed £5,000.

(2) The transactions in question are...

(a) credit transactions,

(b) guarantees provided or securities entered into in connection with credit transactions,

(c) arrangements within subsection (6) or (7) of section 330 relating to credit transactions,

(d) agreements to enter into credit transactions.

[25.] In relation to a company's accounts for a financial year, compliance with this Part is not required by virtue of paragraph [15](c) or [16](c) in the case of any transaction or arrangement with a company or any of its subsidiaries in which a director of the company or its holding company had, directly or indirectly, a material interest if...

(a) the value of each transaction or arrangement within paragraph [15](c) or [16](c) (as the case may be) in which that director had (directly or indirectly) a material interest and which was made after the commencement of the financial year with the company or any of its subsidiaries, and

(b) the value of each such transaction or arrangement which was made before the commencement of the financial year less the amount (if any) by which the liabilities of the person for whom the transaction or arrangement was made have been reduced,

did not at any time during the financial year exceed in the aggregate £1,000 or, if more, did not exceed £5,000 or 1 per cent of the value of the net assets of the company preparing the accounts in question as at the end of the financial year, whichever is the less.

For this purpose a company's net assets are the aggregate of its assets, less the aggregate of its liabilities ("liabilities" to include any provision for liabilities or charges within paragraph 89 of Schedule 4).

[26.] Section 345 of this Act (power of Secretary of State to alter sums by statutory instrument subject to negative resolution in Parliament) applies as if the money sums specified in paragraph [24] or [25] above were specified in Part X.

[27.] [(1)] The following provisions of this Act apply for purposes of this Part of this Schedule...

(a) section 331(2), and (7), as regards the meaning of "guarantee", and "credit transaction";

(b) section 331(9), as to the interpretation of references to a transaction or arrangement being made "for" a person;

(c) section 340, in assigning values to transactions and arrangements, and

(d) section 346, as to the interpretation of references to a person being "connected with" a director of a company.

[(2) In this Part of this Schedule "director" includes a shadow director.]

General

7.5      Schedule 6, Part II was derived from sections 56, 64 and 65 of the Companies Act 1980.^[6] It specifies the particulars of transactions in which directors^[7] were interested that need to be disclosed in the accounts. The transactions in question are:

(a) "section 330-type" transactions, that is transactions or arrangements of the kind described in section 330 (whether prohibited or not), and agreements to enter such transactions or arrangements;^[8] and

(b) other transactions or arrangements in which a director has a material interest.^[9]

It is sufficient if the director or connected person involved was a director or connected person at any time during the financial year, and thus, for example, a loan to a director before his appointment is included.^[10] The transaction or arrangement need not have been made in the financial year in question, but must have been in force at some point during the year in question.^[11]

Materiality

7.6      As already stated,^[12] paragraphs 15(c) and 16(c) of Schedule 6 require disclosure (in group and entity accounts respectively) of the particulars of transactions or arrangements in which directors had a direct or indirect material interest. A number of exceptions are included:

(a) transactions, arrangements or agreements where a director is interested by virtue of a common directorship;

(b) contracts of service;

(c) intragroup transactions in the ordinary course of business on arms' length terms; and

(d) transactions in which a director is intended by reason only of the director being associated with the company provided that (a) the company is a member of a group of companies and (b) either it is a wholly owned subsidiary or no other member of the group (apart from a subsidiary of the company) is a party to the transaction or arrangement.

Paragraphs 22 and 23 deal with the particulars to be disclosed. Paragraphs 24 and 25 contain exemptions for minor transactions.

