1433. The CLR sought to draw out the basis on which criminal liability for a breach of Companies Act requirements is allocated under existing legislation to companies and to officers of companies. It stated in its final report that a reformed Companies Act must be underpinned by effective and proportionate sanctions and enforcement.
1434. The key changes in the Act are:
• refinements to the “officer in default” provisions to make it clearer which individuals in which circumstances may be liable for a breach; and
• removal of criminal liability from the company itself in certain circumstances.
1435. The general principle adopted as to whether a company should be liable for a breach of requirements of the Companies Acts is that where the only victims of the offence are the company or its members, the company should not be liable for the offence. On the other hand, where other persons may be victims of the offence, then the company should be potentially liable for a breach, whether or not the offence may also harm the company or its members.
Section 1121: Liability of officer in default
1436. This section specifies which persons may be liable as an officer of a company for an offence committed by the company under the Act (or the other Companies Acts). It only applies where another provision expressly states that an offence is committed by every officer of a company who is in default.
1437. An “officer” of a company is defined as including a director, manager or (company) secretary, and any person who is to be treated as an officer of the company for the purposes of the provisions in question. An officer is liable for an offence when he is “in default”, meaning he authorises or permits, participates in, or fails to take all reasonable steps to prevent the offence being committed.
Section 1122: Liability of company as officer in default
1438. Under this provision, where a company is an officer of another company, liability for an offence can be fixed upon the company as an officer in default only if one of its officers is in default.
Section 1123: Application to bodies other than companies
1439. This clause provides that section 1121 applies to persons in bodies other than companies where their role is equivalent to that of an officer of a company. It makes specific provision for bodies corporate, partnerships and unincorporated bodies.
Section 1124: Amendments of the Companies Act 1985
Schedule 3: Amendments of remaining provisions of the Companies Act 1985 relating to offences
1440. Section 1124 introduces Schedule 3, which contains amendments to certain provisions relating to offences which remain in Parts 14 and 15 of the 1985 Act.
1441. Many of these amendments are necessary due to the repeal by the Act of Schedule 24 to the 1985 Act. Schedule 24 set out the level of punishment for offences under the 1985 Act. The provisions in Parts 14 and 15 are amended so that the applicable punishments are now included alongside the description of the offence instead of in Schedule 24.
1442. Schedule 3 also makes amendments to the offences provisions remaining in Parts 14 and 15 of the 1985 Act to reflect the (non-textual) changes made to that Act by the Criminal Justice Act 2003. Section 282 of the Criminal Justice Act increases from 6 months to 12 months the maximum term of imprisonment to which a person is liable on summary conviction of an offence triable either way, and section 154(1) of that Act gives power to magistrates to impose a 12 month term of imprisonment. The increased penalties only apply in England and Wales; in Scotland and Northern Ireland the maximum term of imprisonment that may be imposed on summary conviction remains 6 months. When the Act received Royal Assent, neither section 282 nor section 154(1) of the Criminal Justice Act 2003 had come into force (which is the reason for the transitory provision in section 1131).
1443. A number of the amendments make reference to “the statutory maximum fine”. This was set at £5,000 at the time the Act received Royal Assent.
1444. Schedule 3 makes only one substantive change to the offence provisions in Parts 14 and 15. This is to include a daily default fine, of one-fiftieth of the statutory maximum, for continued contravention of section 444(3) (failure to provide information about interests in shares).
Section 1125: Meaning of “daily default fine”
1445. This section defines “daily default fine”. It replaces provision currently in section 730(4) of the 1985 Act.
Section 1126: Consents required for certain prosecutions
1446. This section provides that certain proceedings can only be brought with the consent of specified persons. It replaces section 732(1) and (2) of the 1985 Act.
Section 1127: Summary proceedings: venue
1447. This section restates section 731(1) of the 1985 Act. It specifies the possible venues for summary proceedings for any breach of Companies Acts requirements. For a body corporate the venue may be any place at which the body corporate has a place of business, and for any other person, it may be at any place that the person is.
Section 1128: Summary proceedings: time limit for proceedings
1448. This section restates section 731(2) to (4) of the 1985 Act. It sets out time limits for summary proceedings. The prosecution must be commenced within three years of the offence being committed, and within one year of the prosecuting authorities receiving sufficient evidence to justify the prosecution.
Section 1129: Legal professional privilege
1449. This section restates section 732(3) of the 1985 Act and applies its provisions to all offences prosecuted under the Companies Acts, rather than just those instituted by the Director of Public Prosecutions or the Secretary of State. It provides that the Companies Acts provisions on offences are not to be read as requiring any person to disclose information that is protected by legal professional privilege.
Section 1130: Proceedings against unincorporated bodies
1450. This section restates section 734(1) to (4) of the 1985 Act. It provides for proceedings for offences under the Companies Acts committed by unincorporated bodies to be brought against such bodies as if they were corporate bodies.
Section 1131: Imprisonment on summary conviction in England and Wales: transitory provision
1451. This section provides for the period before the commencement of section 154(1) of the Criminal Justice Act 2003, which makes new provision about the powers of magistrates’ courts in England and Wales to impose sentences of imprisonment on summary conviction. For offences committed before section 154(1) is brought into force, the maximum term of imprisonment in England and Wales for a person guilty of an offence on summary conviction under the Companies Acts is to be 6 months (as it is at present) instead of 12 months.
Section 1132: Production and inspection of documents where offence suspected
1452. This section restates section 721 of the 1985. It makes provision about orders for the production of documents where there is reasonable cause to believe that an offence has been committed.
Section 1133: Transitional provision
1453. This section provides that this Part of the Act (with the exception of section 1132) does not apply to offences committed before the commencement of the provision relevant to the offence.