House of Commons - Amendments

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

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Right to object to variation: companies having a share capital

Margaret Hodge

NC138

To move the following Clause:—

‘(1) This section applies where the rights attached to any class of shares in a company are varied under section (Variation of class rights: companies having a share capital) (variation of class rights: companies having a share capital).

(2) The holders of not less in the aggregate than 15% of the issued shares of the class in question (being persons who did not consent to or vote in favour of the resolution for the variation) may apply to the court to have the variation cancelled.

For this purpose any of the company’s share capital held as treasury shares is disregarded.

(3) If such an application is made, the variation has no effect unless and until it is confirmed by the court.

(4) Application to the court—

(a) must be made within 21 days after the date on which the consent was given or the resolution was passed (as the case may be), and

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

(5) The court, after hearing the applicant and any other persons who apply to the court to be heard and appear to the court to be interested in the application, may, if satisfied having regard to all the circumstances of the case that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation, and shall if not satisfied confirm it.

The decision of the court on any such application is final.

(6) References in this section to the variation of the rights of holders of a class of shares include references to their abrogation.’.

Right to object to variation: companies without a share capital

Margaret Hodge

NC139

To move the following Clause:—

‘(1) This section applies where the rights of any class of members of a company are varied under section (Variation of class rights: companies without a share capital) (variation of class rights: companies without a share capital).

(2) Members amounting to not less than 15% of the members of the class in question (being persons who did not consent to or vote in favour of the resolution for the variation) may apply to the court to have the variation cancelled.

(3) If such an application is made, the variation has no effect unless and until it is confirmed by the court.

(4) Application to the court must be made within 21 days after the date on which the consent was given or the resolution was passed (as the case may be) and may be made on behalf of the members entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

(5) The court, after hearing the applicant and any other persons who apply to the court to be heard and appear to the court to be interested in the application, may, if satisfied having regard to all the circumstances of the case that the variation would unfairly prejudice the members of the class represented by the applicant, disallow the variation, and shall if not satisfied confirm it.

The decision of the court on any such application is final.

(6) References in this section to the variation of the rights of a class of members include references to their abrogation.’.

Copy of court order to be forwarded to the registrar

Margaret Hodge

NC140

To move the following Clause:—

‘(1) The company must within 15 days after the making of an order by the court on an application under section (Right to object to variation: companies having a share capital) or (Right to object to variation: companies without a share capital) (objection to variation of class rights) forward a copy of the order to the registrar.

(2) 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.

(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.’.

Notice of name or other designation of class of shares

Margaret Hodge

NC141

To move the following Clause:—

‘(1) Where a company assigns a name or other designation, or a new name or other designation, to any class of its shares, it must within one month from doing so deliver to the registrar a notice giving particulars of the name or designation so assigned.

(2) 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.

Notice of particulars of variation of rights attached to shares

Margaret Hodge

NC142

To move the following Clause:—

‘(1) Where the rights attached to any shares of a company are varied, the company must within one month from the date on which the variation is made deliver to the registrar a notice giving particulars of the variation.

(2) 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.

Notice of new class of members

Margaret Hodge

NC143

To move the following Clause:—

‘(1) If a company not having a share capital creates a new class of members, the company must within one month from the date on which the new class is created deliver to the registrar a notice containing particulars of the rights attached to that class.

(2) 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.

Notice of name or other designation of class of members

Margaret Hodge

NC144

To move the following Clause:—

‘(1) Where a company not having a share capital assigns a name or other designation, or a new name or other designation, to any class of its members, it must within one month from doing so deliver to the registrar a notice giving particulars of the name or designation so assigned.

(2) 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.

Notice of particulars of variation of class rights

Margaret Hodge

NC145

To move the following Clause:—

‘(1) If the rights of any class of members of a company not having a share capital are varied, the company must within one month from the date on which the variation is made deliver to the registrar a statement containing particulars of the variation.

