Small Business, Enterprise and Employment Bill (HL Bill 103)

company Y broadly similar to the level of control given by
the other specified conditions;

(c) in consequence of any provision made by virtue of
paragraph (b), to change or supplement Part 2 of this
5Schedule so that circumstances specified in that Part in
which a person is to be regarded as holding an interest in
a company correspond to any of the specified conditions,
or would do so but for the extent of the interest.

(3) Regulations under this paragraph are subject to affirmative
10resolution procedure.

Section 790I

Schedule 1A Enforcement of disclosure requirements

Right to issue restrictions notice

1 (1) This paragraph applies if—

(a) a notice under section 790D or 790E is served by a
15company on a person who has a relevant interest in the
company, and

(b) the person fails to comply with that notice within the time
specified in it.

(2) The company may give the person a notice under this paragraph
20(a “warning notice”) informing the person that it is proposing to
issue the person with a notice (a “restrictions notice”) with respect
to the relevant interest.

(3) The company may issue the restrictions notice if, by the end of the
period of one month beginning with the date on which the
25warning notice was given—

(a) the person has not complied with the notice served under
section 790D or 790E, and

(b) the company has not been provided with a valid reason
sufficient to justify the person’s failure to comply with the
30notice served under that section.

(4) A restrictions notice is issued on a person by sending the notice to
the person.

(5) The effect of a restrictions notice is set out in paragraph 3.

(6) In deciding whether to issue a restrictions notice, the company
35must have regard to the effect of the notice on the rights of third
parties in respect of the relevant interest.

Relevant interests

2 (1) For the purposes of this Schedule, a person has a relevant interest
in a company if the person—

(a) 40holds any shares in the company,

(b) holds any voting rights in the company, or

(c) holds the right to appoint or remove any member of the
board of directors of the company.

(2) References to “the relevant interest” are to the shares or right in
question.

(3) Part 3 of Schedule 1A applies for the interpretation of sub-
paragraph (1) save that, where the relevant interest is by virtue of
5paragraph 19 or 20 of that Schedule, treated for the purposes of
that Schedule as held by a person other than the person who in fact
holds the interest, both the holder and the other person are to be
regarded for the purposes of this Schedule as having the relevant
interest.

10Effect of restrictions notice

3 (1) The effect of a restrictions notice issued under paragraph 1 with
respect to a relevant interest is as follows—

(a) any transfer of the interest is void,

(b) no rights are exercisable in respect of the interest,

(c) 15no shares may be issued in right of the interest or in
pursuance of an offer made to the interest-holder,

(d) except in a liquidation, no payment may be made of sums
due from the company in respect of the interest, whether
in respect of capital or otherwise.

(2) 20An agreement to transfer an interest that is subject to the
restriction in sub-paragraph (1)(a) is void.

(3) Sub-paragraph (2) does not apply to an agreement to transfer the
interest on the making of an order under paragraph 8 made by
virtue of sub-paragraph (3)(b) of that paragraph (removal of
25restrictions in case of court-approved transfer).

(4) An agreement to transfer any associated right (otherwise than in a
liquidation) is void.

(5) Sub-paragraph (4) does not apply to an agreement to transfer any
such right on the making of an order under paragraph 8 made by
30virtue of sub-paragraph (3)(b) of that paragraph (removal of
restrictions in case of court-approved transfer).

(6) An “associated right”, in relation to a relevant interest, is—

(a) a right to be issued with any shares issued in right of the
relevant interest, or

(b) 35a right to receive payment of any sums due from the
company in respect of the relevant interest.

(7) The provisions of this section are subject to any directions given
under paragraph 4.

Protection of third party rights

4 (1) 40The court may give a direction under this paragraph if, on
application by any person aggrieved, the court is satisfied that a
restrictions notice issued by the company under paragraph 1
unfairly affects the rights of third parties in respect of the relevant
interest.

(2) The direction is given for the purpose of protecting those third
party rights.

(3) The direction is a direction that certain acts will not constitute a
breach of the restrictions placed on the relevant interest by the
5restrictions notice.

(4) An order containing a direction under this paragraph—

(a) must specify the acts that will not constitute a breach of the
restrictions, and

(b) may confine the direction to cases where those acts are
10done by persons, or for purposes, described in the order.

(5) The direction may be given subject to such terms as the court
thinks fit.

Breach of restrictions

5 (1) A person commits an offence if the person does anything listed in
15sub-paragraph (2) knowing that the interest is subject to
restrictions.

