Company Law Reform Bill [HL]

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL]

Company Law Reform Bill [HL]
Part 8 — Members of a company
Chapter 3 — Prohibition on subsidiary being member of its holding company
60

Subsidiary acting as dealer in securities
134
Subsidiary acting as authorised dealer in securities
(1)
The prohibition in section 129 (prohibition on subsidiary being a member of its
holding company) does not apply where the shares are held by the subsidiary
in the ordinary course of its business as an intermediary.
5
(2)
For this purpose a person is an intermediary if he—
(a)
carries on a bona fide business of dealing in securities,
(b)
is a member of an EEA exchange (and satisfies any requirements for
recognition as a dealer in securities laid down by that exchange) or is
otherwise approved or supervised as a dealer in securities under the
10
laws of an EEA State, and
(c)
does not carry on an excluded business.
(3)
The following are excluded businesses—
(a)
a business that consists wholly or mainly in the making or managing of
investments;
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(b)
a business that consists wholly or mainly in, or is carried on wholly or
mainly for the purposes of, providing services to persons who are
connected with the person carrying on the business;
(c)
a business that consists in insurance business;
(d)
a business that consists in managing or acting as trustee in relation to a
20
pension scheme, or that is carried on by the manager or trustee of such
a scheme in connection with or for the purposes of the scheme;
(e)
a business that consists in operating or acting as trustee in relation to a
collective investment scheme, or that is carried on by the operator or
trustee of such a scheme in connection with and for the purposes of the
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scheme.
(4)
For the purposes of this section—
(a)
the question whether a person is connected with another shall be
determined in accordance with section 839 of the Income and
Corporation Taxes Act 1988 (c. 1);
30
(b)
“collective investment scheme” has the meaning given in section 236 of
the Financial Services and Markets Act 2000 (c. 8);
(c)
“EEA exchange” means a market that appears on the list drawn up by
an EEA State pursuant to Article 16 of Council Directive 93/22/EEC on
investment services in the securities field;
35
(d)
“insurance business” means business that consists in the effecting or
carrying out of contracts of insurance;
(e)
“securities” includes—
(i)
options,
(ii)
futures, and
40
(iii)
contracts for differences,

and rights or interests in those investments;
(f)
“trustee” and “the operator” in relation to a collective investment
scheme shall be construed in accordance with section 237(2) of the
Financial Services and Markets Act 2000.
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Company Law Reform Bill [HL]
Part 9 — Exercise of members’ rights
61

(5)
Expressions used in this section that are also used in the provisions regulating
activities under the Financial Services and Markets Act 2000 (c. 8) have the
same meaning here as they do in those provisions.

See section 22 of that Act, orders made under that section and Schedule 2 to
that Act.
5
135
Protection of third parties in other cases where subsidiary acting as dealer in
securities
(1)
This section applies where—
(a)
a subsidiary that is a dealer in securities has purportedly acquired
shares in its holding company in contravention of the prohibition in
10
section 129, and
(b)
a person acting in good faith has agreed, for value and without notice
of the contravention, to acquire shares in the holding company—
(i)
from the subsidiary or
(ii)
from someone who has purportedly acquired the shares after
15
their disposal by the subsidiary.
(2)
A transfer to that person of the shares mentioned in subsection (1)(a) has the
same effect as it would have had if their original acquisition by the subsidiary
had not been in contravention of the prohibition.
Supplementary
20
136
Application of provisions to companies not limited by shares

In relation to a company other than a company limited by shares, the references
in this Chapter to shares shall be read as references to the interest of its
members as such, whatever the form of that interest.
137
Application of provisions to nominees
25

The provisions of this Chapter apply to a nominee acting on behalf of a
subsidiary as to the subsidiary itself.
Part 9
Exercise of members’ rights
138
Enjoyment or exercise of members’ rights
30
(1)
All companies admitted to trading on a regulated market are deemed within
the company’s articles to have a provision to enable members to nominate
another person or persons as entitled to—
(a)
receive documents and information that the member is entitled to
receive from the company; and
35
(b)
enjoy or exercise all or any specified rights of the member in relation to
the company.
(2)
So far as is necessary to give effect to that provision, anything required or
authorised by any provision of the Companies Acts to be done by or in relation
to the member shall instead be done, or (as the case may be) may instead be
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Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 1 — Appointment and removal of directors
62

