Small Business, Enterprise and Employment Bill (HL Bill 57)

Breach of restrictions

5 (1) A person commits an offence if the person does anything listed in
sub-paragraph (2) knowing that the interest is subject to
restrictions.

(2) 5The things are—

(a) exercising or purporting to exercise any right to dispose of
a relevant interest,

(b) exercising or purporting to exercise any right to dispose of
any right to be issued with a relevant interest, or

(c) 10voting in respect of a relevant interest (whether as holder
of the interest or as proxy) or appointing a proxy to vote in
respect of a relevant interest.

(3) A person who has a relevant interest that the person knows to be
subject to restrictions commits an offence if the person—

(a) 15knows a person to be entitled (apart from the restrictions)
to vote in respect of the interest, whether as holder or as
proxy,

(b) does not know the person to be aware of the fact that the
interest is subject to restrictions, and

(c) 20fails to notify the person of that fact.

(4) A person commits an offence if the person—

(a) either has a relevant interest that the person knows to be
subject to restrictions or is entitled to an associated right,
and

(b) 25enters in that capacity into an agreement that is void by
virtue of paragraph 3(2) or (4).

(5) References in this Schedule to an interest being “subject to
restrictions” are to an interest being subject to restrictions by
virtue of a restrictions notice under paragraph 1.

6 30If shares in a company are issued in contravention of a restriction
imposed by virtue of a restrictions notice under paragraph 1, an
offence is committed by—

(a) the company, and

(b) every officer of the company who is in default.

7 (1) 35A person guilty of an offence under paragraph 5 or 6 is liable—

(a) on conviction on indictment, to a fine;

(b) on summary conviction—

(i) in England and Wales, to a fine,

(ii) in Scotland or Northern Ireland, to a fine not
40exceeding the statutory maximum.

(2) The provisions of those paragraphs are subject to any direction
given under paragraph 4 or 8.

Relaxation of restrictions

8 (1) An application may be made to the court for an order directing
45that the relevant interest cease to be subject to restrictions.

(2) An application for an order under this paragraph may be made by
the company in question or by any person aggrieved.

(3) The court must not make an order under this paragraph unless—

(a) it is satisfied that the information required by the notice
5served under section 790D or 790E has been disclosed to
the company and no unfair advantage has accrued to any
person as a result of the earlier failure to make that
disclosure, or

(b) the relevant interest is to be transferred for valuable
10consideration and the court approves the transfer.

(4) An order under this paragraph made by virtue of sub-paragraph
(3)(b) may continue, in whole or in part, the restrictions mentioned
in paragraph 3(1)(c) and (d) so far as they relate to a right acquired
or offer made before the transfer.

(5) 15Where any restrictions continue in force under sub-paragraph
(4)—

(a) an application may be made under this paragraph for an
order directing that the relevant interest cease to be subject
to those restrictions, and

(b) 20sub-paragraph (3) does not apply in relation to the making
of such an order.

Orders for sale

9 (1) The court may order that the relevant interest subject to
restrictions be sold subject to the court’s approval as to the sale.

(2) 25An application for an order under sub-paragraph (1) may only be
made by the company in question.

(3) If the court makes an order under this paragraph, it may make
such further order relating to the sale or transfer of the interest as
it thinks fit.

(4) 30An application for an order under sub-paragraph (3) may be
made—

(a) by the company in question,

(b) by the person appointed by or in pursuance of the order to
effect the sale, or

(c) 35by any person with an interest in the relevant interest.

(5) On making an order under sub-paragraph (1) or (3), the court may
order that the applicant’s costs (in Scotland, expenses) be paid out
of the proceeds of sale.

10 (1) If a relevant interest is sold in pursuance of an order under
40paragraph 9, the proceeds of the sale, less the costs of the sale,
must be paid into court for the benefit of those who are
beneficially interested in the relevant interest.

(2) A person who is beneficially interested in the relevant interest
may apply to the court for the whole or part of those proceeds to
45be paid to that person.

(3) On such an application, the court must order the payment to the
applicant of—

(a) the whole of the proceeds of sale together with any interest
on the proceeds, or

(b) 5if another person was also beneficially interested in the
relevant interest at the time of the sale, such proportion of
the proceeds (and any interest) as the value of the
applicant’s interest bears to the total value of the relevant
interest.

