House of Commons - Amendments

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

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Power of directors to allot shares etc: private company with only one class of shares

Margaret Hodge

NC55

To move the following Clause:—

Where a private company has only one class of shares, the directors may exercise any power of the company—

(a) to allot shares of that class, or

(b) to grant rights to subscribe for or to convert any security into such shares,

except to the extent that they are prohibited from doing so by the company’s articles.’.

Power of directors to allot shares etc: authorisation by company

Margaret Hodge

NC56

To move the following Clause:—

‘(1) The directors of a company may exercise a power of the company—

(a) to allot shares in the company, or

(b) to grant rights to subscribe for or to convert any security into shares in the company,

if they are authorised to do so by the company’s articles or by resolution of the company.

(2) Authorisation may be given for a particular exercise of the power or for its exercise generally, and may be unconditional or subject to conditions.

(3) Authorisation must—

(a) state the maximum amount of shares that may be allotted under it, and

(b) specify the date on which it will expire, which must be not more than five years from—

(i) in the case of authorisation contained in the company’s articles at the time of its original incorporation, the date of that incorporation;

(ii) in any other case, the date on which the resolution is passed by virtue of which the authorisation is given.

(4) Authorisation may—

(a) be renewed or further renewed by resolution of the company for a further period not exceeding five years, and

(b) be revoked or varied at any time by resolution of the company.

(5) A resolution renewing authorisation must—

(a) state (or restate) the maximum amount of shares that may be allotted under the authorisation or, as the case may be, the amount remaining to be allotted under it, and

(b) specify the date on which the renewed authorisation will expire.

(6) In relation to rights to subscribe for or to convert any security into shares in the company, references in this section to the maximum amount of shares that may be allotted under the authorisation are to the maximum amount of shares that may be allotted pursuant to the rights.

(7) The directors may allot shares, or grant rights to subscribe for or to convert any security into shares, after authorisation has expired if—

(a) the shares are allotted, or the rights are granted, in pursuance of an offer or agreement made by the company before the authorisation expired, and

(b) the authorisation allowed the company to make an offer or agreement which would or might require shares to be allotted, or rights to be granted, after the authorisation had expired.

(8) A resolution of a company to give, vary, revoke or renew authorisation under this section may be an ordinary resolution, even though it amends the company’s articles.’.

General prohibition of commissions, discounts and allowances

Margaret Hodge

NC57

To move the following Clause:—

‘(1) Except as permitted by section (permitted commission) (permitted commission), a company must not apply any of its shares or capital money, either directly or indirectly, in payment of any commission, discount or allowance to any person in consideration of his—

(a) subscribing or agreeing to subscribe (whether absolutely or conditionally) for shares in the company, or

(b) procuring or agreeing to procure subscriptions (whether absolute or conditional) for shares in the company.

(2) It is immaterial how the shares or money are so applied, whether by being added to the purchase money of property acquired by the company or to the contract price of work to be executed for the company, or being paid out of the nominal purchase money or contract price, or otherwise.

(3) Nothing in this section affects the payment of such brokerage as has previously been lawful.’.

Permitted commission

Margaret Hodge

NC58

To move the following Clause:—

‘(1) A company may, if the following conditions are satisfied, pay a commission to a person in consideration of his subscribing or agreeing to subscribe (whether absolutely or conditionally) for shares in the company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for shares in the company,

(2) The conditions are—

(a) the payment of the commission is authorised by the company’s articles;

(b) the commission paid or agreed to be paid does not exceed—

(i) 10% of the price at which the shares are issued, or

(ii) the amount or rate authorised by the articles,

whichever is the less.

(3) A vendor to, or promoter of, or other person who receives payment in money or shares from, a company may apply any part of the money or shares so received in payment of any commission the payment of which directly by the company would be permitted by this section.’.

Registration of allotment

Margaret Hodge

NC59

To move the following Clause:—

‘(1) A company must register an allotment of shares as soon as practicable and in any event within two months after the date of the allotment.

(2) This does not apply if the company has issued a share warrant in respect of the shares (see section (Issue and effect of share warrant to bearer).

(3) If a company fails to comply with this section, 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 2 on the standard scale.

(5) For the company’s duties as to the issue of share certificates etc, see Part 21 (certification and transfer of securities)’.

Return of allotment by limited company

Margaret Hodge

NC60

To move the following Clause:—

‘(1) This section applies to a company limited by shares and to a company limited by guarantee and having a share capital.

(2) The company must, within one month of making an allotment of shares, deliver to the registrar for registration a return of the allotment.

(3) The return must—

(a) contain the prescribed information, and

(b) be accompanied by a statement of capital.

