| Company Law Reform Bill [Lords] - continued | House of Commons |
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Exceptions to general rule Margaret Hodge NC163 To move the following Clause:— ‘(1) A limited company may acquire any of its own fully paid shares otherwise than for valuable consideration. (2) Section (General rule against limited company acquiring its own shares) does not prohibit— (a) the acquisition of shares in a reduction of capital duly made; (b) the purchase of 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.’. Treatment of shares held by nominee Margaret Hodge NC164 To move the following Clause:— ‘(1) This section applies where shares in a limited company— (a) are taken by a subscriber to the memorandum as nominee of the company, (b) are issued to a nominee of the company, or (c) are acquired by a nominee of the company, partly paid up, from a third person. (2) For all purposes— (a) the shares are to be treated as held by the nominee on his own account, and (b) the company is to be regarded as having no beneficial interest in them. (3) This section does not apply— (a) to shares acquired otherwise than by subscription by a nominee of the public company, where— (i) a person acquires shares in the company with financial assistance given to him, directly or indirectly, by the company for the purpose of or in connection with the acquisition, and (ii) the company has a beneficial interest in the shares; (b) to shares acquired by a nominee of the company when the company has no beneficial interest in the shares.’. Liability of others where nominee fails to make payment in respect of shares Margaret Hodge NC165 To move the following Clause:— ‘(1) This section applies where shares in a limited company— (a) are taken by a subscriber to the memorandum as nominee of the company, (b) are issued to a nominee of the company, or (c) are acquired by a nominee of the company, partly paid up, from a third person. (2) If the nominee, having been called on to pay any amount for the purposes of paying up, or paying any premium on, the shares, fails to pay that amount within 21 days from being called on to do so, then— (a) in the case of shares that he agreed to take as subscriber to the memorandum, the other subscribers to the memorandum, and (b) in any other case, the directors of the company when the shares were issued to or acquired by him, are jointly and severally liable with him to pay that amount. (3) If in proceedings for the recovery of an amount under subsection (3) it appears to the court that the subscriber or director— (a) has acted honestly and reasonably, and (b) having regard to all the circumstances of the case, ought fairly to be relieved from liability, the court may relieve him, either wholly or in part, from his liability on such terms as the court thinks fit. (4) If a subscriber to a company’s memorandum or a director of a company has reason to apprehend that a claim will or might be made for the recovery of any such amount from him— (a) he may apply to the court for relief, and (b) the court has the same power to relieve him as it would have had in proceedings for recovery of that amount. (5) This section does not apply to shares acquired by a nominee of the company when the company has no beneficial interest in the shares.’. Duty to cancel shares in public company held by or for the company Margaret Hodge NC166 To move the following Clause:— ‘(1) This section applies in the case of a public company— (a) where shares in the company are forfeited, or surrendered to the company in lieu of forfeiture, in pursuance of the articles, for failure to pay any sum payable in respect of the shares; (b) where shares in the company
are surrendered to the company in pursuance of section 102C(1)(b) of
the (c) where shares in the company are acquired by it (otherwise than in accordance with this Part) and the company has a beneficial interest in the shares; (d) where a nominee of the company acquires shares in the company from a third party without financial assistance being given directly or indirectly by the company and the company has a beneficial interest in the shares; or (e) where a person acquires shares in the company, with financial assistance given to him, directly or indirectly, by the company for the purpose of or in connection with the acquisition, and the company has a beneficial interest in the shares. (2) Unless the shares or any interest of the company in them are previously disposed of, the company must— (a) cancel the shares and diminish the amount of the company’s share capital by the nominal value of the shares cancelled, and (b) where the effect is that the nominal value of the company’s allotted share capital is brought below the authorised minimum (see section 538), apply for re-registration as a private company, stating the effect of the cancellation. (3) It must do so no later than— (a) in a case within subsection (1)(a) or (b), three years from the date of the forfeiture or surrender; (b) in a case within subsection (1)(c) or (d), three years from the date of the acquisition; (c) in a case within subsection (1)(e), one year from the date of the acquisition. (4) The directors of the company may take any steps necessary to enable the company to comply with this section, and may do so without complying with the provisions of Chapter (Reduction of capital) of Part (A company’s share capital). See also section (Re-registration as private company in consequence of cancellation) (re-registration as private company in consequence of cancellation). (5) Neither the company nor, in a case within subsection (1)(d) or (e), the nominee or other shareholder may exercise any voting rights in respect of the shares. (6) Any purported exercise of those rights is void.’