done, by or in relation to the nominated person (or each of them) as if he were
a member of the company.
(3)
This applies, in particular, to the rights conferred by—
(a)
sections 274 and 276 (right to be sent proposed written resolution);
(b)
section 275 (right to require circulation of written resolution);
5
(c)
section 286 (right to require directors to call general meeting);
(d)
section 293 (right to notice of general meetings);
(e)
section 297 (right to require circulation of a statement);
(f)
section 307 (right to appoint proxy to act at meeting);
(g)
section 321 (right to require circulation of resolution for AGM of public
10
company);
(h)
section 405 (right to be sent a copy of annual accounts and reports); and
(i)
all such other rights as a member would otherwise enjoy (in accordance
with any provision of the Companies Acts).
(4)
This section and any such provision as is mentioned in subsection (1)—
15
(a)
do not confer rights enforceable against the company by anyone other
than the member, and
(b)
do not affect the requirements for an effective transfer or other
disposition of the whole or part of a member’s interest in the company.
Part 10
20
Company directors
Chapter 1
Appointment and removal of directors
Requirement to have directors
139
Companies required to have directors
25
(1)
A private company must have at least one director.
(2)
A public company must have at least two directors.
140
Companies required to have at least one director who is a natural person
(1)
A company must have at least one director who is a natural person.
(2)
This requirement is met if the office of director is held by a natural person as a
30
corporation sole or otherwise by virtue of an office.
141
Direction requiring company to make appointment
(1)
If it appears to the Secretary of State that a company is in breach of—
section 139 (requirements as to number of directors), or
section 140 (requirement to have at least one director who is a natural
35
person),

the Secretary of State may give the company a direction under this section.

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 1 — Appointment and removal of directors
63

(2)
The direction must specify—
(a)
the statutory requirement the company appears to be in breach of,
(b)
what the company must do in order to comply with the direction, and
(c)
the period within which it must do so.

That period must be not less than one month or more than three months after
5
the date on which the direction is given.
(3)
The direction must also inform the company of the consequences of failing to
comply.
(4)
Where the company is in breach of section 139 or 140 it must comply with the
direction by—
10
(a)
making the necessary appointment or appointments, and
(b)
giving notice of them under section 152,

before the end of the period specified in the direction.
(5)
If the company has already made the necessary appointment or appointments
(or so far as it has done so), it must comply with the direction by giving notice
15
of them under section 152 before the end of the period specified in the
direction.
(6)
If a company fails to comply with a direction under this section, an offence is
committed by—
(a)
the company, and
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(b)
every officer of the company who is in default.

For this purpose a shadow director is treated as an officer of the company.
(7)
A person guilty of an offence under this section is liable on summary
conviction to a fine not exceeding level 5 on the standard scale and, for
continued contravention, a daily default fine not exceeding one-tenth of level
25
5 on the standard scale.
Appointment
142
Minimum age for appointment as director
(1)
A person may not be appointed a director of a company unless he has attained
the age of 16 years.
30
(2)
This does not affect the validity of an appointment that is not to take effect until
the person appointed attains that age.
(3)
Where the office of director of a company is held by a corporation sole, or
otherwise by virtue of another office, the appointment to that other office of a
person who has not attained the age of 16 years is not effective also to make
35
him a director of the company until he attains the age of 16 years.
(4)
An appointment made in contravention of this section is void.
(5)
Nothing in this section affects any liability of a person under any provision of
the Companies Acts if he—
(a)
purports to act as director or
40
(b)
acts as a shadow director,

although he could not, by virtue of this section, be validly appointed as a
director.

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 1 — Appointment and removal of directors
64

(6)
This section has effect subject to section 143 (power to provide for exceptions
from minimum age requirement).
143
Power to provide for exceptions from minimum age requirement
(1)
The Secretary of State may make provision by regulations for cases in which a
person who has not attained the age of 16 years may be appointed a director of
5
a company.
(2)
The regulations must specify the circumstances in which, and any conditions
subject to which, the appointment may be made.
(3)
If the specified circumstances cease to obtain, or any specified conditions cease
to be met, a person who was appointed by virtue of the regulations and who
10
has not since attained the age of 16 years ceases to hold office.
(4)
The regulations may make different provision for different parts of the United
Kingdom.