(4) The statement of capital must state with respect to the company’s share capital at the date to which the return is made up—

(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).’.

Return of allotment by unlimited company allotting new class of shares

Margaret Hodge

NC61

To move the following Clause:—

‘(1) This section applies to an unlimited company that allots shares of a class with rights that are not in all respects uniform with shares previously allotted.

(2) The company must, within one month of making such an allotment, deliver to the registrar for registration a return of the allotment.

(3) The return must contain the prescribed particulars of the rights attached to the shares.

(4) For the purposes of this section shares are not to be treated as different from shares previously allotted by reason only that the former do not carry the same rights to dividends as the latter during the twelve months immediately following the former’s allotment.’.

Offence of failure to make return

Margaret Hodge

NC62

To move the following Clause:—

‘(1) If a company makes default in complying with—

section (return of allotment by limited company) (return of allotment of shares by limited company), or

section (return of allotment by unlimited company of new class of shares) (return of allotment of new class of shares by unlimited company),

an offence is committed by every officer of the company who is in default.

(2) 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-tenth of the statutory maximum.

(3) In the case of default in delivering to the registrar within one month after the allotment the return required by section (return of allotment of shares by limited company) or (return of allotment of new class of shares by unlimited company)—

(a) any person liable for the default may apply to the court for relief, and

(b) the court, if satisfied—

(i) that the omission to deliver the document was accidental or due to inadvertence, or

(ii) that it is just and equitable to grant relief,

may make an order extending the time for delivery of the document for such period as the court thinks proper.’.

When shares are allotted

Margaret Hodge

NC63

To move the following Clause:—

‘For the purposes of the Companies Acts shares in a company are taken to be allotted when a person acquires the unconditional right to be included in the company’s register of members in respect of the shares.’.

Provisions about allotment not applicable to shares taken on formation

Margaret Hodge

NC64

To move the following Clause:—

‘The provisions of this Chapter have no application in relation to the taking of shares by the subscribers to the memorandum on the formation of the company.’.

Meaning of “equity securities” and related expressions

Margaret Hodge

NC65

To move the following Clause:—

‘(1) In this Chapter—

“equity securities” means—

(d) rights to subscribe for, or to convert securities into, ordinary shares in the company;

“ordinary shares” means shares other than shares that as respects dividends and capital carry a right to participate only up to a specified amount in a distribution.

(2) References in this Chapter to the allotment of equity securities include—

(a) the grant of a right to subscribe for, or to convert any securities into, ordinary shares in the company, and

(b) the sale of ordinary shares in the company that immediately before the sale are held by the company as treasury shares.’.

Existing shareholders’ right of pre-emption

Margaret Hodge

NC66

To move the following Clause:—

‘(1) A company must not allot equity securities to a person on any terms unless—

(a) it has made an offer to each person who holds ordinary shares in the company to allot to him on the same or more favourable terms a proportion of those securities that is as nearly as practicable equal to the proportion in nominal value held by him of the ordinary share capital of the company, and

(b) the period during which any such offer may be accepted has expired or the company has received notice of the acceptance or refusal of every offer so made.

(2) Securities that a company has offered to allot to a holder of ordinary shares may be allotted to him, or anyone in whose favour he has renounced his right to their allotment, without contravening subsection (1)(b).

(3) If subsection (1) applies in relation to the grant of such a right, it does not apply in relation to the allotment of shares in pursuance of that right.

(4) Shares held by the company as treasury shares are disregarded for the purposes of this section, so that—

(a) the company is not treated as a person who holds ordinary shares, and

(b) the shares are not treated as forming part of the ordinary share capital of the company.

(5) This section is subject to—

(a) sections (Exception to pre-emption right: bonus shares) to (Exception to pre-emption right: securities held under employees’ share scheme) (exceptions to pre-emption right),

(b) sections (Exclusion of requirements by private companies) and (Exclusion of pre-emption right: articles conferring corresponding right) (exclusion of rights of pre-emption),

(c) sections (Disapplication of pre-emption rights: private company with only one class of shares) to (Disapplication of pre-emption rights: sale of treasury shares) (disapplication of pre-emption rights), and

(d) section (Saving for certain older pre-emption requirements) (saving for certain older pre-emption procedures).’.

Communication of pre-emption offers to shareholders

Margaret Hodge

NC67

To move the following Clause:—

‘(1) This section has effect as to the manner in which offers required by section (Existing shareholders’ right of pre-emption) are to be made to holders of a company’s shares.

(2) The offer may be made in hard copy or electronic form.