7.7      From such enquiries as we have made it appears that there are few transactions which are disclosable under Schedule 6, Part II which are not required to be disclosed under FRS 8.^[13] A possible reason for this is that paragraph 17 of Schedule 6 enables directors to take the decision that a particular interest is not material. In many cases, what is material involves an evaluation of the facts and the directors are well-placed to know the relevant facts. On the other hand, it is possible that this provision leads to a degree of subjective judgment which tends to weaken the effectiveness of Schedule 6. It is for consideration whether a provision on these lines should be retained as one way in which materiality can be determined.
7.8      Apart from paragraph 17, "material interest" is not defined in the Schedule and it is unclear, as a matter of construction, whether it bears one or two meanings. The first is that a material interest is one which is likely to be of relevance to shareholders or creditors if it could influence decisions taken by them on the basis of the financial statements. Thus the fact that a transaction was of low value may not be decisive if its circumstances reveal a threat to future profitability, for example, because intellectual property rights were transferred. The second approach is to measure materiality in terms of the extent of a director's interest in a transaction. A material interest would arise here if the director's interest was a substantial one. This means that it is the size of the director's interest, not the value of the transaction which is the starting point. Thus the purchase by a director of a Mars Bar from the company's canteen would be disclosable on this construction but not his 1 per cent interest in a larger contract. Indeed this test is often called the Mars Bar test. However the company may derive more value from the Mars Bar approach as an indicator of potential conflicts of interest.
7.9      The DTI's consultative document in 1991 suggested that an interest in a transaction should be treated as material unless disclosure of the interest would be of no significance to the company's members or creditors, including prospective creditors, and that in determining whether disclosure would be of no significance regard should be had to any other transaction or arrangement entered into during the financial year in question in which the director concerned was directly or indirectly interested.^[14] FRS 8 on the other hand applies materiality to the transaction and not to the interest. For the purpose of FRS 8,^[15] materiality of a transaction is to be determined by reference to both the reporting entity and to the related party. A transaction of small significance to the company issuing the accounts may be of major importance to the individual director concerned. This is also the view expressed in a recent technical release^[16] of the Institute of Chartered Accountants in England and Wales, which says that materiality depends not just on a quantitative judgment as to the transaction's size, but also on a qualitative judgment. It states that ultimately materiality depends on how information could influence the economic decisions of users of the accounts. This is similar to the definition put forward by the DTI in 1991, except that the latter starts with an assumption that all transactions are material. By itself, however, this definition does not explain how it is to be decided whether a transaction is likely to be of significance to users of accounts, and in those circumstances the preferable course may be to provide that references to materiality are to be construed in accordance with accounting standards for the time being.

Consultees are asked:

(i) whether Schedule 6 should contain a definition of materiality for the purposes of paragraphs 15(c) and 16(c); and

(ii) if so, how materiality should be defined.

7.10      The discussion of materiality leads to the further question whether it would be possible for Schedule 6, Part II to be repealed and reliance placed on FRS 8. It would obviously be easier for preparers of accounts if they did not have to look at both accounting standards and the Act. However as we see it there are a number of possible difficulties with this course. The Schedule is drafted in more precise terms than FRS 8^[17] and carries criminal sanctions.^[18] The Act is administered by the DTI whereas the Financial Reporting Review Panel is concerned with material departures from accounting standards. There are differences between the two regimes: for instance Schedule 6 exempts intra-group arms' length transactions in the ordinary course of business^[19] whereas FRS 8 does not, and FRS 8 contains exemptions for all transactions between 90 per cent controlled subsidiaries and members of their group or investees of the group qualified as related parties.^[20] Under the Financial Reporting Standard for Smaller Entities, smaller companies are permitted to make fewer disclosures than those which FRS 8 requires of larger companies.^[21] Schedule 6, Part II could not be repealed in its entirety because the Fourth EC Directive on company accounts^[22] requires the notes to the accounts to give certain particulars of "advances and credits" granted to directors.^[23]
7.11      There is accordingly likely to be a separate role for Schedule 6, Part II. In those circumstances a number of questions arise concerning Schedule 6, Part II, many of which were raised by the DTI in 1991. It may be however that the need to take any action has changed since that time, particularly in view of the introduction of FRS 8. We seek consultees' views on this question below. Most of these amendments are designed to rationalise and simplify Schedule 6, Part II. But in some instances they also involve policy decisions about the breadth of disclosure of transactions in which directors are interested, in particular whether disclosure should be required even if they are arms' length transactions in the ordinary course of business (question (iii) below). One possible reason for disclosure in this situation is that the terms of a transaction might be altered more easily if the director has an interest in it. On the other hand, in 1991 the DTI proposed extending this exemption to all transactions in the ordinary course of business.^[24] The points raised in relation to questions (iv)-(vi) appear to be drafting omissions. As respects question (vii), it may be of little assistance to the user of accounts to tell him that the value of a transaction is over £100,000 when it is clear that it must have a very much greater value.

Consultees are asked:

(i) whether Schedule 6, Part II should be retained notwithstanding the introduction of FRS 8;

(ii) whether a director should have a duty to give notice to the company of such matters relating to himself and (so far as known to him) his connected persons as may be necessary for the purposes of that part;^[25]

(iii) whether the exception for transactions in the ordinary course of business in paragraph 21 should be retained and if so whether it should be extended to apply to transactions which are not intra-group;

(iv) whether the details of the value required to be given in relation to loans (and related guarantees and security) under paragraph 22(d) and (e) should be the same in relation to quasi-loans and credit transactions (including related guarantees and security) or vice-versa;

(v) whether the exemption in paragraph 23 should extend to credit transactions;

(vi) whether there should be an exemption like paragraphs 24 and 25 for loans and quasi-loans;

(vii) whether, where the deemed value provision in section 340(7) applies,^[26] the directors should be required if possible to give some estimate of the value;

(viii) whether a transaction should be outside paragraphs 15(c) and 16(d) simply because the director is a common director of both parties to the transaction;^[27]

(ix) whether there is any other change to Schedule 6 which should be considered.

