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Further provision about notices given under section (Right of offeror to buy out minority shareholder)

Margaret Hodge

NC358

    To move the following Clause:—

      ‘(1) A notice under section (Right of offeror to buy out minority shareholder) must be given in the prescribed manner.

      (2) No notice may be given under section (Right of offeror to buy out minority shareholder)(2) or (4) after the end of—

        (a) the period of three months beginning with the day after the last day on which the offer can be accepted, or

        (b) the period of six months beginning with the date of the offer, where that period ends earlier and the offer is one to which subsection (3) below applies.

      (3) This subsection applies to an offer if the time allowed for acceptance of the offer is not governed by rules under section 643(1) that give effect to Article 7 of the Takeovers Directive.

      In this subsection “the Takeovers Directive” has the same meaning as in section 643.

      (4) At the time when the offeror first gives a notice under section (Right of offeror to buy out minority shareholder) in relation to an offer, he must send to the company—

        (a) a copy of the notice, and

        (b) a statutory declaration by him in the prescribed form, stating that the conditions for the giving of the notice are satisfied.

      (5) Where the offeror is a company (whether or not a company within the meaning of this Act) the statutory declaration must be signed by a director.

      (6) A person commits an offence if—

        (a) he fails to send a copy of a notice or a statutory declaration as required by subsection (4), or

        (b) he makes such a declaration for the purposes of that subsection knowing it to be false or without having reasonable grounds for believing it to be true.

      (7) It is a defence for a person charged with an offence for failing to send a copy of a notice as required by subsection (4) to prove that he took reasonable steps for securing compliance with that subsection.

      (8) 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 to a fine not exceeding the statutory maximum (or both) and, for continued contravention, a daily default fine not exceeding one-fiftieth of the statutory maximum;

          (ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both) and, for continued contravention, a daily default fine not exceeding one-fiftieth of the statutory maximum.’.


Effect of notice under section (Right of offeror to buy out minority shareholder)

Margaret Hodge

NC359

    To move the following Clause:—

      ‘(1) Subject to section (Applications to the court), this section applies where the offeror gives a shareholder a notice under section (Right of offeror to buy out minority shareholder).

      (2) The offeror is entitled and bound to acquire the shares to which the notice relates on the terms of the offer.

      (3) Where the terms of an offer are such as to give the shareholder a choice of consideration, the notice must give particulars of the choice and state—

        (a) that the shareholder may, within six weeks from the date of the notice, indicate his choice by a written communication sent to the offeror at an address specified in the notice, and

        (b) which consideration specified in the offer will apply if he does not indicate a choice.

      The reference in subsection (2) to the terms of the offer is to be read accordingly.

      (4) Subsection (3) applies whether or not any time-limit or other conditions applicable to the choice under the terms of the offer can still be complied with.

      (5) If the consideration offered to or (as the case may be) chosen by the shareholder—

        (a) is not cash and the offeror is no longer able to provide it, or

        (b) was to have been provided by a third party who is no longer bound or able to provide it,

      the consideration is to be taken to consist of an amount of cash, payable by the offeror, which at the date of the notice is equivalent to the consideration offered or (as the case may be) chosen.

      (6) At the end of six weeks from the date of the notice the offeror must immediately—

        (a) send a copy of the notice to the company, and

        (b) pay or transfer to the company the consideration for the shares to which the notice relates.

      Where the consideration consists of shares or securities to be allotted by the offeror, the reference in paragraph (b) to the transfer of the consideration is to be read as a reference to the allotment of the shares or securities to the company.

      (7) If the shares to which the notice relates are registered, the copy of the notice sent to the company under subsection (6)(a) must be accompanied by an instrument of transfer executed on behalf of the holder of the shares by a person appointed by the offeror.

      On receipt of that instrument the company must register the offeror as the holder of those shares.

      (8) If the shares to which the notice relates are transferable by the delivery of warrants or other instruments, the copy of the notice sent to the company under subsection (6)(a) must be accompanied by a statement to that effect.

      On receipt of that statement the company must issue the offeror with warrants or other instruments in respect of the shares, and those already in issue in receipt of the shares become void.