This is without prejudice to the general power to make different provision for
different cases.
15
(5)
Regulations under this section are subject to negative resolution procedure.
144
Existing under-age directors
(1)
This section applies where—
(a)
a person appointed a director of a company before section 142
(minimum age for appointment as director) comes into force has not
20
attained the age of 16 when that section comes into force, or
(b)
the office of director of a company is held by a corporation sole, or
otherwise by virtue of another office, and the person appointed to that
other office has not attained the age of 16 years when that section comes
into force,
25

and the case is not one excepted from that section by regulations under section
143.
(2)
That person ceases to be a director on section 142 coming into force.
(3)
The company must make the necessary consequential alteration in its register
of directors but need not give notice to the registrar of the change.
30
(4)
If it appears to the registrar (from other information) that a person has ceased
by virtue of this section to be a director of a company, the registrar shall note
that fact on the register.
145
Appointment of directors of public company to be voted on individually
(1)
At a general meeting of a public company a motion for the appointment of two
35
or more persons as directors of the company by a single resolution must not be
made unless a resolution that it should be so made has first been agreed to by
the meeting without any vote being given against it.
(2)
A resolution moved in contravention of this section is void, whether or not its
being so moved was objected to at the time.
40

But where a resolution so moved is passed, no provision for the automatic
reappointment of retiring directors in default of another appointment applies.

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 1 — Appointment and removal of directors
65

(3)
For the purposes of this section a motion for approving a person’s
appointment, or for nominating a person for appointment, is treated as a
motion for his appointment.
(4)
Nothing in this section applies to a resolution altering the company’s articles.
146
Validity of acts of directors
5
(1)
The acts of a person acting as a director are valid notwithstanding that it is
afterwards discovered—
(a)
that there was a defect in his appointment;
(b)
that he was disqualified from holding office;
(c)
that he had ceased to hold office;
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(d)
that he was not entitled to vote on the matter in question.
(2)
This applies even if the resolution for his appointment is void under section
145 (appointment of directors of public company to be voted on individually).
Register of directors, etc
147
Register of directors
15
(1)
Every company must keep a register of its directors.
(2)
The register—
(a)
must contain the required particulars (see sections 148 to 151) of each
person who is a director of the company, and
(b)
must be kept available for inspection at the company’s registered office.
20
(3)
The register must be open to the inspection—
(a)
of any member of the company without charge, and
(b)
of any other person on payment of such fee as may be prescribed.
(4)
If default is made in complying with subsection (1) or (2), or if an inspection
required under this section is refused, an offence is committed by—
25
(a)
the company, and
(b)
every officer of the company who is in default.
(5)
A person guilty of an offence under this section is liable on summary
conviction to a fine not exceeding level 5 on the standard scale and, for
continued contravention, a daily default fine not exceeding one-tenth of level
30
5 on the standard scale.
(6)
In the case of a refusal of inspection of the register, the court may by order
compel an immediate inspection of it.
148
Particulars of directors to be registered: individuals
(1)
A company’s register of directors must contain the following particulars in the
35
case of an individual—
(a)
name and any former name;
(b)
a service address;
(c)
the country or state (or part of the United Kingdom) in which he is
usually resident;
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Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 1 — Appointment and removal of directors
66

(d)
nationality;
(e)
business occupation (if any);
(f)
date of birth.
(2)
For the purposes of this section “name” means a person’s Christian name (or
other forename) and surname, except that in the case of—
5
(a)
a peer, or
(b)
an individual usually known by a title,

the title may be stated instead of his Christian name (or other forename) and
surname or in addition to either or both of them.
(3)
For the purposes of this section a “former name” means a name by which the
10
individual was formerly known for business purposes.

Where a person is or was formerly known by more than one such name, each
of them must be stated.
(4)
It is not necessary for the register to contain particulars of a former name in the
following cases—
15
(a)
in the case of a peer or an individual normally known by a British title,
where the name is one by which the person was known previous to the
adoption of or succession to the title;
(b)
in the case of any person, where the former name—
(i)
was changed or disused before the person attained the age of 16
20
years, or
(ii)
has been changed or disused for 20 years or more.
(5)
A person’s service address may be stated to be “The company’s registered
office”.
149
Particulars of directors to be registered: corporate directors and firms
25

A company’s register of directors must contain the following particulars in the
case of a body corporate, or a firm that is a legal person under the law by which
it is governed—
(a)
corporate or firm name;
(b)
registered or principal office;
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(c)
in the case of an EEA company to which the First Company Law
Directive applies, particulars of—
(i)
the register in which the company file mentioned in Article 3 of
that Directive is kept (including details of the relevant state),
and
35
(ii)
the registration number in that register;
(d)
in any other case, particulars of—
(i)
the legal form of the company or firm and the law by which it is
governed, and
(ii)
if applicable, the register in which it is entered (including details
40
of the state) and its registration number in that register.
150
Register of directors’ residential addresses
(1)
Every company must keep a register of directors’ residential addresses.