House of Commons - Amendments

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

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The capital redemption reserve

Margaret Hodge

NC237

To move the following Clause:—

‘(1) Where under this Part shares of a limited company are redeemed or purchased wholly out of the company’s profits, the amount by which the company’s issued share capital is diminished—

(a) on cancellation of the shares redeemed or purchased (see section (Redeemed shares treated as cancelled) or (Treatment of shares purchased)(3)), or

(b) on cancellation of shares held as treasury shares (see section (Treasury shares: cancellation),

must be transferred to a reserve, called the “capital redemption reserve”.

(2) Where—

(a) the shares are redeemed or purchased wholly or partly out of the proceeds of a fresh issue, and

(b) the aggregate amount of the proceeds is less than the aggregate nominal value of the shares redeemed or purchased,

the amount of the difference must be transferred to the capital redemption reserve.

(3) Subsection (2) does not apply in the case of a private company if, in addition to the proceeds of the fresh issue, the company applies a payment out of capital under Chapter (Redemption or purchase by private company out of capital) in making the purchase of shares.

(4) The company may use the capital redemption reserve to pay up new shares to be allotted to members as fully paid bonus shares.

(5) Subject to that, the provisions of the Companies Acts relating to the reduction of a company’s share capital apply as if the capital redemption reserve were part of its paid up share capital.’.

Accounting consequences of payment out of capital

Margaret Hodge

NC238

To move the following Clause:—

‘(1) This section applies where a payment out of capital is made in accordance with Chapter (Redemption or purchase by private company out of capital) (redemption or purchase of own shares by private company out of capital).

(2) If the permissible capital payment is less than the nominal amount of the shares redeemed or purchased, the amount of the difference must be transferred to the company’s capital redemption reserve.

(3) If the permissible capital payment is greater than the nominal amount of the shares redeemed or purchased—

(a) the amount of any capital redemption reserve, share premium account or fully paid share capital of the company, and

(b) any amount representing unrealised profits of the company for the time being standing to the credit of any revaluation reserve maintained by the company,

may be reduced by a sum not exceeding (or by sums not in total exceeding) the amount by which the permissible capital payment exceeds the nominal amount of the shares.

(4) Where the proceeds of a fresh issue are applied by the company in making a redemption or purchase of its own shares in addition to a payment out of capital under this Chapter, the references in subsections (2) and (3) to the permissible capital payment are to be read as referring to the aggregate of that payment and those proceeds.’.

Effect of company’s failure to redeem or purchase

Margaret Hodge

NC239

To move the following Clause:—

‘(1) This section applies where a company—

(a) issues shares on terms that they are or are liable to be redeemed, or

(b) agrees to purchase any of its shares.

(2) The company is not liable in damages in respect of any failure on its part to redeem or purchase any of the shares.

This is without prejudice to any right of the holder of the shares other than his right to sue the company for damages in respect of its failure.

(3) The court shall not grant an order for specific performance of the terms of redemption or purchase if the company shows that it is unable to meet the costs of redeeming or purchasing the shares in question out of distributable profits.

(4) If the company is wound up and at the commencement of the winding up any of the shares have not been redeemed or purchased, the terms of redemption or purchase may be enforced against the company.

When shares are redeemed or purchased under this subsection, they are treated as cancelled.

(5) Subsection (4) does not apply if—

(a) the terms provided for the redemption or purchase to take place at a date later than that of the commencement of the winding up, or

(b) during the period—

(i) beginning with the date on which the redemption or purchase was to have taken place, and

(ii) ending with the commencement of the winding up,

the company could not at any time have lawfully made a distribution equal in value to the price at which the shares were to have been redeemed or purchased.

(6) There shall be paid in priority to any amount that the company is liable under subsection (4) to pay in respect of any shares—

(a) all other debts and liabilities of the company (other than any due to members in their character as such), and

(b) if other shares carry rights (whether as to capital or as to income) that are preferred to the rights as to capital attaching to the first-mentioned shares, any amount due in satisfaction of those preferred rights.

Subject to that, any such amount shall be paid in priority to any amounts due to members in satisfaction of their rights (whether as to capital or income) as members.’.

Meaning of “distributable profits”

Margaret Hodge

NC240

To move the following Clause:—

‘In this Part (except in Chapter (Financial assistance for purchase of own shares) (financial assistance): see section (Definitions for this Chapter) “distributable profits”, in relation to the making of any payment by a company, means profits out of which the company could lawfully make a distribution (within the meaning given by section (Distributions to be made only out of profits available for the purpose)) equal in value to the payment.’.