      (9) The company must hold any money or other consideration received by it under subsection (6)(b) on trust for the person who, before the offeror acquired them, was entitled to the shares in respect of which the money or other consideration was received.

      Section (Further provision about consideration held on trust under section (Effect of notice under section (Right of offeror to buy out minority shareholder))(9)) contains further provision about how the company should deal with such money or other consideration.’.


Further provision about consideration held on trust under section (Effect of notice under section (Right of offeror to buy out minority shareholder))(9)

Margaret Hodge

NC360

    To move the following Clause:—

      ‘(1) This section applies where an offeror pays or transfers consideration to the company under section (Effect of notice under section (Right of offeror to buy out minority shareholder))(6).

      (2) The company must pay into a separate bank account that complies with subsection (3)—

        (a) any money it receives under paragraph (b) of section (Effect of notice under section (Right of offeror to buy out minority shareholder))(6), and

        (b) any dividend or other sum accruing from any other consideration it receives under that paragraph.

      (3) A bank account complies with this subsection if the balance on the account—

        (a) bears interest at an appropriate rate, and

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

      (4) If—

        (a) the person entitled to the consideration held on trust by virtue of section (Effect of notice under section (Right of offeror to buy out minority shareholder))(9) cannot be found, and

        (b) subsection (5) applies,

      the consideration (together with any interest, dividend or other benefit that has accrued from it) must be paid into court.

      (5) This subsection applies where—

        (a) reasonable enquiries have been made at reasonable intervals to find the person, and

        (b) twelve years have elapsed since the consideration was received, or the company is wound up.

      (6) In relation to a company registered in Scotland, subsections (7) and (8) apply instead of subsection (4).

      (7) If the person entitled to the consideration held on trust by virtue of section (Effect of notice under section (Right of offeror to buy out minority shareholder))(9) cannot be found and subsection (5) applies—

        (a) the trust terminates,

        (b) the company or (if the company is wound up) the liquidator must sell any consideration other than cash and any benefit other than cash that has accrued from the consideration, and

        (c) a sum representing—

          (i) the consideration so far as it is cash,

          (ii) the proceeds of any sale under paragraph (b), and

          (iii) any interest, dividend or other benefit that has accrued from the consideration,

        must be deposited in the name of the Accountant of Court in a separate bank account complying with subsection (3) and the receipt for the deposit must be transmitted to the Accountant of Court.

      (8) Section 58 of the Bankruptcy (Scotland) Act 1985 (c. 66) (so far as consistent with this Act) applies (with any necessary modifications) to sums deposited under subsection (7) as it applies to sums deposited under section 57(1)(a) of that Act.

      (9) The expenses of any such enquiries as are mentioned in subsection (5) may be paid out of the money or other property held on trust for the person to whom the enquiry relates.’.


Right of minority shareholder to be bought out by offeror

Margaret Hodge

NC361

    To move the following Clause:—

      ‘(1) Subsections (2) and (3) apply in a case where a takeover offer relates to all the shares in a company.

      For this purpose a takeover offer relates to all the shares in a company if it is an offer to acquire all the shares in the company within the meaning of section (Meaning of “takeover offer”).

      (2) The holder of any voting shares to which the offer relates who has not accepted the offer may require the offeror to acquire those shares if, at any time before the end of the period within which the offer can be accepted—

        (a) the offeror has by virtue of acceptances of the offer acquired or unconditionally contracted to acquire some (but not all) of the shares to which the offer relates, and

        (b) those shares, with or without any other shares in the company which he has acquired or contracted to acquire (whether unconditionally or subject to conditions being met)—

          (i) amount to not less than 90% in value of all the voting shares in the company (or would do so but for section (Debentures carrying voting rights)(1)), and

          (ii) carry not less than 90% of the voting rights in the company (or would do so but for section (Debentures carrying voting rights)(1)).

      (3) The holder of any non-voting shares to which the offer relates who has not accepted the offer may require the offeror to acquire those shares if, at any time before the end of the period within which the offer can be accepted—

        (a) the offeror has by virtue of acceptances of the offer acquired or unconditionally contracted to acquire some (but not all) of the shares to which the offer relates, and

        (b) those shares, with or without any other shares in the company which he has acquired or contracted to acquire (whether unconditionally or subject to conditions being met), amount to not less than 90% in value of all the shares in the company (or would do so but for section (Debentures carrying voting rights)(1)).

