House of Commons - Amendments

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

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Registration of order and statement of capital

Margaret Hodge

NC154

To move the following Clause:—

‘(1) The registrar, on production of an order of the court confirming the reduction of a company’s share capital and the delivery of a copy of the order and of a statement of capital (approved by the court), shall register the order and statement.

This is subject to section (Public company reducing capital below authorised minimum) (public company reducing capital below authorised minimum).

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

(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 resolution for reducing share capital, as confirmed by the court’s order, takes effect—

(a) in the case of a reduction of share capital that forms part of a compromise or arrangement sanctioned by the court under Part (Arrangements and reconstructions) (arrangements and reconstructions)—

(i) on delivery of the order and statement of capital to the registrar, or

(ii) if the court so orders, on the registration of the order and statement of capital;

(b) in any other case, on the registration of the order and statement of capital.

(4) Notice of the registration of the order and statement of capital must be published in such manner as the court may direct.

(5) The registrar must certify the registration of the order and statement of capital.

(6) The certificate—

(a) must be signed by the registrar or authenticated by the registrar’s official seal, and

(b) is conclusive evidence—

(i) that the requirements of this Act with respect to the reduction of share capital have been complied with, and

(ii) that the company’s share capital is as stated in the statement of capital.’.

Public company reducing capital below authorised minimum

Margaret Hodge

NC155

To move the following Clause:—

‘(1) This section applies where the court makes an order confirming a reduction of a public company’s capital that has the effect of bringing the nominal value of its allotted share capital below the authorised minimum (see section 538).

(2) The registrar must not register the order unless either—

(a) the court so directs, or

(b) the company is first re-registered as a private company.

(3) Section (Expedited procedure for re-registration as a private company) provides an expedited procedure for re-registration in these circumstances.’.

Expedited procedure for re-registration as a private company

Margaret Hodge

NC156

To move the following Clause:—

‘(1) The court may authorise the company to be re-registered as a private company without its having passed the special resolution required by section 97.

(2) If it does so, the court must specify in the order the changes to the company’s name and articles to be made in connection with the re-registration.

(3) The company may then be re-registered as a private company if an application to that effect is delivered to the registrar together with—

(a) a copy of the court’s order, and

(b) notice of the company’s name, and a copy of the company’s articles, as altered by the court’s order.

(4) On receipt of such an application the registrar must issue a certificate of incorporation altered to meet the circumstances of the case.

(5) The certificate must state that it is issued on re-registration and the date on which it is issued.

(6) 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.

(7) The certificate is conclusive evidence that the requirements of this Act as to re-registration have been complied with.’.

Liability of members following reduction of capital

Margaret Hodge

NC157

To move the following Clause:—

‘(1) Where a company’s share capital is reduced a member of the company (past or present) is not liable in respect of any share to any call or contribution exceeding in amount the difference (if any) between—

(a) the nominal amount of the share as notified to the registrar in the statement of capital delivered under section (Registration of resolution and supporting documents) or (Registration of order and statement of capital), and

(b) the amount paid on the share or the reduced amount (if any) which is deemed to have been paid on it, as the case may be.

(2) This is subject to section (Liability to creditor in case of omission from list of creditors) (liability to creditor in case of omission from list).

(3) Nothing in this section affects the rights of the contributories among themselves.’.

Liability to creditor in case of omission from list of creditors

Margaret Hodge

NC158

To move the following Clause:—

‘(1) This section applies where, in the case of a reduction of capital confirmed by the court—

(a) a creditor entitled to object to the reduction of share capital is by reason of his ignorance—

(i) of the proceedings for reduction of share capital, or

(ii) of their nature and effect with respect to his debt or claim,

not entered on the list of creditors, and

(b) after the reduction of capital the company is unable to pay the amount of his debt or claim.

(2) Every person who was a member of the company at the date on which the resolution for reducing capital took effect under section (Registration of order and statement of capital)(3) is liable to contribute for the payment of the debt or claim an amount not exceeding that which he would have been liable to contribute if the company had commenced to be wound up on the day before that date.

(3) If the company is wound up, the court on the application of the creditor in question, and proof of ignorance as mentioned in subsection (1)(a), may (if it thinks fit)—

(a) settle accordingly a list of persons liable to contribute under this section, and

(b) make and enforce calls and orders on them as if they were ordinary contributories in a winding up.

(4) The reference in subsection (1)(b) to a company being unable to pay the amount of a debt or claim has the same meaning as in section 123 of the Insolvency Act 1986 (c. 45) or Article 103 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).’.

Shares no bar to damages against company

Margaret Hodge

NC159

To move the following Clause:—

‘A person is not debarred from obtaining damages or other compensation from a company by reason only of his holding or having held shares in the company or any right to apply or subscribe for shares or to be included in the company’s register of members in respect of shares.’.

Public companies: duty of directors to call meeting on serious loss of capital

Margaret Hodge

NC160

To move the following Clause:—

‘(1) Where the net assets of a public company are half or less of its called-up share capital, the directors must call a general meeting of the company to consider whether any, and if so what, steps should be taken to deal with the situation.

(2) They must do so not later than 28 days from the earliest day on which that fact is known to a director of the company.

(3) The meeting must be convened for a date not later than 56 days from that day.

(4) If there is a failure to convene a meeting as required by this section, each of the directors of the company who—

(a) knowingly authorises or permits the failure, or

(b) after the period during which the meeting should have been convened, knowingly authorises or permits the failure to continue,

commits an offence.

(5) 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.

(6) Nothing in this section authorises the consideration at a meeting convened in pursuance of subection (1) of any matter that could not have been considered at that meeting apart from this section.’.

General power to make further provision by regulations

Margaret Hodge

NC161

To move the following Clause:—

‘(1) The Secretary of State may by regulations modify the following provisions of this Part—

Sections (General prohibition of commissions, discounts and allowances) and (Permitted commission),

Chapter (Payment for shares) (payment for shares),

Chapter (Public companies: independent valuation of non-cash consideration) (public companies: independent valuation of non-cash consideration),

Chapter (Share premiums) (share premiums),

sections (Redenomination of share capital) to (Redenomination reserve) (redenomination of share capital),

Chapter (Reduction of share capital) (reduction of capital), and

section (Public companies: duty of directors to call meeting on serious loss of capital) (public companies: duty of directors to call meeting on serious loss of capital).

(2) The regulations may—

(a) amend or repeal any of those provisions, or

(b) make such other provision as appears to the Secretary of State appropriate in place of any of those provisions.

(3) Regulations under this section may make consequential amendments or repeals in other provisions of this Act, or in other enactments.

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

General rule against limited company acquiring its own shares

Margaret Hodge

NC162

To move the following Clause:—

‘(1) A limited company must not acquire its own shares, whether by purchase, subscription or otherwise, except in accordance with the provisions of this Part.

(2) If a company purports to act in contravention of this section—

(a) an offence is committed by—

(i) the company, and

(ii) every officer of the company who is in default, and

(b) the purported acquisition is void.

(3) 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 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 a fine not exceeding the statutory maximum (or both).’.

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

(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

(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 Building Societies Act 1986 (c. 53);

(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;

(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,

(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

(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.’.

Prepared: 20 July 2006