§ THE MINISTER OF STATE, BOARD OF TRADE (LORD DERWENT)
My Lords, these Regulations, if your Lordships approve them, will determine the content of the accounts which companies that advertise for deposits from the public will prepare for the Registrar of Companies, the Board of Trade and the companies' depositors and prospective depositors. The accounts are required so that all concerned shall have ready access to material which will enable them to assess the state of a company's financial affairs and, if they are prospective or present depositors, to decide whether the company is one with which they can in their judgment safely entrust or continue to entrust their money. If the accounts are to serve this purpose they must be up to date and they must be informative. The Act itself ensures that the accounts will be up to date by providing that in general they shall be published within three months of the end of the period to which they relate, and by providing that the annual audited accounts shall be supported by interim accounts covering a period of six months. These regulations which are now before your Lordships seek to ensure that the accounts will be informative.
The Companies Act sets out, in some ten sections and in the Eighth Schedule the information which directors are required to include in the accounts they lay before their companies in general meeting. Nearly the whole of this information is as relevant to the interests of the depositors with a company as it is to the company's members. The Regulations therefore begin by applying to the accounts required under the Protection of Depositors Act virtually the whole of the accounting provisions of the Companies Act. I shall deal only with a few of the details, but if any noble Lord has any questions I shall try to answer them afterwards.
The provisions are applied with certain modifications and exceptions. They do little more than is made necessary by the essential differences between the accounts required by the two Acts. Where the Companies Act refers to a financial year the Regulations refer to the period to which the accounts relate; where the 1036 Companies Act requires accounts for one year to give for purposes of comparison figures for the previous year the Regulations, as they apply to interim accounts covering six months as well as to annual accounts, permit the figures given for comparison in interim accounts to be either those from the last annual accounts or those from the last interim accounts.
I now come to the most important part of these Regulations. The fact that they apply to a particular class of companies—those that seek deposits—makes it both possible and desirable to provide for the accounts to contain information additional to that required by the Companies Act. This is effected by Regulations 2 and 3 and Schedule 2. The first requirement in Part I of the Schedule is that a company should give information about the amount of money deposited with it at the balance sheet date, the periods after which the deposits become repayable, and the amount payable as interest to depositors in the period to which the accounts relate.
The second requirement is for information about those of a company's assets which derive from what in these Regulations are called instalment credit agreements. That is, hire-purchase agreements, credit sale agreements, and loans repayable in instalments at intervals not exceeding three months. A company is required to state the amount receivable at the balance sheet date under instalment credit agreements it has entered into or has had assigned to it. In order that the amount so stated should give as accurate an indication as possible of the company's position, it is to be stated after provision has been made for bad and doubtful debts; and for the same reason the company must show what part of it, if any, is revenue which at the balance sheet date had not then been earned.
Regulation 3 and Part 2 of Schedule 2 apply only to companies a substantial part of whose activities consists of dealing in property. Regulation 5 provides for certain statements from directors. The first two of these statements about the main activities of the company during the period covered by the accounts, are relevant to Section 12 of the Act which places on a company obligations towards its depositors if, 1037 after describing one activity in its advertisements for deposits, it thereafter carries on some other activity. The third statement, about the value at which the current assets shown in the balance sheet could be realised in the ordinary course of business, is a stricter version of a similar provision in the Companies Act. Finally, I would mention Regulation 6 and Schedule 3 which require from the auditors a report on much the same lines as one made under the Companies Act. I beg to move that these Regulations be approved.
§ Moved, That the Protection of Depositors (Accounts) Regulations, 1963, be approved.—(Lord Derwent.)
§ On Question, Motion agreed to.