      (4) If a takeover offer relates to shares of one or more classes and at any time before the end of the period within which the offer can be accepted—

        (a) the offeror has by virtue of acceptances of the offer acquired or unconditionally contracted to acquire some (but not all) of the shares of any class to which the offer relates, and

        (b) those shares, with or without any other shares of that class which he has acquired or contracted to acquire (whether unconditionally or subject to conditions being met)—

          (i) amount to not less than 90% in value of all the shares of that class, and

          (ii) in a case where the shares of that class are voting shares, carry not less than 90% of the voting rights carried by the shares of that class,

      the holder of any shares of that class to which the offer relates who has not accepted the offer may require the offeror to acquire those shares.

      (5) For the purposes of subsections (2) to (4), in calculating 90% of the value of any shares, shares held by the company as treasury shares are to be treated as having been acquired by the offeror.

      (6) Subsection (7) applies where—

        (a) a shareholder exercises rights conferred on him by subsection (2), (3) or (4),

        (b) at the time when he does so, there are shares in the company which the offeror has contracted to acquire subject to conditions being met, and in relation to which the contract has not become unconditional, and

        (c) the requirement imposed by subsection (2)(b), (3)(b) or (4)(b) (as the case may be) would not be satisfied if those shares were not taken into account.

      (7) The shareholder is treated for the purposes of section (Effect of requirement under section (Right of minority shareholder to be bought out by offeror)) as not having exercised his rights under this section unless the requirement imposed by paragraph (b) of subsection (2), (3) or (4) (as the case may be) would be satisfied if—

        (a) the reference in that paragraph to other shares in the company which the offeror has contracted to acquire unconditionally or subject to conditions being met were a reference to such shares which he has unconditionally contracted to acquire, and

        (b) the reference in that subsection to the period within which the offer can be accepted were a reference to the period referred to in section (Further provision about rights conferred by section (Right of minority shareholder to be bought out by offeror))(2).

      (8) A reference in subsection (2)(b), (3)(b), (4)(b), (6) or (7) to shares which the offeror has acquired or contracted to acquire includes a reference to shares which an associate of his has acquired or contracted to acquire.’.


Further provision about rights conferred by section (Right of minority shareholder to be bought out by offeror)

Margaret Hodge

NC362

    To move the following Clause:—

      ‘(1) Rights conferred on a shareholder by subsection (2), (3) or (4) of section (Right of minority shareholder to be bought out by offeror) are exercisable by a written communication addressed to the offeror.

      (2) Rights conferred on a shareholder by subsection (2), (3) or (4) of that section are not exercisable after the end of the period of three months from—

        (a) the end of the period within which the offer can be accepted, or

        (b) if later, the date of the notice that must be given under subsection (3) below.

      (3) Within one month of the time specified in subsection (2), (3) or (4) (as the case may be) of that section, the offeror must give any shareholder who has not accepted the offer notice in the prescribed manner of—

        (a) the rights that are exercisable by the shareholder under that subsection, and

        (b) the period within which the rights are exercisable.

      If the notice is given before the end of the period within which the offer can be accepted, it must state that the offer is still open for acceptance.

      (4) Subsection (3) does not apply if the offeror has given the shareholder a notice in respect of the shares in question under section (Right of offeror to buy out minority shareholder).

      (5) An offeror who fails to comply with subsection (3) commits an offence.

      If the offeror is a company, every officer of the company who is in default or to whose neglect the failure is attributable also commits an offence.

      (6) If an offeror other than a company is charged with an offence for failing to comply with subsection (3), it is a defence for him to prove that he took all reasonable steps for securing compliance with that subsection.

      (7) A person guilty of an offence under this section is liable—

        (a) on conviction on indictment, to a fine;

        (b) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, a daily default fine not exceeding one-fiftieth of the statutory maximum.’.


Effect of requirement under section (Right of minority shareholder to be bought out by offeror)

Margaret Hodge

NC363

    To move the following Clause:—

      ‘(1) Subject to section (Applications to the court), this section applies where a shareholder exercises his rights under section (Right of minority shareholder to be bought out by offeror) in respect of any shares held by him.

