The Companies Act 1985 (Bank Accounts) Regulations 1991

• “Financial fixed assets” means loans and advances and securities held as fixed assets; participating interests and shareholdings in group undertakings shall be regarded as financial fixed assets;

• “Fungible assets” means assets of any description which are substantially indistinguishable one from another;

• “Lease” includes an agreement for a lease;

• “Listed security” means a security listed on a recognised stock exchange, or on any stock exchange of repute outside Great Britain and the expression “unlisted security” shall be construed accordingly;

• “Long lease” means a lease in the case of which the portion of the term for which it was granted remaining unexpired at the end of the financial year is not less than 50 years;

• “Repayable on demand”, in connection with deposits, loans or advances, means those amounts which can at any time be withdrawn or demanded without notice or for which a maturity or period of notice of not more than 24 hours or one working day has been agreed;

• “Sale and repurchase transaction” means a transaction which involves the transfer by a credit institution or customer (“the transferor”) to another credit institution or customer (“the transferee”) of assets subject to an agreement that the same assets, or (in the case of fungible assets) equivalent assets, will subsequently be transferred back to the transferor at a specified price on a date specified or to be specified by the transferor; but the following shall not be regarded as sale and repurchase transactions: forward exchange transactions, options, transactions involving the issue of debt securities with a commitment to repurchase all or part of the issue before maturity or any similar transactions;

• “Sale and option to resell transaction” means a transaction which involves the transfer by a credit institution or customer (“the transferor”) to another credit institution or customer

• (“the transferee”) of assets subject to an agreement that the transferee is entitled to require the subsequent transfer of the same assets, or (in the case of fungible assets) equivalent assets, back to the transferor at the purchase price or another price agreed in advance on a date specified or to be specified; and

• “Short lease” means a lease which is not a long lease.

Loans

83

For the purposes of this Part of this Schedule a loan or advance (including a liability comprising a loan or advance) is treated as falling due for repayment, and an instalment of a loan or advance is treated as falling due for payment, on the earliest date on which the lender could require repayment or (as the case may be) payment, if he exercised all options and rights available to him.

Materiality

84

For the purposes of this Part of this Schedule amounts which in the particular context of any provision of this Part are not material may be disregarded for the purposes of that provision.

Provisions

85

For the purposes of this Part of this Schedule and its interpretation:

• (a) references in this Part to provisions for depreciation or diminution in value of assets are to any amount written off by way of providing for depreciation or diminution in value of assets;

• (b) any reference in the profit and loss account formats or the notes thereto set out in Section B of this Part to the depreciation of, or amounts written off, assets of any description is to any provision for depreciation or diminution in value of assets of that description; and

• (c) references in this Part to provisions for liabilities or charges are to any amount retained as reasonably necessary for the purpose of providing for any liability or loss which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise.

Scots land tenure

86

In the application of this Part of this Schedule to Scotland, “land of freehold tenure” means land in respect of which the company is the proprietor of the dominium utile or, in the case of land not held on feudal tenure, is the owner; “land of leasehold tenure” means land of which the company is the tenant under a lease; and the reference to ground-rents, rates and other outgoings includes feu-duty and ground annual.

Staff costs

87

For the purposes of this Part of this Schedule and its interpretation:

• (a) “Social security costs” means any contributions by the company to any state social security or pension scheme, fund or arrangement;

• (b) “Pension costs” includes any other contributions by the company for the purposes of any pension scheme established for the purpose of providing pensions for persons employed by the company, any sums set aside for that purpose and any amounts paid by the company in respect of pensions without first being so set aside; and

• (c) any amount stated in respect of either of the above items or in respect of the item “wages and salaries” in the company’s profit and loss account shall be determined by reference to payments made or costs incurred in respect of all persons employed by the company during the financial year who are taken into account in determining the relevant annual number for the purposes of paragraph 77(1)(a).

PART II — CONSOLIDATED ACCOUNTS

Undertakings to be included in consolidation

1

• (1) An undertaking (other than a credit institution) whose activities are a direct extension of or ancillary to banking business shall not be excluded from consolidation under section 229(4) (exclusion of undertakings whose activities are different from those of the undertakings consolidated).