Sections 343-344: Special provisions for banks

343. ((1) The following provisions of this section...

(a) apply in the case of a company which is [a banking company, or is the holding company of a credit institution,] and

(b) are subject to the exceptions provided by section 344.

[(2) Where such a company takes advantage of the provisions of paragraph 2 of Part IV of Schedule 9 in relation to a financial year, that company shall keep a register containing a copy of every transaction, arrangement or agreement of which particulars would, but for that paragraph, be required to be disclosed in the company's accounts or group accounts for that financial year and for each financial year in the preceding 10 in relation to which the company has taken advantage of the provisions of that paragraph.]

(3) In the case of a transaction, arrangement or agreement which is not in writing, there shall be contained in the register a written memorandum setting out its terms.

[(4) Where such a company takes advantage of the provisions of paragraph 2 of Part IV of Schedule 9 in relation to the last complete financial year preceding its annual general meeting, that company shall before that meeting make available at its registered office for not less than 15 days ending with the date of the meeting a statement containing the particulars of transactions, arrangements and agreements which the company would, but for that paragraph, be required to disclose in its accounts or group accounts for that financial year.]

(5) The statement shall be so made available for inspection by members of the company; and such a statement shall also be made available for their inspection at the annual general meeting.

(6) It is the duty of the company's auditors to examine the statement before it is made available to members of the company and to make a report to the members on it; and the report shall be annexed to the statement before it is made so available.

(7) The auditors' report shall state whether in their opinion the statement contains the particulars required by subsection (4); and, where their opinion is that it does not, they shall include in the report, so far as they are reasonably able to do so, a statement giving the required particulars.

(8) If a company fails to comply with any provision of subsections (2) to (5), every person who at the time of the failure is a director of it is guilty of an offence and liable to a fine; but...

(a) it is a defence in proceedings against a person for this offence to prove that he took all reasonable steps for securing compliance with the subsection concerned, and

(b) a person is not guilty of the offence by virtue only of being a shadow director of the company.

(9) For purposes of the application of this section to loans and quasi-loans made by a company to persons connected with a person who at any time is a director of the company or of its holding company, a company which a person does not control is not connected with him.

344.((1) Section 343 does not apply in relation to...

(a) transactions or arrangements made or subsisting during a financial year by a company or by a subsidiary of a company for a person who was at any time during that year a director of the company or of its holding company or was connected with such a director, or

(b) an agreement made or subsisting during that year to enter into such a transaction or arrangement,

if the aggregate of the values of each transaction or arrangement made for that person, and of each agreement for such a transaction or arrangement, less the amount (if any) by which the value of those transactions, arrangements and agreements has been reduced, did not exceed [£2,000] at any time during the financial year.

For purposes of this subsection, values are to be determined as under section 340.

(2) Section 343(4) and (5) do not apply to [a banking company] which is the wholly-owned subsidiary of a company incorporated in the United Kingdom.

