House of Commons - Amendments

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

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Enforceability of undertakings to do work etc

Margaret Hodge

NC113

To move the following Clause:—

‘(1) An undertaking given by any person, in or in connection with payment for shares in a company, to do work or perform services or to do any other thing, if it is enforceable by the company apart from this Chapter, is so enforceable notwithstanding that there has been a contravention in relation to it of a provision of this Chapter.

(2) This is without prejudice to section (Power of court to grant relief) (power of court to grant relief etc in respect of liabilities).’.

The appropriate rate of interest

Margaret Hodge

NC114

To move the following Clause:—

‘(1) For the purposes of this Chapter the “appropriate rate” of interest is 5% per annum or such other rate as may be specified by order made by the Secretary of State.

(2) An order under this section is subject to negative resolution procedure.’.

Application of share premiums

Margaret Hodge

NC115

To move the following Clause:—

‘(1) If a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares must be transferred to an account called “the share premium account”.

(2) Where, on issuing shares, a company has transferred a sum to the share premium account, it may use that sum to write off—

(a) the expenses of the issue of those shares;

(b) any commission paid on the issue of those shares.

(3) The company may use the share premium account to pay up new shares to be allotted to members as fully paid bonus shares.

(4) Subject to subsections (2) and (3), the provisions of the Companies Acts relating to the reduction of a company’s share capital apply as if the share premium account were part of its paid-up share capital.

(5) This section has effect subject to—

section (Group reconstruction relief) (group reconstruction relief);

section (Merger relief) (merger relief);

section (Power to make further provision by regulations) (power to make further provisions by regulations).

(6) In this Chapter “the issuing company” means the company issuing shares as mentioned in subsection (1) above.’.

Group reconstruction relief

Margaret Hodge

NC116

To move the following Clause:—

‘(1) This section applies where the issuing company—

(a) is a wholly owned subsidiary of another company (“the holding company”), and

(b) allots shares—

(i) to the holding company or

(ii) to another wholly-owned subsidiary of the holding company,

in consideration for the transfer to the issuing company of non-cash assets of a company (“the transferor company”) that is a member of the group of companies that comprises the holding company and all its wholly-owned subsidiaries.

(2) Where the shares in the issuing company allotted in consideration for the transfer are issued at a premium, the issuing company is not required by section (Application of share premiums) to transfer any amount in excess of the minimum premium value to the share premium account.

(3) The minimum premium value means the amount (if any) by which the base value of the consideration for the shares allotted exceeds the aggregate nominal value of the shares.

(4) The base value of the consideration for the shares allotted is the amount by which the base value of the assets transferred exceeds the base value of any liabilities of the transferor company assumed by the issuing company as part of the consideration for the assets transferred.

(5) For the purposes of this section—

(a) the base value of assets transferred is taken as—

(i) the cost of those assets to the transferor company, or

(ii) if less, the amount at which those assets are stated in the transferor company’s accounting records immediately before the transfer;

(b) the base value of the liabilities assumed is taken as the amount at which they are stated in the transferor company’s accounting records immediately before the transfer.’.

Merger relief

Margaret Hodge

NC117

To move the following Clause:—

‘(1) This section applies where the issuing company has secured at least a 90% equity holding in another company in pursuance of an arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be provided—

(a) by the issue or transfer to the issuing company of equity shares in the other company, or

(b) by the cancellation of any such shares not held by the issuing company.

(2) If the equity shares in the issuing company allotted in pursuance of the arrangment in consideration for the acquisition or cancellation of equity shares in the other company are issued at a premium, section (Application of share premiums) does not apply to the premiums on those shares.

(3) Where the arrangement also provides for the allotment of any shares in the issuing company on terms that the consideration for those shares is to be provided—

(a) by the issue or transfer to the issuing company of non-equity shares in the other company, or

(b) by the cancellation of any such shares in that company not held by the issuing company,

relief under subsection (2) extends to any shares in the issuing company allotted on those terms in pursuance of the arrangement.

(4) This section does not apply in a case falling within section (Group reconstruction relief) (group reconstruction relief).’.

Merger relief: meaning of 90% equity holding

Margaret Hodge

NC118

To move the following Clause:—

‘(1) The following provisions have effect to determine for the purposes of section (Merger relief) (merger relief) whether a company (“company A”) has secured a 90% equity holding in another company (“company B”) in pursuance of such an arrangement as is mentioned in subsection (1) of that section.