General power to make further provision by regulations

Margaret Hodge

NC241

To move the following Clause:—

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

(2) The regulations may—

(a) amend or repeal any of the provisions of this Part, or

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

(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.’.

Meaning of “debenture”

Margaret Hodge

NC242

To move the following Clause:—

‘In the Companies Acts “debenture” includes debenture stock, bonds and any other securities of a company, whether or not constituting a charge on the assets of the company.’.

Perpetual debentures

Margaret Hodge

NC243

To move the following Clause:—

‘(1) A condition contained in debentures, or in a deed for securing debentures, is not invalid by reason only that the debentures are thereby made—

(a) irredeemable, or

(b) redeemable only—

(i) on the happening of a contingency (however remote), or

(ii) on the expiration of a period (however long),

any rule of equity to the contrary notwithstanding.

(2) Subsection (1) applies to debentures whenever issued and to deeds whenever executed.’.

Enforcement of contract to subscribe for debentures

Margaret Hodge

NC244

To move the following Clause:—

‘A contract with a company to take up and pay for debentures of the company may by enforced by an order for specific performance.’.

Registration of allotment of debentures

Margaret Hodge

NC245

To move the following Clause:—

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

(2) 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.

(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.

(4) For the duties of the company as to the issue of the debentures, or certificates of debenture stock, see Part 22 (certification and transfer of securities).’.

Debentures to bearer (Scotland)

Margaret Hodge

NC246

To move the following Clause:—

‘Notwithstanding anything in the statute of the Scots Parliament of 1696, chapter 25, debentures to bearer issued in Scotland are valid and binding according to their terms.’.

Register of debenture holders

Margaret Hodge

NC247

To move the following Clause:—

‘(1) Any register of debenture holders of a company that is kept by the company must be kept available for inspection—

(a) at the company’s registered office, or

(b) at another place in the part of the United Kingdom in which the company is registered.

(2) A company must give notice to the registrar of the place where any such register is kept available for inspection and of any change in that place.

(3) No such notice is required if the register has, at all times since it came into existence, been kept available for inspection at the company’s registered office.

(4) If a company makes default for 14 days in complying with subsection (2), 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 in the case of continued contravention to a daily default fine not exceeding one-tenth of level 3 on the standard scale.

(6) References in this section to a register of debenture holders include a duplicate—

(a) of a register of debenture holders that is kept outside the United Kingdom, or

(b) of any part of such a register.’.

Register of debenture holders: right to inspect and require copy

Margaret Hodge

NC248

To move the following Clause:—

‘(1) Every register of debenture holders of a company must, except when duly closed, be open to the inspection—

(a) of the registered holder of any such debentures, or any holder of shares in the company, without charge, and

(b) of any other person on payment of such fee as may be prescribed.

(2) Any person may require a copy of the register, or any part of it, on payment of such fee as may be prescribed.

(3) A person seeking to exercise either of the rights conferred by this section must make a request to the company to that effect.

(4) The request must contain the following information—

(a) in the case of an individual, his name and address;

(b) in the case of an organisation, the name and address of an individual responsible for making the request on behalf of the organisation;

(d) whether the information will be disclosed to any other person, and if so—

(i) where that person is an individual, his name and address,

(ii) where that person is an organisation, the name and address of an individual responsible for receiving the information on its behalf, and

(iii) the purpose for which the information is to be used by that person.

(5) For the purposes of this section a register is “duly closed” if it is closed in accordance with provision contained—

(a) in the articles or in the debentures,

(b) in the case of debenture stock in the stock certificates, or

The total period for which a register is closed in any year must not exceed 30 days.

(6) References in this section to a register of debenture holders include a duplicate—

(a) of a register of debenture holders that is kept outside the United Kingdom, or

(b) of any part of such a register.’.

Register of debenture holders: response to request for inspection or copy

Margaret Hodge

NC249

To move the following Clause:—

‘(1) Where a company receives a request under section (Register of debenture holders: right to inspect and require copy) (register of debenture holders: right to inspect and require copy), it must within five working days either—

(a) comply with the request, or

(b) apply to the court.

(2) If it applies to the court it must notify the person making the request.

(3) If on an application under this section the court is satisfied that the inspection or copy is not sought for a proper purpose—

(a) it shall direct the company not to comply with the request, and

(b) it may further order that the company’s costs (in Scotland, expenses) on the application be paid in whole or in part by the person who made the request, even if he is not a party to the application.

(4) If the court makes such a direction and it appears to the court that the company is or may be subject to other requests made for a similar purpose (whether made by the same person or different persons), it may direct that the company is not to comply with any such request.