(3) If the holder is the holder of a share warrant, the offer may be made by causing it, or a notice specifying where a copy of it can be obtained or inspected, to be published in the Gazette.

(4) The offer must state a period of not less than 21 days during which it may be accepted and the offer shall not be withdrawn before the end of that period.

(5) The Secretary of State may by regulations made by statutory instrument—

(a) reduce the period specified in subsection (4) (but not to less than 14 days), or

(b) increase that period.

(6) A statutory instrument containing regulations made under subsection (5) is subject to affirmative resolution procedure.’.

Liability of company and officers in case of contravention

Margaret Hodge

NC68

To move the following Clause:—

‘(1) This section applies where there is a contravention of—

section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption), or

section (Communication of pre-emption offers to shareholders) (communication of pre-emption offers to shareholders).

(2) The company and every officer of it who knowingly authorised or permitted the contravention are jointly and severally liable to compensate any person to whom an offer should have been made in accordance with those provisions for any loss, damage, costs or expenses which the person has sustained or incurred by reason of the contravention.

(3) No proceedings to recover any such loss, damage, costs or expenses shall be commenced after the expiration of two years—

(a) from the delivery to the registrar of companies of the return of allotment in question, or

(b) where equity securities other than shares are granted, from the date of the grant.

Exception to pre-emption right: bonus shares

Margaret Hodge

NC69

To move the following Clause:—

‘Section (Existing shareholders’ right of pre-emption)(1) (existing shareholders’ right of pre-emption) does not apply in relation to—

(a) the allotment of bonus shares, or

(b) the grant of a right to subscribe for, or to convert securities into, bonus shares.’.

Exception to pre-emption right: issue for non-cash consideration

Margaret Hodge

NC70

To move the following Clause:—

‘Section (Existing shareholders’ right of pre-emption)(1) (existing shareholders’ right of pre-emption) does not apply to a particular allotment of equity securities if these are, or are to be, wholly or partly paid up otherwise than in cash.’.

Exception to pre-emption right: securities held under employees’ share scheme

Margaret Hodge

NC71

To move the following Clause:—

‘Section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption) does not apply to the allotment of securities that would, apart from any renunciation or assignment of the right to their allotment, be held under an employees’ share scheme.’.

Exclusion of requirements by private companies

Margaret Hodge

NC72

To move the following Clause:—

‘(1) All or any of the requirements of—

(a) section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption), or

(b) section (Communication of pre-emption offers to shareholders) (communication of pre-emption offers to shareholders),

may be excluded by provision contained in the articles of a private company.

(2) They may be excluded—

(a) generally in relation to the allotment by the company of equity securities, or

(b) in relation to allotments of a particular description.

(3) Any requirement or authorisation contained in the articles of a private company that is inconsistent with either of those sections is treated for the purposes of this section as a provision excluding that section.

(4) A provision to which section (Exclusion of pre-emption right: articles conferring corresponding right) applies (exclusion of pre-emption right: corresponding right conferred by articles) is not to be treated as inconsistent with section (Existing shareholders’ right of pre-emption).’.

Exclusion of pre-emption right: articles conferring corresponding right

Margaret Hodge

NC73

To move the following Clause:—

‘(1) The provisions of this section apply where, in a case in which section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption) would otherwise apply—

(a) a company’s articles contain provision (“pre-emption provision”) prohibiting the company from allotting ordinary shares of a particular class unless it has complied with the condition that it makes such an offer as is described in section (Existing shareholders’ right of pre-emption)(1) to each person who holds ordinary shares of that class, and

(b) in accordance with that provision—

(i) the company makes an offer to allot shares to such a holder, and

(ii) he or anyone in whose favour he has renounced his right to their allotment accepts the offer.

(2) In that case, section (Existing shareholders’ right of pre-emption) does not apply to the allotment of those shares and the company may allot them accordingly.

(3) The provisions of section (Communication of pre-emption offers to shareholders) (communication of pre-emption offers to shareholders) apply in relation to offers made in pursuance of the pre-emption provision of the company’s articles.

This is subject to section (Exclusion of requirements by private companies) (exclusion of requirements by private companies).

(4) If there is contravention of the pre-emption provision of the company’s articles, the company, and every officer of it who knowingly authorised or permitted the contravention, are jointly and severally liable to compensate any person to whom an offer should have been made under the provision for any loss, damage, costs or expenses which the person has sustained or incurred by reason of the contravention.

(5) No proceedings to recover any such loss, damage, costs or expenses shall be commenced after the expiration of two years—

(a) from the delivery to the registrar of companies of the return of allotment, or

(b) where equity securities other than shares are granted, from the date of the grant.’.

Prepared: 20 July 2006