• (2) For the purposes of this paragraph “banking” means the carrying on of a deposit taking business within the meaning of the Banking Act 1987.

General application of provisions applicable to individual accounts

2

• (1) In paragraph 1 of Schedule 4A (application to group accounts of provisions applicable to Schedule 1Part IIindividual accounts), the reference in sub-paragraph (1) to the provisions of Schedule 4 shall be construed as a reference to the provisions of Part I of this Schedule; and accordingly:

• (a) the reference in sub-paragraph (2) to paragraph 59 of Schedule 4 shall be construed as a reference to note (20) on the balance sheet format set out in Section B of Chapter I of Part I of this Schedule and paragraphs 66(4) and 67 of Part I of this Schedule; and

• (b) sub-paragraph (3) shall be omitted.

• (2) The general application of the provisions of Part I of this Schedule in place of those of Schedule 4 is subject to the following provisions.

Minority interests and associated undertakings

3

• (1) The provisions of this paragraph shall have effect so as to adapt paragraphs 17 and 21 of Schedule 4A (which require items in respect of “Minority interests” and associated undertakings to be added to the formats set out in Schedule 4) to the formats prescribed by Part 1 of this Schedule.

• (2) The item required to be added to the balance sheet format by paragraph 17(2) shall be added either between Liabilities items 7 and 8 or after Liabilities item 12.

• (3) The item required to be added to the profit and loss account format by paragraph 17(3) shall be added:

• (a) in the case of format 1, between items 17 and 18; or

• (b) in the case of format 2, between items A11 and A12 or between items B9 and B10.

• (4) The item required to be added to the profit and loss account format by paragraph 17(4) shall be added:

• (a) in the case of format 1, between items 22 and 23; or

• (b) in the case of format 2, between items A14 and A15 or between items B11 and B12.

• (5) Paragraph 17(5) shall not apply but for the purposes of paragraph 3(3) of Part I of this Schedule (power to combine items) the additional items required by the foregoing provisions of this paragraph shall be treated as items to which a letter is assigned.

• (6) Paragraph 21(2) shall apply with respect to a balance sheet prepared under this Schedule as if it required Assets item 7 (Participating interests) in the balance sheet format to be replaced by the two replacement items referred to in that paragraph.

• (7) Paragraph 21(3) shall not apply, but the following items in the profit and loss account formats, namely:

• (a) format 1 item 3(b) (Income from participating interests)

• (b) format 2 item B2(b) (Income from participating interests),

• shall be replaced by the following two replacement items: “Income from participating interests other than associated undertakings”, which shall be shown at position 3(b) in format 1 and position B2(b) in format 2; and “Income from associated undertakings”, which shall be shown at an appropriate position.

4

Paragraphs 18 and 22(1) of Schedule 4A shall apply as if, in substitution for the references therein to paragraphs 17 to 19 and 21 of Schedule 4, they referred to paragraphs 24 to 26 and 28 of Part I of this Schedule.

Foreign currency translation

5

Any difference between:

• (a) the amount included in the consolidated accounts for the previous financial year with respect to any undertaking included in the consolidation or the group’s interest in any associated undertaking, together with the amount of any transactions undertaken to cover any such interest; and

• (b) the opening amount for the financial year in respect of those undertakings and in respect of any such transactions

• arising as a result of the application of paragraph 45 of Part I of this Schedule may be credited to (where (a) is less than (b)), or deducted from (where (a) is greater than (b)), (as the case may be) consolidated reserves.

6

Any income and expenditure of undertakings included in the consolidation and associated undertakings in a foreign currency may be translated for the purposes of the consolidated accounts at the average rates of exchange prevailing during the financial year.

Information as to undertaking in which shares held as a result of financial assistance operation

7

• (1) The following provisions apply where the parent company of a banking group has a subsidiary undertaking which:

• (a) is a credit institution of which shares are held as a result of a financial assistance operation with a view to its reorganisation or rescue; and

• (b) is excluded from consolidation under section 229(3)(c) (interest held with a view to resale).

• (2) Information as to the nature and terms of the operations shall be given in a note to the group accounts and there shall be appended to the copy of the group accounts delivered to the registrar in accordance with section 242 a copy of the undertaking’s latest individual accounts and, if it is a parent undertaking, its latest group accounts.