(2) 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.

Circumstances in which a company may reduce its share capital

Margaret Hodge

NC146

To move the following Clause:—

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

(a) in the case of a private company limited by shares, by special resolution supported by a solvency statement (see sections (Reduction of capital supported by solvency statement) to (Registration of resolution and supporting documents));

(b) in any case, by special resolution confirmed by the court (see sections (Application to court for order of confirmation) to (Expedited procedure for re-registration as a private company)).

(2) A company may not reduce its capital under subsection (1)(a) if as a result of the reduction there would no longer be any member of the company holding shares other than redeemable shares.

(3) Subject to that, a company may reduce its share capital under this section in any way.

(4) In particular, a company may—

(a) extinguish or reduce the liability on any of its shares in respect of share capital not paid up, or

(b) either with or without extinguishing or reducing liability on any of its shares—

(i) cancel any paid-up share capital that is lost or unrepresented by available assets, or

(ii) pay off any paid-up share capital in excess of the company’s wants.

(5) A special resolution under this section may not provide for a reduction of share capital to take effect later than the date on which the resolution has effect in accordance with this Chapter.

(6) This Chapter (apart from subsection (5) above) has effect subject to any provision of the company’s articles restricting or prohibiting the reduction of the company’s share capital.’.

Reduction of capital supported by solvency statement

Margaret Hodge

NC147

To move the following Clause:—

‘(1) A resolution for reducing share capital of a private company limited by shares is supported by a solvency statement if—

(a) the directors of the company make a statement of the solvency of the company in accordance with section (Solvency statement) (a “solvency statement”) not more than 15 days before the date on which the resolution is passed, and

(b) the resolution and solvency statement are registered in accordance with section (Registration of resolution and supporting documents).

(2) Where the resolution is proposed as a written resolution, a copy of the solvency statement must be sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him.

(3) Where the resolution is proposed at a general meeting, a copy of the solvency statement must be made available for inspection by members of the company throughout that meeting.

(4) The validity of a resolution is not affected by a failure to comply with subsection (2) or (3).’.

Solvency statement

Margaret Hodge

NC148

To move the following Clause:—

‘(1) A solvency statement is a statement that each of the directors—

(a) has formed the opinion, as regards the company’s situation at the date of the statement, that there is no ground on which the company could then be found to be unable to pay (or otherwise discharge) its debts; and

(b) has also formed the opinion—

(i) if it is intended to commence the winding up of the company within twelve months of that date, that the company will be able to pay (or otherwise discharge) its debts in full within twelve months of the commencement of the winding up; or

(ii) in any other case, that the company will be able to pay (or otherwise discharge) its debts as they fall due during the year immediately following that date.

(2) In forming those opinions, the directors must take into account all of the company’s liabilities (including any contingent or prospective liabilities).

(3) The solvency statement must be in the prescribed form and must state—

(a) the date on which it is made, and

(b) the name of each director of the company.

(4) If the directors make a solvency statement without having reasonable grounds for the opinions expressed in it, and the statement is delivered to the registrar, an offence is committed by every director who is in default.

(5) A person guilty of an offence under subsection (4) 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);

(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).’.

Registration of resolution and supporting documents

Margaret Hodge

NC149

To move the following Clause:—

‘(1) Within 15 days after the resolution for reducing share capital is passed the company must deliver to the registrar—

(a) a copy of the solvency statement, and

(b) a statement of capital.

This is in addition to the copy of the resolution itself that is required to be delivered to the registrar under Chapter 3 of Part 3.

(2) The statement of capital must state with respect to the company’s share capital as reduced by the resolution—

(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).

(3) The registrar must register the documents delivered to him under subsection (1) on receipt.

(4) The resolution does not take effect until those documents are registered.

(5) The company must also deliver to the registrar, within 15 days after the resolution is passed, a statement by the directors confirming that the solvency statement was—

(a) made not more than 15 days before the date on which the resolution was passed, and

(b) provided to members in accordance with section (Reduction of capital supported by solvency statement)(2) or (3).

