House of Commons - Amendments

Company Law Reform Bill [Lords] *- continued*	House of Commons

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Notice to registrar of cancellation of shares

Margaret Hodge

NC212

To move the following Clause:—

‘(1) If on the purchase by a company of any of its own shares in accordance with this Part—

(a) section (Treasury shares) (treasury shares) does not apply (so that the shares are treated as cancelled), or

(b) that section applies but the shares are cancelled forthwith (under section (Treasury shares: cancellation) (cancellation of treasury shares)),

the company must give notice of cancellation to the registrar, within the period of 28 days beginning with the date on which the shares are delivered to it, specifying the shares cancelled.

(2) The notice must be accompanied by a statement of capital.

(3) The statement of capital must state with respect to the company’s share capital immediately following the cancellation—

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

(b) the aggregate nominal value of those shares,

(i) prescribed particulars of the rights attached to the shares,

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

(iii) the aggregate nominal value of shares of that class, and

(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).

(4) If default is made in complying this section, an offence is committed by—

(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 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.

Power of private limited company to redeem or purchase own shares out of capital

Margaret Hodge

NC213

To move the following Clause:—

‘(1) A private limited company may in accordance with this Chapter, but subject to any restriction or prohibition in the company’s articles, make a payment in respect of the redemption or purchase of its own shares otherwise than out of distributable profits or the proceeds of a fresh issue of shares.

(2) References below in this Chapter to payment out of capital are to any payment so made, whether or not it would be regarded apart from this section as a payment out of capital.’.

The permissible capital payment

Margaret Hodge

NC214

To move the following Clause:—

‘(1) The payment that may, in accordance with this Chapter, be made by a company out of capital in respect of the redemption or purchase of its own shares is such amount as, after applying for that purpose—

(a) any available profits of the company, and

(b) the proceeds of any fresh issue of shares made for the purposes of the redemption or purchase,

is required to meet the price of redemption or purchase.

(2) That is referred to below in this Chapter as “the permissible capital payment” for the shares.’.

Available profits

Margaret Hodge

NC215

To move the following Clause:—

‘(1) For the purposes of this Chapter the available profits of the company, in relation to the redemption or purchase of any shares, are the profits of the company that are available for distribution (within the meaning of Part (Distributions)).

(2) But the question whether a company has any profits so available, and the amount of any such profits, shall be determined in accordance with section (Determination of available profits) instead of in accordance with sections (Justification of distribution by reference to relevant accounts) to (Determination of profit or loss in respect of asset where records incomplete) in that Part.’.

Determination of available profits

Margaret Hodge

NC216

To move the following Clause:—

‘(1) The available profits of the company are determined as follows.

(2) First, determine the profits of the company by reference to the following items as stated in the relevant accounts—

(a) profits, losses, assets and liabilities,

(b) provisions of the following kinds—

(i) where the relevant accounts are Companies Act accounts, provisions of a kind specified for the purposes of this subsection by regulations under section 378;

(ii) where the relevant accounts are IAS accounts, provisions of any kind;

(3) Second, reduce the amount so determined by the amount of—

(a) any distribution lawfully made by the company, and

(b) any other relevant payment lawfully made by the company out of distributable profits,

after the date of the relevant accounts and before the end of the relevant period.

(4) For this purpose “other relevant payment lawfully made” includes—

(a) financial assistance lawfully given out of distributable profits in accordance with Chapter (Financial assistance for acquisition of own shares) of this Part,

(b) payments lawfully made out of distributable profits in respect of the purchase by the company of any shares in the company, and

(c) payments of any description specified in section (Payments apart from purchase price to be made out of distributable profits) (payments other than purchase price to be made out of distributable profits) lawfully made by the company.

(5) The resulting figure is the amount of available profits.

(6) For the purposes of this section “the relevant accounts” are any accounts that—

(a) are prepared as at a date within the relevant period, and

(b) are such as to enable a reasonable judgment to be made as to the amounts of the items mentioned in subsection (2).

(7) In this section “the relevant period” means the period of three months ending with the date on which the directors’ statement is made in accordance with section (Directors’ statement and auditor’s report).’.

Requirements for payment out of capital

Margaret Hodge

NC217

To move the following Clause:—

‘(1) A payment out of capital by a private company for the redemption or purchase of its own shares is not lawful unless the requirements of the following sections are met—

section (Directors’ statement and auditor’s report) (directors’ statement and auditor’s report);

section (Approval by special resolution) (approval by special resolution);

section (Public notice of proposed payment) (public notice of proposed payment);

section (Directors’ statement and auditor’s report to be available for inspection) (directors’ statement and auditor’s report to be available for inspection)

(2) This is subject to any order of the court under section (Application to court to cancel resolution) (power of court to extend period for compliance on application by persons objecting to payment).’.