(2) Company A has a 90% equity holding in company B if in consequence of an acquisition or cancellation of equity shares in company B (in pursuance of that arrangement) it holds equity shares in company B of an aggregate amount equal to 90% or more of the nominal value of that company’s equity share capital.

(3) For this purpose—

(a) it is immaterial whether any of those shares were acquired in pursuance of the arrangement; and

(b) shares in company B held by the company as treasury shares are excluded in determining the nominal value of company B’s share capital.

(4) Where the equity share capital of company B is divided into different classes of shares, company A is not regarded as having a 90% equity holding in company B unless the requirements of subsection (2) are met in relation to each of those classes of shares taken separately.

(5) For the purposes of this section shares held by—

(a) a company that is company A’s holding company or subsidiary, or

(b) a subsidiary of company A’s holding company, or

are treated as held by company A.’.

Power to make further provision by regulations

Margaret Hodge

NC119

To move the following Clause:—

‘(1) The Secretary of State may by regulations make such provision as he thinks appropriate—

(a) for relieving companies from the requirements of section (Application of share premiums) (application of share premiums) in relation to premiums other than cash premiums;

(b) for restricting or otherwise modifying any relief from those requirements provided by this Chapter.

(2) Regulations under this section are subject to affirmative resolution procedure.’.

Relief may be reflected in company’s balance sheet

Margaret Hodge

NC120

To move the following Clause:—

‘An amount corresponding to the amount representing the premiums, or part of the premiums, on shares issued by a company that by virtue of any relief under this Chapter is not included in the company’s share premium account may also be disregarded in determining the amount at which any shares or other consideration provided for the shares issued is to be included in the company’s balance sheet.’

Interpretation of this Chapter

Margaret Hodge

NC121

To move the following Clause:—

‘(1) In this Chapter—

“arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with—

(e) Part (Arrangements and reconstructions) (arrangements and reconstructions), or

(f) section 110 of the Insolvency Act 1986 (c. 45) or Article 96 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) (liquidator in winding up accepting shares as consideration for sale of company property));

“company”, except in reference to the issuing company, includes any body corporate;

“equity shares” means shares comprised in a company’s equity share capital, and “non-equity shares” means shares (of any class) that are not so comprised;

“the issuing company” has the meaning given by section (Application of share premiums)(6).

(2) References in this Chapter (however expressed) to—

(a) the acquisition by a company of shares in another company, and

(b) the issue or allotment of shares to, or the transfer of shares to or by, a company,

include (respectively) the acquisition of shares by, and the issue or allotment or transfer of shares to or by, a nominee of that company.

The reference in section (Group reconstruction relief) to the transferor company shall be read accordingly.

(3) References in this Chapter to the transfer of shares in a company include the transfer of a right to be included in the company’s register of members in respect of those shares.’.

Alteration of share capital of limited company

Margaret Hodge

NC122

To move the following Clause:—

‘(1) A limited company having a share capital may not alter its share capital except in the following ways.

(2) The company may—

(a) increase its share capital by allotting new shares in accordance with this Part, or

(b) reduce its share capital in accordance with Chapter (Reduction of share capital) of this Part.

(3) The company may—

(a) sub-divide or consolidate all or any of its share capital in accordance with section (Sub-division or consolidation of shares), or

(b) reconvert stock into shares in accordance with section (Re-conversion of stock into shares).

(4) The company may redenominate all or any of its shares in accordance with section (Redenomination of share capital) and may reduce its share capital in accordance with section (Reduction of capital in connection with redenomination) in connection with such a redenomination.

(5) Nothing in this section affects—

(a) the power of a company to purchase its own shares, or to redeem shares, in accordance with Part 19;

(b) the power of a company to purchase shares in pursuance of an order of the court under—

(i) section 98 (application to court to cancel resolution for re-registration as a private company),

(ii) section (Application to court to cancel resolution)(6) (powers of court on objection to redemption or purchase of shares out of capital),

(iii) section 534 (remedial order in case of breach of prohibition of public offers by private company), or

(iv) Part (Protection of members against unfair prejudice) (protection of members against unfair prejudice);

(c) the forfeiture of shares, or the acceptance of shares surrendered in lieu, in pursuance of the company’s articles, for failure to pay any sum payable in respect of the shares;

(d) the cancellation of shares under section (Duty to cancel shares in public company held by or for the company) (duty to cancel shares held by or for a public company);

(e) the power of a company—

(i) to enter into a compromise or arrangement in accordance with Part (Arrangements and reconstructions) (arrangements and reconstructions), or

(ii) to do anything required to comply with an order of the court on an application under that Part.’.