(4) 10If the court has ordered under paragraph 9 that the costs (in
Scotland, expenses) of an applicant under that paragraph are to be
paid out of the proceeds of sale, the applicant is entitled to
payment of those costs (or expenses) out of the proceeds before
any person receives any part of the proceeds under this
15paragraph.

Company’s power to withdraw restrictions notice

11 A company that issues a person with a restrictions notice under
paragraph 1 must by notice withdraw the restrictions notice if—

(a) it is satisfied that there is a valid reason sufficient to justify
20the person’s failure to comply with the notice served under
section 790D or 790E,

(b) the notice served under section 790D or 790E is complied
with, or

(c) it discovers that the rights of a third party in respect of the
25relevant interest are being unfairly affected by the
restrictions notice.

Supplementary provision

12 (1) The Secretary of State may by regulations make provision about
the procedure to be followed by companies in issuing and
30withdrawing restrictions notices.

(2) The regulations may in particular make provision about—

(a) the form and content of warning notices and restrictions
notices, and the manner in which they must be given,

(b) the factors to be taken into account in deciding what
35counts as a “valid reason” sufficient to justify a person’s
failure to comply with a notice under section 790D or 790E,
and

(c) the effect of withdrawing a restrictions notice on matters
that are pending with respect to the relevant interest when
40the notice is withdrawn.

(3) Regulations under this paragraph are subject to negative
resolution procedure.

Offences for failing to comply with notices

13 (1) A person to whom a notice under section 790D or 790E is
45addressed commits an offence if the person—

(a) fails to comply with the notice, or

(b) in purported compliance with the notice—

(i) makes a statement that the person knows to be false
in a material particular, or

(ii) recklessly makes a statement that is false in a
5material particular.

(2) Where the person is a legal entity, an offence is also committed by
every officer of the entity who is in default.

(3) A person does not commit an offence under sub-paragraph (1)(a)
(or sub-paragraph (2) as it applies in relation to that sub-
10paragraph) if the person proves that the requirement to give
information was frivolous or vexatious.

(4) A person guilty of an offence under this paragraph is liable—

(a) on conviction on indictment, to imprisonment for a term
not exceeding two years or a fine (or both);

(b) 15on summary conviction—

(i) in England and Wales, to imprisonment for a term
not exceeding twelve months or to a fine (or both);

(ii) in Scotland, to imprisonment for a term not
exceeding twelve months or to a fine not exceeding
20the statutory maximum (or both);

(iii) in Northern Ireland, to imprisonment for a term
not exceeding six months or to a fine not exceeding
the statutory maximum (or both).

Offences for failing to provide information

14 (1) 25A person commits an offence if the person—

(a) fails to comply with a duty under section 790G or 790H, or

(b) in purported compliance with such a duty—

(i) makes a statement that the person knows to be false
in a material particular, or

(ii) 30recklessly makes a statement that is false in a
material particular.

(2) Where the person is a legal entity, an offence is also committed by
every officer of the entity who is in default.

(3) A person guilty of an offence under this paragraph is liable—

(a) 35on conviction on indictment, to imprisonment for a term
not exceeding two years or a fine (or both);

(b) on summary conviction—

(i) in England and Wales, to imprisonment for a term
not exceeding twelve months or to a fine (or both);

(ii) 40in Scotland, to imprisonment for a term not
exceeding twelve months or to a fine not exceeding
the statutory maximum (or both);

(iii) in Northern Ireland, to imprisonment for a term
not exceeding six months or to a fine not exceeding
45the statutory maximum (or both).”

Part 2 Related amendments

3 The Companies Act 2006 is amended as follows.

4 In section 9 (registration documents), in subsection (4), at the end of
5paragraph (c) insert “;

(d) a statement of initial significant control (see section 12A).”

5 After section 12 insert—

“12A Statement of initial significant control

(1) The statement of initial significant control required to be delivered to
10the registrar must—

(a) state whether, on incorporation, there will be anyone who
will count for the purposes of section 790M (register of
people with significant control over a company) as either a
registrable person or a registrable relevant legal entity in
15relation to the company,

(b) include the required particulars of anyone who will count as
such, and

(c) include any other matters that on incorporation will be
required (or, in the absence of an election under section
20790W, would be required) to be entered in the company’s
PSC register by virtue of section 790M.

(2) It is not necessary to include under subsection (1)(b) the date on
which someone becomes a registrable person or a registrable
relevant legal entity in relation to the company.