• If the accounts appended are required by law to be audited, a copy of the auditors' report shall also be appended.

• (3) If any document required to be appended is in a language other than English, the directors shall annex a translation of it into English, certified in the prescribed manner to be a correct translation.

• (4) The above requirements are subject to the following qualifications:

• (a) an undertaking is not required to prepare for the purposes of this paragraph accounts which would not otherwise be prepared, and if no accounts satisfying the above requirements are prepared none need be appended;

• (b) the accounts of an undertaking need not be appended if they would not otherwise be required to be published, or made available for public inspection, anywhere in the world, but in that case the reason for not appending the accounts shall be stated in a note to the consolidated accounts.

• (5) Where a copy of an undertaking’s accounts is required to be appended to the copy of the group accounts delivered to the registrar, that fact shall be stated in a note to the group accounts.

• (6) Sub-sections (2) to (4) of section 242 (penalties, c. in case of default) apply in relation to the requirements of this paragraph as regards the delivery of documents to the registrar as they apply in relation to the requirements of sub-section (1) of that section.

PART III — ADDITIONAL DISCLOSURE: RELATED UNDERTAKINGS

1

• (1) Where accounts are prepared in accordance with the special provisions of this Schedule relating to banking companies or groups:

• (a) the information required by paragraphs 8 and 24 of Schedule 5 (information about significant holdings of the company in undertakings other than subsidiary undertakings) need only be given in respect of undertakings (otherwise falling within the class of undertakings in respect of which disclosure is required) in which the company has a significant holding amounting to 20 per cent. or more of the nominal value of the shares in the undertaking; and

• (b) the information required by paragraph 27 of Schedule 5 (information about significant holdings of the group in undertakings other than subsidiary undertakings) need only be given in respect of undertakings (otherwise falling within the class of undertakings in respect of which disclosure is required) in which the group has a significant holding amounting to 20 per cent. or more of the nominal value of the shares in the undertaking.

In addition any information required by those paragraphs may be omitted if it is not material.

• (2) Paragraph 13(3) and (4) of Schedule 5 shall apply mutatis mutandis for the purposes of subparagraph (1)(a) above and paragraph 32(3) and (4) of that Schedule shall apply mutatis mutandis for the purposes of sub-paragraph (1)(b) above.

SCHEDULE 2 — FURTHER AMENDMENTS TO PART VII OF THE 1985 ACT

1

Section 254(3) of the 1985 Act[^f00007] is amended by the insertion of the words “if the company is a banking company or the parent company of a banking group or” after the word “apply” therein.

2

Section 260(6)[^f00008] of the 1985 Act is amended by the insertion of the words “and in Chapter I of Part I of Schedule 9” after the words “Schedule 4”.

3

The index of defined expressions set out in section 262A of the 1985 Act[^f00009] is amended:

• (a) by the substitution, against the entries relating to the following expressions, of the following new references in place of those already existing:

• (i) “banking group”: section 255A(4); and

• (ii) “insurance group”: section 255A(5);

• (b) by the substitution of the words “Schedule 9A” for the words “Schedule 9” where they occur in the index;

• (c) by the insertion of the following entries into the index at their appropriate position:

“banking activities (in Schedule 9)	paragraph 82 of Part I of that Schedule”
“banking transactions (in Schedule 9)	paragraph 82 of Part I of that Schedule”
“financial fixed assets (in Schedule 9)	paragraph 82 of Part I of that Schedule”
“listed security (in Schedule 9)	paragraph 82 of Part I of that Schedule”
“repayable on demand (in Schedule 9)	paragraph 82 of Part I of that Schedule”
“sale and repurchase transaction (in Schedule 9)	paragraph 82 of Part I of that Schedule”
“sale and option to resell transaction (in Schedule 9)	paragraph 82 of Part I of that Schedule”

• (d) by the insertion of the following entries in substitution for the existing entries dealing with the same subject matter:

“historical cost accounting rules
– in Schedule 4	Paragraph 29 of that Schedule
– in Schedule 9	Paragraph 39 of Part I of of that Schedule”
“pension costs
– in Schedule 4	Paragraph 94(2) and (3) of that Schedule
– in Schedule 9	Paragraph 87(b) and (c) of I of of that Schedule”
“social security costs
– in Schedule 4	Paragraph 94(1) and (3) of that Schedule
– in Schedule 9	Paragraph 87(a) and (c) of I of of that Schedule”

• and by the: insertion of the following words at the appropriate place in the entry relating to “land of freehold tenure and land of leasehold tenure” : – in Schedule 9paragraph 86 of Part I of that Schedule ; insertion of the following words at the appropriate place in the entry relating to “lease, long lease and short lease”: – in Schedule 9paragraph 82 of Part I of that Schedule ; insertion of the following words at the appropriate place in the entry relating to “provision”: – in Schedule 9paragraph 85 of Part I of that Schedule .

4

Parts I and II of Schedule 9 to the 1985 Act, formed into a new Schedule by Regulation 5 of these Regulations and numbered Schedule 9A, shall be amended as follows:

• (a) in paragraph 17(2) of Part I, the words from “except in so far as” to the end shall be omitted;

• (b) paragraph 27 of Part I is repealed;

• (c) in paragraph 28A[^f00010] of Part I, the words “27 or” shall be omitted;

• (d) the words “Banking or” shall be omitted from the heading to Part II;

• (e) the following shall be substituted for paragraph 1 of Part II:

(1) An undertaking (other than one carrying on insurance business) whose activities are a direct extension of or ancillary to insurance business shall not be excluded from consolidation under section 229(4) (exclusion of undertakings whose activities are different from those of the undertakings consolidated).

• (f) in paragraph 5 of Part II, the word “an” shall be substituted for the words “a banking or” in sub-paragraph (1) and the words “27 or” in that sub-paragraph and “27(4)” in subparagraph (2) shall be omitted; and

• (g) paragraph 6 of Part II is repealed.

5

Schedule 10 to the 1985 Act (Directors' Report where Accounts Prepared in Accordance with Special Provisions for Banking or Insurance Companies or Groups)[^f00011] shall be amended as follows:

• (a) the words “banking or” shall be omitted from the heading to the Schedule and also from paragraphs 1(1), 2(1) and 3(1) where they occur; and

• (b) the words “(other than banking …Schedule 9)” in paragraph 2(2) shall be omitted.

SCHEDULE 3 — (CONSEQUENTIAL) AMENDMENTS OF THE COMPANIES ACT 1985

1

• (1) Schedule 11 (Modifications of Part VIII where Company’s Accounts Prepared in Accordance with Special Provisions for Banking or Insurance Companies)[^f00012] to the 1985 Act is amended as follows.

• (2) The following paragraphs are inserted before paragraph 1 of the Schedule:

(1) Paragraphs 2 to 6 below apply where a company has prepared accounts in accordance with the special provisions of Part VII relating to banking companies and paragraphs 7 to 13 below apply where a company has prepared accounts in accordance with the special provisions of Part VII relating to insurance companies. Modifications where accounts prepared in accordance with special provisions for banking companies (2) Section 264(2) shall apply as if the reference to paragraph 89 of Schedule 4 therein was a reference to paragraph 85(c) of Part I of Schedule 9. (3) Section 269 shall apply as if: (a) there were substituted for the words “are shown as an asset” in sub-section (1) the words “are included as an asset”; and (b) the reference to paragraph 20 of Schedule 4 in sub-section (2)(b) was to paragraph 27 of Part I of Schedule 9. (4) Sections 270(2) and 275 shall apply as if the references therein to paragraphs 88 and 89 of Schedule 4 were to paragraph 85 of Part I of Schedule 9. (5) Sections 272 and 273 shall apply as if in section 272(3) there were substituted, for the references to section 226 and Schedule 4, references to section 255 and Part I of Schedule 9. (6) Section 276 shall apply as if the references to paragraphs 12(a) and 34(3)(a) (d) of Schedule 4 were to paragraphs 19(a) and 44(3)(a)[^f00013] of Schedule 9.