Sub-division or consolidation of shares

Margaret Hodge

NC123

To move the following Clause:—

‘(1) A limited company having a share capital may—

(a) sub-divide its shares, or any of them, into shares of a smaller nominal amount than its existing shares, or

(b) consolidate and divide all or any of its share capital into shares of a larger nominal amount than its existing shares.

(2) In any sub-division, consolidation or division of shares under this section, the proportion between the amount paid and the amount (if any) unpaid on each resulting share must be the same as it was in the case of the share from which that share is derived.

(3) A company may exercise a power conferred by this section only if its members have passed an ordinary resolution authorising it to do so.

(4) A resolution under subsection (3) may authorise a company—

(a) to exercise more than one of the powers conferred by this section;

(b) to exercise a power on more than one occasion;

(5) The company’s articles may exclude or restrict the exercise of any power conferred by this section.’.

Notice to registrar of sub-division or consolidation

Margaret Hodge

NC124

To move the following Clause:—

‘(1) If a company exercises the power conferred by section (Sub-division or consolidation of shares) (sub-division or consolidation of shares) it must within one month after doing so give notice to the registrar, specifying the shares affected.

(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 exercise of the power—

(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 with 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.’.

Re-conversion of stock into shares

Margaret Hodge

NC125

To move the following Clause:—

‘(1) A limited company that has converted paid-up shares into stock (before the repeal by this Act of the power to do so) may re-convert that stock into paid-up shares of any nominal value.

(2) A company may exercise the power conferred by this section only if its members have passed an ordinary resolution authorising it to do so.

(3) A resolution under subsection (2) may authorise a company to exercise the power conferred by this section—

(a) on more than one occasion;

(b) at a specified time or in specified circumstances.’.

Notice to registrar of re-conversion of stock into shares

Margaret Hodge

NC126

To move the following Clause:—

‘(1) If a company exercises a power conferred by section (Re-conversion of stock into shares) (reconversion of stock into shares) it must within one month after doing so give notice to the registrar, specifying the stock affected.

(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 exercise of the power—

(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.

Redenomation of share capital

Margaret Hodge

NC127

To move the following Clause:—

‘(1) A limited company having a share capital may by ordinary resolution redenominate its share capital or any class of its share capital.

“Redenominate” means convert shares from having a fixed nominal value in one currency to having a fixed nominal value in another currency.

(2) The conversion must be made at an appropriate spot rate of exchange specified in the resolution.

(3) The rate must be either—

(a) a rate prevailing on a day specified in the resolution, or

(b) a rate determined by taking the average of rates prevailing on each consecutive day of a period specified in the resolution.

The day or period specified for the purposes of paragraph (a) or (b) must be within the period of 28 days ending on the day before the resolution is passed.

(4) A resolution under this section may specify conditions which must be met before the redenomination takes effect.

(5) Redenomination in accordance with a resolution under this section takes effect—

(a) on the day on which the resolution is passed, or

(b) on such later day as may be determined in accordance with the resolution.

(6) A resolution under this section lapses if the redenomination for which it provides has not taken effect at the end of the period of 28 days beginning on the date on which it is passed.

(7) A company’s articles may prohibit or restrict the exercise of the power conferred by this section.’.

Calculation of new nominal values

Margaret Hodge

NC128

To move the following Clause:—

‘ ‘For each class of share the new nominal value of each share is calculated as follows:

Step One

Take the aggregate of the old nominal values of all the shares of that class.

Step Two

Translate that amount into the new currency at the rate of exchange specified in the resolution.

Step Three

Divide that amount by the number of shares in the class.’.

Effect of redenomination

Margaret Hodge

NC129

To move the following Clause:—

‘(1) The redenomination of shares does not affect any rights or obligations of members under the company’s constitution, or any restrictions affecting members under the company’s constitution.

In particular, it does not affect entitlement to dividends (including entitlement to dividends in a particular currency), voting rights or any liability in respect of amounts unpaid on shares.

(2) For this purpose the company’s constitution includes the terms on which any shares of the company are allotted or held.

(3) Subject to subsection (1), references to the old nominal value of the shares in any agreement or statement, or in any deed, instrument or document, shall (unless the context otherwise requires) be read after the resolution takes effect as references to the new nominal value of the shares.’.

Prepared: 18 July 2006