(3) 25If the statement includes required particulars of an individual, it
must also contain a statement that those particulars are included
with the knowledge of that individual.

(4) “Registrable person”, “registrable relevant legal entity” and
“required particulars” have the meanings given in Part 21A (see
30sections 790C and 790K).”

6 In section 120 (information as to state of register and index), in subsection
(1), for “there were no” substitute “whether there are”.

7 In section 1068 (registrar’s requirements as to form, authentication and
manner of delivery), in subsection (6A) (inserted by Schedule 5 to this Act),
35after “central register)” insert “or Chapter 4 of Part 21A (option to keep PSC
information on central register)”.

8 In section 1087 (material not available for public inspection), in subsection
(1), after paragraph (ba) insert—

“(bb) information to which sections 240 to 244 are applied by
40section 790ZE(1) (residential addresses of people with
significant control over the company) or any corresponding
provision of regulations under section 1046 (overseas
companies);

(bc) information that, by virtue of regulations under section
45790ZF or any corresponding provision of regulations under

section 1046, the registrar must omit from the material on the
register that is available for inspection;”.

9 (1) Section 1126 (consents required for certain prosecutions) is amended as
follows.

(2) 5In subsection (1), at the end insert—

• “section 1112 of this Act (general false statement offence);

• paragraph 5 or 6 of Schedule 1B to this Act (breach of certain
  restrictions imposed under that Schedule)”.

(3) In subsection (2)(a)—

(a) 10omit the “or” at the end of sub-paragraph (ii), and

(b) after sub-paragraph (iii) insert “or

(iv) section 1112 of this Act,”.

(4) In subsection (2)(b), after “section 798 of” insert “, or paragraph 5 or 6 of
Schedule 1B to,”.

(5) 15In subsection (3)(a)—

(a) omit the “or” at the end of sub-paragraph (ii), and

(b) after sub-paragraph (iii) insert “or

(iv) section 1112 of this Act,”.

(6) In subsection (3)(b), after “section 798 of” insert “, or paragraph 5 or 6 of
20Schedule 1B to,”.

10 In section 1136 (regulations about where certain company records to be kept
available for inspection), in subsection (2), after the entry for section 743
insert—

• “section 790M (register of people with significant control over a
  25company);

• section 790Y (historic PSC register);”.

11 In Schedule 8 (index of defined expressions), in the appropriate places
insert—

Section 81

SCHEDULE 4 40Abolition of share warrants to bearer

Part 1 Arrangements for conversion and cancellation of existing share warrants

Right of surrender during surrender period

1 (1) This paragraph applies in relation to a company which has issued a share
45warrant which has not been surrendered for cancellation before the day on
which section 81 comes into force (the “commencement date”).

(2) During the period of 9 months beginning with the commencement date (the
“surrender period”) the bearer of the share warrant has a right of surrender
in relation to the warrant.

(3) 50For the purposes of this Schedule, if the bearer of a share warrant has a right
of surrender in relation to the warrant, the bearer is entitled on surrendering
the warrant for cancellation—

(a) to have the bearer’s name entered as a member in the register of
members of the company concerned, or

(b) 55where an election is in force under section 128B of the Companies Act
2006 (option to keep membership information on central register) in
respect of the company, to have the bearer’s name and other
particulars delivered to the registrar, and the document containing
that information registered by the registrar and the date recorded, as
60if the information were information required to be delivered under
section 128E of that Act.

(4) A company must, as soon as reasonably practicable and in any event before
the end of the period of 2 months beginning with the day on which a share
warrant is surrendered for cancellation pursuant to a right of surrender,
65complete and have ready for delivery the certificates of the shares specified
in the warrant.

(5) If a company fails to comply with sub-paragraph (4) an offence is committed
by every officer of the company who is in default.

2 (1) A company must, as soon as reasonably practicable and in any event before
70the end of the period of 1 month beginning with the commencement date,
give notice to the bearer of a share warrant issued by the company of—

(a) the bearer’s right of surrender,

(b) the consequences of not exercising that right before the end of the
period of 7 months beginning with the commencement date (see
75paragraph 3),

(c) the fact that the right will cease to be exercisable at the end of the
surrender period, and

(d) the consequences of not exercising the right before the end of that
period (see in particular paragraphs 5, 6 and 9 to 12).