(2) The things are—

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

(b) 20exercising or purporting to exercise any right to dispose of
any right to be issued with a relevant interest, or

(c) voting 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) 25A person who has a relevant interest that the person knows to be
subject to restrictions commits an offence if the person—

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

(b) 30does not know the person to be aware of the fact that the
interest is subject to restrictions, and

(c) fails 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
35subject to restrictions or is entitled to an associated right,
and

(b) enters 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
40restrictions” are to an interest being subject to restrictions by
virtue of a restrictions notice under paragraph 1.

6 If 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) 45the company, and

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

7 (1) A 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) 5in Scotland or Northern Ireland, to a fine not
exceeding 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) 10An application may be made to the court for an order directing
that 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) 15it is satisfied that the information required by the notice
served 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) 20the relevant interest is to be transferred for valuable
consideration 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
25or offer made before the transfer.

(5) Where 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
30to those restrictions, and

(b) sub-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
35restrictions be sold subject to the court’s approval as to the sale.

(2) An 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
40it thinks fit.

(4) An 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) by any person with an interest in the relevant interest.

(5) On making an order under sub-paragraph (1) or (3), the court may
5order 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
paragraph 9, the proceeds of the sale, less the costs of the sale,
must be paid into court for the benefit of those who are
10beneficially 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
be paid to that person.

(3) On such an application, the court must order the payment to the
15applicant of—

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

(b) if another person was also beneficially interested in the
relevant interest at the time of the sale, such proportion of
20the proceeds (and any interest) as the value of the
applicant’s interest bears to the total value of the relevant
interest.

(4) If the court has ordered under paragraph 9 that the costs (in
Scotland, expenses) of an applicant under that paragraph are to be
25paid 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
paragraph.

Company’s power to withdraw restrictions notice

11 30A 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
the person’s failure to comply with the notice served under
section 790D or 790E,

(b) 35the 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
relevant interest are being unfairly affected by the
restrictions notice.

40Supplementary provision

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

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

(a) 45the 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
counts as a “valid reason” sufficient to justify a person’s
failure to comply with a notice under section 790D or 790E,
and

(c) 5the effect of withdrawing a restrictions notice on matters
that are pending with respect to the relevant interest when
the notice is withdrawn.

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

10Offences for failing to comply with notices

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

(a) fails to comply with the notice, or

(b) in purported compliance with the notice—

(i) 15makes a statement that the person knows to be false
in a material particular, or

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

(2) Where the person is a legal entity, an offence is also committed by
20every 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-
paragraph) if the person proves that the requirement to give
information was frivolous or vexatious.

(4) 25A 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) on summary conviction—

(i) in England and Wales, to imprisonment for a term
30not 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
the statutory maximum (or both);

(iii) in Northern Ireland, to imprisonment for a term
35not exceeding six months or to a fine not exceeding
the statutory maximum (or both).

Offences for failing to provide information

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

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

(b) 40in purported compliance with such a duty—

(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
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) on conviction on indictment, to imprisonment for a term
5not 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) in Scotland, to imprisonment for a term not
10exceeding 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
the statutory maximum (or both).”

15Part 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
paragraph (c) insert “;

(d) 20a 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
the registrar must—

(a) 25state 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
relation to the company,

(b) 30include 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 790X,
would be required) to be entered in the company’s PSC
35register 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) If the statement includes required particulars of an individual, it
40must 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
sections 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),
5after “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
10section 790ZF(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
15790ZG 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) 20In 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) 25omit 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) 30In 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
35Schedule 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
  40company);

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

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

Section 84

10SCHEDULE 4 Abolition of share warrants to bearer

Part 1 Arrangements for conversion and cancellation of existing share warrants

Right of surrender during surrender period

1 (1) 15This paragraph applies in relation to a company which has issued a share
warrant which has not been surrendered for cancellation before the day on
which section 84 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
20in relation to the warrant.

(3) For 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
25members of the company concerned, 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, to have the bearer’s name and other
particulars delivered to the registrar, and the document containing
30that information registered by the registrar and the date recorded, as
if 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
35warrant is surrendered for cancellation pursuant to a right of surrender,
complete 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
the 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) 5the consequences of not exercising that right before the end of the
period of 7 months beginning with the commencement date (see
paragraph 3),

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

(d) 10the consequences of not exercising the right before the end of that
period (see in particular paragraphs 5, 6 and 9 to 12).

(2) If 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) 15This 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) Any transfer of, or agreement to transfer, the share warrant made after the
end of that period is void.

(3) 20With 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) The company must pay into a separate bank account that complies with sub-
paragraph (5) any dividend or other distribution which the bearer of the
25share 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) bears interest at an appropriate rate, and

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

(6) 30If the share warrant is subsequently surrendered in accordance with this
Schedule—

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

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

(7) 35The “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
entitled to receive, plus

(b) any interest accrued on that amount.

40Second 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
of the company of—

(a) the bearer’s right of surrender,