7.12      As indicated above, the regime regarding disclosure is different in relation to authorised banking institutions and their holding companies.^[28] In this situation the company which prepares its accounts in accordance with Schedule 9 and takes advantage of Part IV, paragraph 3 of that Schedule shall make the register, containing directors' transactions,^[29] available at its registered office 15 days prior to the annual general meeting. The register contains a copy of every transaction, arrangement or agreement which other companies would disclose in their accounts. Section 344 disapplies this regime in relation to a transaction for a person who, never owed more than £2000 at any time during the financial year.
7.13      In practice what the shareholders are entitled to see is laid down in paragraphs 22 and 29 of Schedule 6, Part II. The accounts must contain a statement detailing the total amounts outstanding at the end of the financial year for these particular transactions, and the number of officers for whom the transactions were made. The statement should be examined by the company's auditors who should make a report to the members on it.^[30] The Register contains the name of each person entering into a transaction and the amounts of liability and unpaid interest.
7.14      These sections were first enacted in the Companies Act 1980. When they were introduced, three reasons were advanced for differential treatment.^[31] Firstly, to avoid the disruption of perfectly proper commercial business between companies associated with a director and the bank. Second, that a prohibition would be likely to cut off an important source of potential directors from the bank; the example mentioned being large-scale farmers who may require sizeable loans from time to time. Thirdly, that none of the clearing banks had been implicated in any scandal during the secondary banking crisis, the consequences of which were keenly felt at the time of debate.
7.15      The fact that a director has to borrow from his company, may indicate that he is not creditworthy. On the other hand, it may be said that greater scrutiny might apply in relation to a bank making a loan to its director than to a company in some other business making a loan. However, the question at issue is whether banks should be treated differently from other companies. This question becomes more acute when it is considered that supermarkets and building societies now offer banking facilities including loans. A further issue is whether the provisions in the sections provide sufficient protection to shareholders, and whether they are aware of their rights under 343(4).
7.16      It is clearly desirable that loans between directors and banks be disclosed. The issue is what level of disclosure should be required. Section 343 in not applying the same level of disclosure for other companies, but requiring a register to be maintained may provide a sufficient safeguard. However, in practice, this form of disclosure may not be sufficiently stringent. It may be said that those bank directors who are not creditworthy may be more inclined to seek advantage from their own companies. A question is whether, in this situation, section 343 encourages banks to enter into transactions without applying the same level of scrutiny as those companies who must provide fuller details on the face of their accounts.
7.17      There would seem to be no reason why the register referred to in section 343 could not be kept in an electronic form.^[32]

Consultees are asked:

(i) Are sections 343 and 344 necessary or desirable?

(ii) On the basis these sections are retained, are consultees aware of any deficiency in these sections which are required to be addressed?

Note 1   See para 2.17(9) above.    [Back]

Note 2   See para 3.92(7) above.    [Back]

Note 3   Sched 6, Pt II deals with completed transactions, or agreements to enter transactions. It is not thought that these raise any question of confidentiality.    [Back]

Note 4   See generally ss 245-245C of the Companies Act 1985. This power has also been conferred on the Financial Reporting Review Panel, to which, like the Accounting Standards Board, the Financial Reporting Council is "parent and mentor" (Financial Reporting Council, Progress Report (1997)).    [Back]

Note 5   Section 232(3) of the Companies Act 1985.    [Back]

Note 6   As amended by Sched 3, para 52 of the Companies Act 1981.    [Back]

Note 7   And where applicable, connected persons.    [Back]

Note 8   Paragraphs 15(1)(a), (b), 19(a). Paras 15 and 16 deal with group accounts, and individual company accounts respectively.    [Back]

Note 9   Paras 15(1)(c), 16(1)(c).    [Back]

Note 10   Paras 15, 16, 19(6).    [Back]

Note 11   Paras 18(c).    [Back]

Note 12   See para 7.5 above.    [Back]

Note 13   See Appendix N.     [Back]

Note 14   See para 1.17 above.     [Back]

Note 15   See para 20 in Appendix N below.    [Back]

Note 16   TECH 32/96 on The Interpretation of Materiality in Financial Reporting (May 1996).    [Back]

Note 17   See the discusion below on "connected person" at para 8.5 et seq below.    [Back]

Note 18   Section 233(5), but only if the director knows that they do not compy or is reckless as to whether they comply.    [Back]

Note 19   See Sched 6, para 20.    [Back]

Note 20   FRS 8, para 17; cf Sched 6, Pt II.    [Back]

Note 21   In particular, materiality is judged in terms of signifance to the reporting entity.    [Back]

Note 22   1978 OJ L 222/11.    [Back]

Note 23   Art 43.1(13). The prescribed particulars are the amounts, indications of the interests rates, main conditions, any amounts repaid,commitments to give guarantees and an indication of the total for each category. This requirement is extended by the Seventh EC Directive on consolidated accounts (1983 OJ L193/1) to similar transactions entered into by subsidiaries (see art 34.13).    [Back]

Note 24   See Amendments to Schedule 6 of the Companies Act 1985: Disclosure by Companies of Dealings in Favour of Directors, A Consultative Document, DTI (October 1991). But see now FRS 8, Appendix N below.     [Back]

Note 25   Cf s 232(3).    [Back]

Note 26   Schedule 6, para 26.    [Back]

Note 27   See para 18(a) cf FRS 8.     [Back]

Note 28   Sections 343 and 344 implement article 40(7) of the Bank Accounts Directive.    [Back]

Note 29   Loans, quasi-loans and credit transactions.    [Back]

Note 30   Section 343(6).    [Back]

Note 31   House of Commons Official Report: Standing Committees (1979-80) HC 1, col 450 .     [Back]

Note 32   Section 723A.    [Back]