Directors’ statement and auditor’s report

Margaret Hodge

NC218

To move the following Clause:—

‘(1) The company’s directors must make a statement in accordance with this section.

(2) The statement must specify the amount of the permissible capital payment for the shares in question.

(3) It must state that, having made full inquiry into the affairs and prospects of the company, the directors have formed the opinion—

(a) as regards its initial situation immediately following the date on which the payment out of capital is proposed to be made, that there will be no grounds on which the company could then be found unable to pay its debts, and

(b) as regards its prospects for the year immediately following that date, that having regard to—

(i) their intentions with respect to the management of the company business during that year, and

(ii) the amount and character of the financial resources that will in their view be available to the company during that year,

the company will be able to continue to carry on business as a going concern (and will accordingly be able to pay its debts as they fall due) throughout that year.

(4) In forming their opinion for the purposes of subsection (3)(a), the directors must take into account all of the company’s liabilities (including any contingent or prospective liabilities).

(5) The directors’ statement must be in the prescribed form and must contain such information with respect to the nature of the company’s business as may be prescribed.

(6) It must in addition have annexed to it a report addressed to the directors by the company’s auditor stating that—

(a) he has inquired into the company’s state of affairs,

(b) the amount specified in the statement as the permissible capital payment for the shares in question is in his view properly determined in accordance with sections (The permissible capital payment) to (Determination of available profits), and

(c) he is not aware of anything to indicate that the opinion expressed by the directors in their statement as to any of the matters mentioned in subsection (3) above is unreasonable in all the circumstances.’.

Directors’ statement: offence if no reasonable grounds for opinion

Margaret Hodge

NC219

To move the following Clause:—

‘(1) If the directors make a statement under section (Directors’ statement and auditor’s report) without having reasonable grounds for the opinion expressed in it, an offence is committed by every director who is in default.

(2) A person guilty of an offence under this section 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 not exceeding twelve months or a fine not exceeding the statutory maximum (or both);

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

Payment to be approved by special resolution

Margaret Hodge

NC220

To move the following Clause:—

‘(1) The payment out of capital must be approved by a special resolution of the company.

(2) The resolution must be passed on, or within the week immediately following, the date on which the directors make the statement required by section (Directors’ statement and auditor’s report).

(3) A resolution under this section is subject to—

section (Resolution authorising payment: exercise of voting rights) (exercise of voting rights), and

section (Resolution authorising payment: disclosure of directors’ statement and auditor’s report) (disclosure of directors’ statement and auditors’ report).’.

Resolution authorising payment: exercise of voting rights

Margaret Hodge

NC221

To move the following Clause:—

‘(1) This section applies to a resolution under section (Payment to be approved by special resolution) (authority for payment out of capital for redemption or purchase of own shares).

(2) Where the resolution is proposed as a written resolution, a member who holds shares to which the resolution relates is not an eligible member.

(3) Where the resolution is proposed at a meeting of the company, it is not effective if—

(a) any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution, and

(b) the resolution would not have been passed if he had not done so.

(4) For this purpose—

(a) a member who holds shares to which the resolution relates is regarded as exercising the voting rights carried by those shares not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll;

(b) notwithstanding anything in the company’s articles, any member of the company may demand a poll on that question;

(c) a vote and a demand for a poll by a person as proxy for a member are the same respectively as a vote and a demand by the member.’.

Resolution authorising payment: disclosure of directors’ statement and auditors’ report

Margaret Hodge

NC222

To move the following Clause:—

‘(1) This section applies to a resolution under section (Payment to be approved by special resolution) (resolution authorising payment out of capital for redemption or purchase of own shares).

(2) The directors’ statement and auditors’ report under section (Directors’ statement and auditor’s report) must be made available to members—

(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;

(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company at the meeting.

(3) The resolution is ineffective if this requirement is not complied with.’.