(6) The validity of a resolution is not affected by—

(a) a failure to deliver the documents required to be delivered to the registrar under subsection (1) within the time specified in that subsection, or

(b) a failure to comply with subsection (5).

(7) If the company delivers to the registrar a solvency statement that was not provided to members in accordance with section (Reduction of capital supported by solvency statement)(2) or (3), an offence is committed by every officer of the company who is in default.

(8) 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.

(9) A person guilty of an offence under subsection (7) or (8) is liable—

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

(b) on summary conviction, to a fine not exceeding the statutory maximum.’.

Application to court for order of confirmation

Margaret Hodge

NC150

To move the following Clause:—

‘(1) Where a company has passed a resolution for reducing share capital, it may apply to the court for an order confirming the reduction.

(2) If the proposed reduction of capital involves either—

(a) diminution of liability in respect of unpaid share capital, or

(b) the payment to a shareholder of any paid-up share capital,

section (Creditors entitled to object to reduction) applies (creditors entitled to object to reduction) unless the court directs otherwise.

(3) The court may, if having regard to any special circumstances of the case it thinks proper to do so, direct that section (Creditors entitled to object to reduction) is not to apply as regards any class or classes of creditors.

(4) The court may direct that section (Creditors entitled to object to reduction) is to apply in any other case.’.

Creditors entitled to object to reduction

Margaret Hodge

NC151

To move the following Clause:—

‘(1) Where this section applies (see section (Application to court for order of confirmation)(2) and (4)), every creditor of the company who at the date fixed by the court is entitled to any debt or claim that, if that date were the commencement of the winding up of the company would be admissible in proof against the company, is entitled to object to the reduction of capital.

(2) The court shall settle a list of creditors entitled to object.

(3) For that purpose the court—

(a) shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and

(b) may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction of capital.

(4) If a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction, the court may, if it thinks fit, dispense with the consent of that creditor on the company securing payment of his debt or claim.

(5) For this purpose the debt or claim must be secured by appropriating (as the court may direct) the following amount—

(a) if the company admits the full amount of the debt or claim or, though not admitting it, is willing to provide for it, the full amount of the debt or claim;

(b) if the company does not admit, and is not willing to provide for, the full amount of the debt or claim, or if the amount is contingent or not ascertained, an amount fixed by the court after the like enquiry and adjudication as if the company were being wound up by the court.’.

Offences in connection with list of creditors

Margaret Hodge

NC152

To move the following Clause:—

‘(1) If an officer of the company—

(a) intentionally or recklessly—

(i) conceals the name of a creditor entitled to object to the reduction of capital, or

(ii) misrepresents the nature or amount of the debt or claim of a creditor, or

(b) is knowingly concerned in any such concealment or misrepresentation,

he commits an offence.

(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.’.

Court order confirming reduction

Margaret Hodge

NC153

To move the following Clause:—

‘(1) The court may make an order confirming the reduction of capital on such terms and conditions as it thinks fit.

(2) The court must not confirm the reduction unless it is satisfied, with respect to every creditor of the company who is entitled to object to the reduction of capital that either—

(a) his consent to the reduction has been obtained, or

(b) his debt or claim has been discharged, or has determined or has been secured.

(3) Where the court confirms the reduction, it may order the company to publish (as the court directs) the reasons for reduction of capital, or such other information in regard to it as the court thinks expedient with a view to giving proper information to the public, and (if the court thinks fit) the causes that led to the reduction.

(4) The court may, if for any special reason it thinks proper to do so, make an order directing that the company must, during such period (commencing on or at any time after the date of the order) as is specified in the order, add to its name as its last words the words “and reduced”.

If such an order is made, those words are, until the end of the period specified in the order, deemed to be part of the company’s name.’.

Prepared: 20 July 2006