(2) 80If a company fails to comply with this paragraph an offence is committed by
every officer of the company who is in default.

Consequences of failure to surrender during first 7 months of surrender period

3 (1) This paragraph applies in relation to a share warrant of a company which
has not been surrendered by the bearer for cancellation before the end of the
period of 7 months beginning with the commencement date.

(2) 5Any transfer of, or agreement to transfer, the share warrant made after the
end of that period is void.

(3) With effect from the end of that period, all rights which are attached to the
shares specified in the warrant are suspended (including any voting rights
and any right to receive a dividend or other distribution).

(4) 10The company must pay into a separate bank account that complies with sub-
paragraph (5) any dividend or other distribution which the bearer of the
share warrant would, but for the suspension, have been entitled to receive.

(5) A bank account complies with this sub-paragraph if the balance of the
account—

(a) 15bears interest at an appropriate rate, and

(b) can be withdrawn by such notice (if any) as is appropriate.

(6) If the share warrant is subsequently surrendered in accordance with this
Schedule—

(a) the suspension ceases to have effect on surrender, and

(b) 20the suspension period amount must be paid to the bearer by the
company.

(7) The “suspension period amount”, in relation to a share warrant, is—

(a) the aggregate amount of any dividends or other distributions which
the bearer of the warrant would, but for the suspension, have been
25entitled to receive, plus

(b) any interest accrued on that amount.

Second notice of right to surrender

4 (1) A company must, before the end of the period of 8 months beginning with
the commencement date, give further notice to the bearer of a share warrant
30of the company of—

(a) the bearer’s right of surrender,

(b) the consequences of not having exercised the right of surrender
before the end of the period of 7 months beginning with the
commencement date (see paragraph 3), and

(c) 35the matters referred to in paragraph 2(1)(c) and (d).

(2) If a company fails to comply with this paragraph an offence is committed by
every officer of the company who is in default.

Expiry of right to surrender and applications for cancellation of outstanding share warrants

5 (1) This paragraph applies in relation to a company which has issued a share
40warrant which has not been surrendered for cancellation before the end of
the surrender period.

(2) The company must, as soon as reasonably practicable and in any event
before the end of the period of 3 months beginning with the day after the end

of the surrender period, apply to the court for an order (referred to in this
Schedule as a “cancellation order”) cancelling with effect from the date of the
order—

(a) the share warrant, and

(b) 5the shares specified in it.

(3) The company must give notice to the bearer of the share warrant of the fact
that an application has been made under this paragraph before the end of
the period of 14 days beginning with the day on which it is made; and the
notice must include a copy of the application.

(4) 10If a company fails to comply with sub-paragraph (2) or (3) an offence is
committed by every officer of the company who is in default.

(5) A company must, on making an application for a cancellation order,
immediately give notice to the registrar.

(6) If a company fails to comply with sub-paragraph (5) an offence is committed
15by—

(a) the company, and

(b) every officer of the company who is in default.

Cancellation orders and suspended cancellation orders

6 (1) The court must make a cancellation order in respect of a share warrant if, on
20an application under paragraph 5, it is satisfied that—

(a) the company has given notice to the bearer of the share warrant as
required by paragraphs 2 and 4, or

(b) the bearer had actual notice by other means of the matters mentioned
in paragraph 2(1).

(2) 25If, on such an application, the court is not so satisfied, it must instead make
a suspended cancellation order in respect of the share warrant.

(3) A “suspended cancellation order” is an order—

(a) requiring the company to give notice to the bearer of the share
warrant containing the information set out in sub-paragraph (4)
30before the end of the period of 5 working days beginning with the
day the order is made,

(b) providing that the bearer of the share warrant has a right of
surrender during the period of 2 months beginning with the day the
order is made (referred to in this Schedule as “the grace period”), and

(c) 35if the share warrant is not so surrendered, cancelling it and the shares
specified in it with effect from the end of the grace period.

(4) A notice required to be given by a suspended cancellation order must—

(a) inform the bearer of the share warrant of the fact that the bearer has
a right of surrender during the grace period,

(b) 40inform the bearer of the consequences of not having exercised that
right before the end of the period of 7 months beginning with the
commencement date (see paragraph 3), and

(c) explain that the share warrant will be cancelled with effect from the
end of the grace period if it is not surrendered before then.