The order must contain such provision as appears to the court appropriate to identify the requests to which it applies.

(5) If on an application under this section the court does not direct the company not to comply with the request, the company must comply with the request immediately upon the court giving its decision or, as the case may be, the proceedings being discontinued.’.

Register of debenture holders: refusal of inspection or default in providing copy

Margaret Hodge

NC250

To move the following Clause:—

‘(1) If an inspection required under section (Register of debenture holders: right to inspect and require copy) (register of debenture holders: right to inspect and require copy) is refused or default is made in providing a copy required under that section, otherwise than in accordance with an order of the court, an offence is committed by—

(a) the company, and

(b) every officer of the company who is in default.

(2) 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.

(3) In the case of any such refusal or default the court may by order compel an immediate inspection or, as the case may be, direct that the copy required be sent to the person requesting it.’.

Register of debenture holders: offences in connection with request for or disclosure of information

Margaret Hodge

NC251

To move the following Clause:—

‘(1) It is an offence for a person knowingly or recklessly to make in a request under section (Register of debenture holders: right to inspect and require copy) (register of debenture holders: right to inspect and require copy) a statement that is misleading, false or deceptive in a material particular.

(2) It is an offence for a person in possession of information obtained by exercise of either of the rights conferred by that section—

(a) to do anything that results in the information being disclosed to another person, or

(b) to fail to do anything with the result that the information is disclosed to another person,

knowing or having reason to suspect that person may use the information for a purpose that is not a proper purpose.

(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 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).’.

Time limit for claims arising from entry in register

Margaret Hodge

NC252

To move the following Clause:—

‘(1) Liability incurred by a company—

(a) from the making or deletion of an entry in the register of debenture holders, or

(b) from a failure to make or delete any such entry,

is not enforceable more than ten years after the date on which the entry was made or deleted or, as the case may be, the failure first occurred.

(2) This is without prejudice to any lesser period of limitation (and, in Scotland, to any rule that the obligation giving rise to the liability prescribes before the expiry of that period).’.

Right of debenture holder to copy of deed

Margaret Hodge

NC253

To move the following Clause:—

‘(1) Any holder of debentures of a company is entitled, on request and on payment of such fee as may be prescribed, to be provided with a copy of any trust deed for securing the debentures.

(2) If default is made in complying with this section, an offence is committed by every officer of the company who is in default.

(4) In the case of any such default the court may direct that the copy required be sent to the person requiring it.’.

Liability of trustees of debentures

Margaret Hodge

NC254

To move the following Clause:—

‘(1) Any provision contained in—

(a) a trust deed for securing an issue of debentures, or

(b) any contract with the holders of debentures secured by a trust deed,

is void in so far as it would have the effect of exempting a trustee of the deed from, or indemnifying him against, liability for breach of trust where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust deed conferring on him any powers, authorities or discretions.

(2) Subsection (1) does not invalidate—

(a) a release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release;

(b) any provision enabling such a release to be given—

(i) on being agreed to by a majority of not less than 75% in value of the debenture holders present and voting in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose, and

(ii) either with respect to specific acts or omissions or on the trustee dying or ceasing to act.

(3) This section is subject to section (Liability of trustees of debentures: saving for certain older provisions) (saving for certain older provisions).’.

Liability of trustees of debentures: saving for certain older provisions

Margaret Hodge

NC255

To move the following Clause:—

‘(1) Section (Liability of trustees of debentures) (liability of trustees of debentures) does not operate—

(a) to invalidate any provision in force on the relevant date so long as any person—

(i) then entitled to the benefit of the provision, or

(ii) afterwards given the benefit of the provision under subsection (3) below,

remains a trustee of the deed in question, or

(b) to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.

(2) The relevant date for this purpose is—

(a) 1st July 1948 in a case where section 192 of the Companies Act 1985 (c. 6) applied immediately before the commencement of this section;

(b) 1st July 1961 in a case where Article 201 of the Companies (Northern Ireland) Order 1986 then applied.

(3) While any trustee of a trust deed remains entitled to the benefit of a provision saved by subsection (1) above the benefit of that provision may be given either—

(a) to all trustees of the deed, present and future, or

(b) to any named trustees or proposed trustees of it,

by a resolution passed by a majority of not less than 75% in value of the debenture holders present in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose.

(4) A meeting for that purpose must be summoned in accordance with the provisions of the deed or, if the deed makes no provision for summoning meetings, in a manner approved by the court.’.

Prepared: 20 July 2006