. Notice of cancellation of shares Margaret Hodge NC167 To move the following Clause:— ‘(1) Where a company cancels shares in order to comply with section (Duty to cancel shares in public company held by or for the company), it must within one month after the shares are cancelled give notice to the registrar, 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, (c) for each class of 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-registration as private company in consequence of cancellation Margaret Hodge NC168 To move the following Clause:— ‘(1) Where a company is obliged to re-register as a private company to comply with section (Duty to cancel shares in public company held by or for the company), the directors may resolve that the company should be so re-registered. Any such resolution is subject to Chapter 3 of Part 3 (resolutions affecting company’s constitution: copy to be forwarded to the registrar, etc). (2) The resolution may make such changes— (a) in the company’s name, and (b) in the company’s articles, as are necessary in connection with its becoming a private company. (3) The application for re-registration must contain a statement of the company’s proposed name on re-registration. (4) The application must be accompanied by— (a) a copy of the resolution (unless a copy has already been forwarded under Chapter 3 of Part 3), (b) a copy of the company’s articles as amended by the resolution, and (c) a statement of compliance. (5) The statement of compliance required is a statement that the requirements of this section as to re-registration as a private company have been complied with. (6) The registrar may accept the statement of compliance as sufficient evidence that the company is entitled to be re-registered as a private company.’. Issue of certificate of incorporation on re-registration Margaret Hodge NC169 To move the following Clause:— (2) The registrar must issue a certificate of incorporation altered to meet the circumstances of the case. (3) The certificate must state that it is issued on re-registration and the date on which it is issued. (4) On the issue of the certificate— (a) the company by virtue of the issue of the certificate becomes a private company, and (b) the changes in the company’s name and articles take effect. (5) The certificate is conclusive evidence that the requirements of this Act as to re-registration have been complied with.’. Effect of failure to register Margaret Hodge NC170 To move the following Clause:— ‘(1) If a public company that is required by section (Duty to cancel shares in public company held by or for the company) to apply to be re-registered as a private company fails to do so before the end of the period specified in subsection (3) of that section, Chapter 1 of Part 17 (prohibition of public offers by private company) applies to it as if it were a private company. (2) Subject to that, the company continues to be treated as a public company until it is so registered.’. Offence in case of failure to cancel shares or re-register Margaret Hodge NC171 To move the following Clause:— ‘(1) This section applies where a company, when required to do by section (Duty to cancel shares in public company held by or for the company)— (a) fails to cancel any shares, or (b) fails to make an application for re-registration as a private company, within the time specified in subsection (3) of that section. (2) An offence is committed by— (a) the company, and (b) every officer of the company who is in default. (3) 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.’. Application of provisions to company re-registering as public company Margaret Hodge NC172 To move the following Clause:— ‘(1) This section applies where, after shares in a private company— (a) are forfeited in pursuance of the company’s articles or are surrendered to the company in lieu of forfeiture, (b) are acquired by the company (otherwise than by any of the methods permitted by this Part), the company having a beneficial interest in the shares, (c) are acquired by a nominee of the company from a third party without financial assistance being given directly or indirectly by the company, the company having a beneficial interest in the shares, or (d) are acquired by a person with financial assistance given to him, directly or indirectly, by the company for the purpose of or in connection with the acquisition, the company having a beneficial interest in the shares, the company is re-registered as a public company. (2) In that case the provisions of sections (Duty to cancel shares in public company held by or for the company) to (Offence in case of failure to cancel shares or re-register) apply to the company as if it had been a public company at the time of the forfeiture, surrender or acquisition, subject to the following modification. (3) The modification is that the period specified in section (Duty to cancel shares in public company held by or for the company)(3)(a), (b) or (c) (period for complying with obligations under that section) runs from the date of the re-registration of the company as a public company.’. Accounting treatment of shares held by public company or nominee Margaret Hodge NC173 To move the following Clause:— ‘(1) Where— (a) a public company, or a nominee of a public company, acquires shares in the company, and (b) those shares are shown in a balance sheet of the company as an asset, an amount equal to the value of the shares must be transferred out of profits available for dividend to a reserve fund and is not then available for distribution. (2) Subsection (1) applies to an interest in shares as it applies to shares. As it so applies the reference to the value of the shares shall be read as a reference to the value to the company of its interest in the shares.’