      (2) The offeror is entitled and bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.

      (3) Where the terms of an offer are such as to give the shareholder a choice of consideration—

        (a) the shareholder may indicate his choice when requiring the offeror to acquire the shares, and

        (b) the notice given to the shareholder under section (Further provision about rights conferred by section (Right of minority shareholder to be bought out by offeror))(3)—

          (i) must give particulars of the choice and of the rights conferred by this subsection, and

          (ii) may state which consideration specified in the offer will apply if he does not indicate a choice.

      The reference in subsection (2) to the terms of the offer is to be read accordingly.

      (4) Subsection (3) applies whether or not any time-limit or other conditions applicable to the choice under the terms of the offer can still be complied with.

      (5) If the consideration offered to or (as the case may be) chosen by the shareholder—

        (a) is not cash and the offeror is no longer able to provide it, or

        (b) was to have been provided by a third party who is no longer bound or able to provide it,

      the consideration is to be taken to consist of an amount of cash, payable by the offeror, which at the date when the shareholder requires the offeror to acquire the shares is equivalent to the consideration offered or (as the case may be) chosen.’.


Applications to the court

Margaret Hodge

NC364

    To move the following Clause:—

      ‘(1) Where a notice is given under section (Right of offeror to buy out minority shareholder) to a shareholder the court may, on an application made by him, order—

        (a) that the offeror is not entitled and bound to acquire the shares to which the notice relates, or

        (b) that the terms on which the offeror is entitled and bound to acquire the shares shall be such as the court thinks fit.

      (2) An application under subsection (1) must be made within six weeks from the date on which the notice referred to in that subsection was given.

      If an application to the court under subsection (1) is pending at the end of that period, section (Effect of notice under section (Right of offeror to buy out minority shareholder))(6) does not have effect until the application has been disposed of.

      (3) Where a shareholder exercises his rights under section (Right of minority shareholder to be bought out by offeror) in respect of any shares held by him, the court may, on an application made by him or the offeror, order that the terms on which the offeror is entitled and bound to acquire the shares shall be such as the court thinks fit.

      (4) On an application under subsection (1) or (3)—

        (a) the court may not require consideration of a higher value than that specified in the terms of the offer (“the offer value”) to be given for the shares to which the application relates unless the holder of the shares shows that the offer value would be unfair;

        (b) the court may not require consideration of a lower value than the offer value to be given for the shares.

      (5) No order for costs or expenses may be made against a shareholder making an application under subsection (1) or (3) unless the court considers that—

        (a) the application was unnecessary, improper or vexatious,

        (b) there has been unreasonable delay in making the application, or

        (c) there has been unreasonable conduct on the shareholder’s part in conducting the proceedings on the application.

      (6) A shareholder who has made an application under subsection (1) or (3) must give notice of the application to the offeror.

      (7) An offeror who is given notice of an application under subsection (1) or (3) must give a copy of the notice to—

        (a) any person (other than the applicant) to whom a notice has been given under section (Right of offeror to buy out minority shareholder);

        (b) any person who has exercised his rights under section (Right of minority shareholder to be bought out by offeror).

      (8) An offeror who makes an application under subsection (3) must give notice of the application to—

        (a) any person to whom a notice has been given under section (Right of offeror to buy out minority shareholder);

        (b) any person who has exercised his rights under section (Right of minority shareholder to be bought out by offeror).

      (9) Where a takeover offer has not been accepted to the extent necessary for entitling the offeror to give notices under subsection (2) or (4) of section (Right of offeror to buy out minority shareholder) the court may, on an application made by him, make an order authorising him to give notices under that subsection if it is satisfied that—

        (a) the offeror has after reasonable enquiry been unable to trace one or more of the persons holding shares to which the offer relates,

        (b) the requirements of that subsection would have been met if the person, or all the persons, mentioned in paragraph (a) above had accepted the offer, and

        (c) the consideration offered is fair and reasonable.

      This is subject to subsection (10).

      (10) The court may not make an order under subsection (9) unless it considers that it is just and equitable to do so having regard, in particular, to the number of shareholders who have been traced but who have not accepted the offer.’.


 
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Prepared: 18 July 2006