Public notice of proposed payment

Margaret Hodge

NC223

To move the following Clause:—

‘(1) Within the week immediately following the date of the resolution under section (Payment to be approved by special resolution) the company must cause to be published in the Gazette a notice—

(a) stating that the company has approved a payment out of capital for the purpose of acquiring its own shares by redemption or purchase or both (as the case may be),

(b) specifying—

(i) the amount of the permissible capital payment for the shares in question, and

(ii) the date of the resolution,

(c) stating that the directors’ statement and auditor’s report required by section (Directors’ statement and auditor’s report) are available for inspection at the company’s registered office, and

(d) stating that any creditor of the company may at any time within the five weeks immediately following the date of the resolution apply to the court under section (Application to court to cancel resolution) for an order preventing the payment.

(2) Within the week immediately following the date of the resolution the company must also either—

(a) cause a notice to the same effect as that required by subsection (1) to be published in an appropriate national newspaper, or

(b) give notice in writing to that effect to each of its creditors.

(3) “An appropriate national newspaper” means a newspaper circulating throughout the part of the United Kingdom in which the company is registered.

(4) Not later than the day on which the company—

(a) first publishes the notice required by subsection (1), or

(b) if earlier, first publishes or gives the notice required by subsection (2),

the company must deliver to the registrar a copy of the directors’ statement and auditor’s report required by section (Directors’ statement and auditor’s report).’.

Directors’ statement and auditor’s report to be available for inspection

Margaret Hodge

NC224

To move the following Clause:—

‘(1) The directors’ statement and auditor’s report must be kept available for inspection at the company’s registered office throughout the period—

(a) beginning with the day on which the company—

(i) first publishes the notice required by section (Public notice of proposed payment)(1), or

(ii) if earlier, first publishes or gives the notice required by section (Public notice of proposed payment)(2), and

(b) ending five weeks after the date of the resolution for payment out of capital.

(2) They must be open to the inspection of any member or creditor of the company without charge.

(3) If an inspection under subsection (2) is refused, an offence is committed by—

(a) the company, and

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

(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

(5) In the case of a refusal of an inspection required by subsection (2), the court may by order compel an immediate inspection.’.

Application to court to cancel resolution

Margaret Hodge

NC225

To move the following Clause:—

‘(1) Where a private company passes a special resolution approving a payment out of capital for the redemption or purchase of any of its shares—

(a) any member of the company (other than one who consented to or voted in favour of the resolution), and

(b) any creditor of the company,

may apply to the court for the cancellation of the resolution.

(2) The application—

(a) must be made within five weeks after the passing of the resolution, and

(b) may be made on behalf of the persons entitled to make it by such one or more of their number as they may appoint in writing for the purpose.

(3) On an application under this section the court may if it thinks fit—

(a) adjourn the proceedings in order that an arrangement may be made to the satisfaction of the court—

(i) for the purchase of the interests of dissentient members, or

(ii) for the protection of dissentient creditors, and

(b) give such directions and make such orders as it thinks expedient for facilitating or carrying into effect any such arrangement.

(4) Subject to that, the court must make an order either cancelling or confirming the resolution, and may do so on such terms and conditions as it thinks fit.

(5) If the court confirms the resolution, it may by order alter or extend any date or period of time specified—

(a) in the resolution, or

(b) in any provision of this Chapter applying to the redemption or purchase to which the resolution relates.

(6) The court’s order may, if the court thinks fit—

(a) provide for the purchase by the company of the shares of any of its members and for the reduction accordingly of the company’s capital, and

(b) make any alteration in the company’s articles that may be required in consequence of that provision.

(7) The court’s order may, if the court thinks fit, require the company not to make any, or any specified, amendments of its articles without the leave of the court.’.

Notice to registrar of court application or order

Margaret Hodge

NC226

To move the following Clause:—

‘(1) On making an application under section (Application to court to cancel resolution) (application to court to cancel resolution) the applicants, or the person making the application on their behalf, must immediately give notice to the registrar.

This is without prejudice to any provision of rules of court as to service of notice of the application.

(2) On being served with notice of any such application, the company must immediately give notice to the registrar.

(3) Within 15 days of the making of the court’s order on the application, or such longer period as the court may at any time direct, the company must deliver to the registrar a copy of the order.

(4) If a company fails to comply with subsection (2) or (3) an offence is committed by—

(a) the company, and

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

When payment out of capital to be made

Margaret Hodge

NC227

To move the following Clause:—

‘(1) The payment out of capital must be made—

(a) no earlier than five weeks after the date on which the resolution under section (Payment to be approved by special resolution) is passed, and

(b) no more than seven weeks after that date.

(2) This is subject to any exercise of the court’s powers under section (Application to court to cancel resolution)(5) (power to alter or extend time where resolution confirmed after objection).’.

Prepared: 13 July 2006