(5) 45Where a share warrant is cancelled by an order under this paragraph, the
company concerned must, as soon as reasonably practicable—

(a) enter the cancellation date in its register of members, or

(b) where an election is in force under section 128B of the Companies Act
2006 (option to keep membership information on central register) in
respect of the company, deliver that information to the registrar as if
5it were information required to be delivered under section 128E of
that Act.

(6) In this Schedule “the cancellation date”, in relation to a share warrant, means
the day its cancellation by a cancellation order or suspended cancellation
order takes effect.

10Registration of reduction of share capital

7 (1) This paragraph applies in relation to a company if a share warrant of the
company and the shares specified in it are cancelled by a cancellation order
or a suspended cancellation order.

(2) The company must, before the end of the period of 15 days beginning with
15the cancellation date, deliver to the registrar—

(a) a copy of the order,

(b) in the case of a suspended cancellation order, a statement confirming
that the share warrant and the shares specified in it have been
cancelled by the order with effect from the cancellation date, and

(c) 20a statement of capital.

(3) The statement of capital must state with respect to the company’s share
capital as reduced by the cancellation of the share warrant and the shares
specified in it—

(a) the total number of shares of the company,

(b) 25the aggregate nominal value of those shares,

(c) the aggregate amount (if any) unpaid on those shares (whether on
account of their nominal value or by way of premium), and

(d) for each class of shares—

(i) such particulars of the rights attached to the shares as are
30prescribed by the Secretary of State under section 644(2)(c)(i)
of the Companies Act 2006,

(ii) the total number of shares of that class, and

(iii) the aggregate nominal value of shares of that class.

(4) If the company fails to comply with this paragraph an offence is committed
35by—

(a) the company, and

(b) every officer of the company who is in default.

(5) In the case of a public company, a statement of capital delivered under this
paragraph is to be treated as a document subject to the Directive disclosure
40requirements for the purposes of the Companies Act 2006 (see section 1078
of that Act).

Reduction of share capital below authorised minimum in case of public company

8 (1) This paragraph applies where the court makes a cancellation order or a
suspended cancellation order in relation to a public company and—

(a) in the case of a cancellation order, the order has the effect of bringing
the nominal value of its allotted share capital below the authorised
minimum, or

(b) in the case of a suspended cancellation order, the order may have
5that effect from the end of the grace period.

(2) The registrar must not register the cancellation order or (as the case may be)
the suspended cancellation order if it has that effect from the end of the grace
period unless—

(a) the court so directs in the order concerned, or

(b) 10the company is first re-registered as a private company.

(3) The expedited procedure for re-registration provided by section 651 of the
Companies Act 2006 applies for the purposes of this paragraph as it applies
for the purposes of section 650 of that Act.

(4) Where the court makes an order under section 651 of that Act in connection
15with a suspended cancellation order, the order under section 651 must be
conditional on the suspended cancellation order having the effect
mentioned in sub-paragraph (1)(b) from the end of the grace period.

Payment into court in connection with cancellation

9 (1) Where a share warrant is cancelled by a cancellation order or suspended
20cancellation order, the company concerned must, before the end of the
period of 14 days beginning with the cancellation date, make a payment into
court of an amount equal to—

(a) the aggregate nominal value of the shares specified in the warrant
and the whole of any premium paid on them, plus

(b) 25the suspension period amount.

(2) If a company fails to comply with sub-paragraph (1) an offence is committed
by every officer of the company who is in default.

10 (1) A person who, at the end of the period of 7 months beginning with the
commencement date, was the bearer of a share warrant which has been
30cancelled by a cancellation order or a suspended cancellation order may
apply to the court for the sum paid into court under paragraph 9(1) in
respect of the shares specified in the warrant to be paid to that person.

(2) Such an application may only be made during the period—

(a) beginning with the day which is 6 months after the cancellation date,
35and

(b) ending with the day which is 3 years after the cancellation date.

(3) The court may grant an application under sub-paragraph (1) only if it is
satisfied that there are exceptional circumstances justifying the failure of the
bearer of the share warrant to exercise the right of surrender—

(a) 40in the case of a warrant cancelled by a cancellation order, before the
end of the surrender period, or

(b) in the case of a warrant cancelled by a suspended cancellation order,
before the end of the grace period.

11 (1) This paragraph applies in relation to a company in respect of which a
45cancellation order or suspended cancellation order has been made if any of