. Public companies: general rule against lien or charge on own shares Margaret Hodge NC174 To move the following Clause:— ‘(1) A lien or other charge of a public company on its own shares (whether taken expressly or otherwise) is void, except as permitted by this section. (2) In the case of any description of company, a charge is permitted if the shares are not fully paid up and the charge is for an amount payable in respect of the shares. (3) In the case of a company whose ordinary business— (a) includes the lending of money, or (b) consists of the provision of credit or the bailment (in Scotland, hiring) of goods under a hire purchase agreement, or both, a charge is permitted (whether the shares are fully paid or not) if it arises in connection with a transaction entered into by the company in the ordinary course of that business. (4) In the case of a company that has been re-registered as a public company, a charge is permitted if it was in existence immediately before the application for re-registration.’. Interests to be disregarded in determining whether company has beneficial interest Margaret Hodge NC175 To move the following Clause:— ‘In determining for the purposes of this Chapter whether a company has a beneficial interest in shares, there shall be disregarded any such interest as is mentioned in— section (Residual interest under pension scheme or employees’ share scheme) (residual interest under pension scheme or employees’ share scheme), section (Employer’s charges and other rights of recovery) (employer’s charges and other rights of recovery) or section (Rights as personal representative or trustee) (rights as personal representative or trustee).’. Residual interest under pension scheme or employees’ share scheme Margaret Hodge NC176 To move the following Clause:— ‘(1) Where the shares are held on trust for the purposes of a pension scheme or employees’ share scheme, there shall be disregarded any residual interest of the company that has not vested in possession. (2) A “residual interest” means a right of the company to receive any of the trust property in the event of— (a) all the liabilities arising under the scheme having been satisfied or provided for, or (b) the company ceasing to participate in the scheme, or (c) the trust property at any time exceeding what is necessary for satisfying the liabilities arising or expected to arise under the scheme. (3) In subsection (2)— (a) the reference to a right includes a right dependent on the exercise of a discretion vested by the scheme in the trustee or another person, and (b) the reference to liabilities arising under a scheme includes liabilities that have resulted, or may result, from the exercise of any such discretion. (4) For the purposes of this section a residual interest vests in possession— (a) in a case within subsection (2)(a), on the occurrence of the event mentioned there (whether or not the amount of the property receivable pursuant to the right is ascertained); (b) in a case within subsection (2)(b) or (c), when the company becomes entitled to require the trustee to transfer to it any of the property receivable pursuant to that right. (5) Where by virtue of this section shares are exempt from section (Treatment of shares held by nominee) or (Liability of others where nominee fails to make payment in respect of shares) (shares held by company’s nominee) at the time they are taken, issued or acquired but the residual interest in question vests in possession before they are disposed of or fully paid up, those sections apply to the shares as if they had been taken, issued or acquired on the date on which that interest vests in possession. (6) Where by virtue of this section shares are exempt from sections (Duty to cancel shares in public company held by or for the company) to (Application of provisions to company re-registering as public company) (shares held by or for public company) at the time they are acquired but the residual interest in question vests in possession before they are disposed of, those sections apply to the shares as if they had been acquired on the date on which the interest vests in possession.’. Employer’s charges and other rights of recovery Margaret Hodge NC177 To move the following Clause:— ‘(1) Where the shares are held on trust for the purposes of a pension scheme there shall be disregarded— (a) any charge or lien on, or set-off against, any benefit or other right or interest under the scheme for the purpose of enabling the employer or former employer of a member of the scheme to obtain the discharge of a monetary obligation due to him from the member; (b) any right to receive from
the trustee of the scheme, or as trustee of the scheme to retain, an
amount that can be recovered or retained under section 61 of the (2) Where the shares are held on trust for the purposes of an employees’ share scheme, there shall be disregarded any charge or lien on, or set-off against, any benefit or other right or interest under the scheme for the purpose of enabling the employer or former employer of a member of the scheme to obtain the discharge of a monetary obligation due to him from the member.’. Rights as personal representative or trustee Margaret Hodge NC178 To move the following Clause:— ‘Where the company is a personal representative or trustee, there shall be disregarded any rights that the company has in that capacity including, in particular— (a) any right to recover its expenses or be remunerated out of the estate or trust property, and (b) any right to be indemnified out of that property for any liability incurred by reason of any act or omission of the company in the performance of its duties as personal representative or trustee.’. |
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| © Parliamentary copyright 2006 | Prepared: 18 July 2006 |