• (3) The present paragraphs 1 to 7 shall be renumbered 7 to 13, shall be preceded by the heading

and shall be amended as follows:

• (a) the words “Schedule 9A” shall be substituted for the words “Schedule 9” wherever they occur; and

• (b) the words “27 or” shall be omitted in present paragraphs 5(a) and 6(b).

2

In Schedule 22 (provisions applying to unregistered companies), in the entry relating to Part VII, in column 1, for “Schedules 4 to 8” substitute “Schedules 4 to 9” and for “Schedule 9” substitute “Schedule 9A”.

Signed

John Redwood — Minister of State for Corporate Affairs, — 1st December 1991

Explanatory note

(This note is not part of the Regulations)

1 These Regulations implement Council Directive 86/635/EEC Official Journal N.O. L372 of 31.12.1986, pages 1–17 on the Annual Accounts and Consolidated Accounts of Banks and Other Financial Institutions, in so far as that Directive is applicable to bodies corporate to which Part VII of the Companies Act l985 (“the l985 Act”) applies.

2 The Regulations firstly amend Schedule 9 to the l985 Act, which makes special provision for the accounts of banking and insurance companies and groups. The existing Parts I and II of that Schedule are formed by the Regulations into a new Schedule 9A (Regulation 5(l)) and confined in their operation to insurance companies and groups. The existing Part III of Schedule 9 is repealed (Regulation 5(2)). New Parts I to III are inserted into Schedule 9 by Regulation 5(4) and are set out in Parts I to III of Schedule 1 to the Regulations. The new Part I lays down rules governing the content of the individual accounts of banking companies, including prescribed formats to be followed, the valuation rules to be applied and the disclosures to be made in the notes to the accounts. The new Part II adapts the general rules of Part VII of the l985 Act with respect to the consolidated accounts of a company to the special circumstances of banking groups. The new Part III makes special provision with respect to the disclosures required of banking companies and the parent companies of banking groups in respect of undertakings in which they, or members of their group of companies, have invested.

3 Regulation 3 substitutes new sections 255 to 255B for the existing sections of those numbers in Part VII of the 1985 Act. These sections introduce the new provisions of Schedule 9 and the new Schedule 9A. Inter alia , they define which companies are to prepare group accounts under the special provisions with respect to banking groups.

4 Regulation 4 also amends section 255C of the 1985 Act, which sets out special rules on the content of the directors' report and presently applies to banking and insurance companies and groups, so that for the future it will only apply to insurance companies and groups.

5 Regulations 6 to 8 make further and consequential amendments.

6 Regulation 9 sets out a transitional provision whereby a company may prepare accounts in accordance with the unamended Part VII, as that Part applies to banking companies and groups, rather than under the amended provisions for a financial year commencing prior to 23rd December 1992.

Footnotes

[^f00001]: 1985 c. 6; section 257 was inserted by section 20 of the Companies Act 1989 (1989 c. 40).

[^f00002]: Sections 255 to 255B were inserted into the 1985 Act by section 18(1) of the 1989 Act.

[^f00003]: Section 255C was inserted into the 1985 Act by section 18(1) of the 1989 Act.

[^f00004]: Schedule 9 to the 1985 Act has been amended by the Financial Services Act 1986 (c. 60) and by section 18 of, and Schedule 7 to, the 1989 Act.

[^f00005]: 1967 c. 29.

[^f00006]: 1987 c. 22.

[^f00007]: Section 254(3) was inserted into the 1985 Act by section 17 of the 1989 Act.

[^f00008]: Section 260 was inserted into the 1985 Act by section 22 of the 1989 Act.

[^f00009]: Section 262A was inserted into the 1985 Act by section 22 of the 1989 Act.

[^f00010]: Paragraph 28A was inserted into Schedule 9 to the 1985 Act by section 18 of, and paragraph 10 of Part I of Schedule 7 to, the 1989 Act.

[^f00011]: A new Schedule 10 to the 1985 Act was substituted by section 18(5) of, and Schedule 8 to, the 1989 Act.

[^f00012]: Schedule 11 to the 1985 Act has been amended by paragraph 21 of Schedule 10 to, and section 23 of, the 1989 Act.

[^f00013]: Reference inserted by section 23 of, and paragraph 7 of Schedule 10 to, the 1989 Act.