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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.’.


Joint offers

Margaret Hodge

NC365

    To move the following Clause:—

      ‘(1) In the case of a takeover offer made by two or more persons jointly, this Chapter has effect as follows.

      (2) The conditions for the exercise of the rights conferred by section (Right of offeror to buy out minority shareholder) are satisfied—

        (a) in the case of acquisitions by virtue of acceptances of the offer, by the joint offerors acquiring or unconditionally contracting to acquire the necessary shares jointly;

        (b) in other cases, by the joint offerors acquiring or unconditionally contracting to acquire the necessary shares either jointly or separately.

      (3) The conditions for the exercise of the rights conferred by section (Right of minority shareholder to be bought out by offeror) are satisfied—

        (a) in the case of acquisitions by virtue of acceptances of the offer, by the joint offerors acquiring or unconditionally contracting to acquire the necessary shares jointly;

        (b) in other cases, by the joint offerors acquiring or contracting (whether unconditionally or subject to conditions being met) to acquire the necessary shares either jointly or separately.

      (4) Subject to the following provisions, the rights and obligations of the offeror under sections (Right of offeror to buy out minority shareholder) to (Effect of requirement under section (Right of minority shareholder to be bought out by offeror)) are respectively joint rights and joint and several obligations of the joint offerors.

      (5) A provision of sections (Right of offeror to buy out minority shareholder) to (Applications to the court) that requires or authorises a notice or other document to be given or sent by or to the joint offerors is complied with if the notice or document is given or sent by or to any of them (but see subsection (6)).

      (6) The statutory declaration required by section (Further provision about notices given under section (Right of offeror to buy out minority shareholder))(4) must be made by all of the joint offerors and, where one or more of them is a company, signed by a director of the company.

      (7) In sections (Meaning of “takeover offer”) to (Shares to which an offer relates), (Right of offeror to buy out minority shareholder)(9), (Effect of notice under section (Right of offeror to buy out minority shareholder))(6), (Right of minority shareholder to be bought out by offeror)(8) and (Associates) references to the offeror are to be read as references to the joint offerors or any of them.

      (8) In section (Effect of notice under section (Right of offeror to buy out minority shareholder))(7) and (8) references to the offeror are to be read as references to the joint offerors or such of them as they may determine.

      (9) In sections (Effect of notice under section (Right of offeror to buy out minority shareholder))(5)(a) and (Effect of requirement under section (Right of minority shareholder to be bought out by offeror))(5)(a) references to the offeror being no longer able to provide the relevant consideration are to be read as references to none of the joint offerors being able to do so.

      (10) In section (Applications to the court) references to the offeror are to be read as references to the joint offerors, except that—

        (a) an application under subsection (3) or (9) may be made by any of them, and

        (b) the reference in subsection (9)(a) to the offeror having been unable to trace one or more of the persons holding shares is to be read as a reference to none of the offerors having been able to do so.’.


Associates

Margaret Hodge

NC366

    To move the following Clause:—

      ‘(1) In this Chapter “associate”, in relation to an offeror, means—

        (a) a nominee of the offeror,

        (b) a holding company, subsidiary or fellow subsidiary of the offeror or a nominee of such a holding company, subsidiary or fellow subsidiary,

        (c) a body corporate in which the offeror is substantially interested,

        (d) a person who is, or is a nominee of, a party to a share acquisition agreement with the offeror, or

        (e) (where the offeror is an individual) his spouse or civil partner and any minor child or step-child of his.

      (2) For the purposes of subsection (1)(b) a company is a fellow subsidiary of another body corporate if both are subsidiaries of the same body corporate but neither is a subsidiary of the other.

      (3) For the purposes of subsection (1)(c) an offeror has a substantial interest in a body corporate if—

        (a) the body or its directors are accustomed to act in accordance with his directions or instructions, or

        (b) he is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of the body.

      Subsections (2) and (3) of section 630 (which contain provision about when a person is treated as entitled to exercise or control the exercise of voting power) apply for the purposes of this subsection as they apply for the purposes of that section.

      (4) For the purposes of subsection (1)(d) an agreement is a share acquisition agreement if—

        (a) it is an agreement for the acquisition of, or of an interest in, shares to which the offer relates,

        (b) it includes provisions imposing obligations or restrictions on any one or more of the parties to it with respect to their use, retention or disposal of such shares, or their interests in such shares, acquired in pursuance of the agreement (whether or not together with any other shares to which the offer relates or any other interests of theirs in such shares), and

        (c) it is not an excluded agreement (see subsection (5)).

      (5) An agreement is an “excluded agreement”—

        (a) if it is not legally binding, unless it involves mutuality in the undertakings, expectations or understandings of the parties to it, or

        (b) if it is an agreement to underwrite or sub-underwrite an offer of shares in the company, provided the agreement is confined to that purpose and any matters incidental to it.

      (6) The reference in subsection (4)(b) to the use of interests in shares is to the exercise of any rights or of any control or influence arising from those interests (including the right to enter into an agreement for the exercise, or for control of the exercise, of any of those rights by another person).

      (7) In this section—

        (a) “agreement” includes any agreement or arrangement;

        (b) references to provisions of an agreement include—

          (i) undertakings, expectations or understandings operative under an arrangement, and

          (ii) any provision whether express or implied and whether absolute or not.’.


Convertible securities

Margaret Hodge

NC367

    To move the following Clause:—

      ‘(1) For the purposes of this Chapter securities of a company are treated as shares in the company if they are convertible into or entitle the holder to subscribe for such shares.

      References to the holder of shares or a shareholder are to be read accordingly.

      (2) Subsection (1) is not to be read as requiring any securities to be treated—

        (a) as shares of the same class as those into which they are convertible or for which the holder is entitled to subscribe, or

        (b) as shares of the same class as other securities by reason only that the shares into which they are convertible or for which the holder is entitled to subscribe are of the same class.’.


Debentures carrying voting rights

Margaret Hodge

NC368

    To move the following Clause:—

      ‘(1) For the purposes of this Chapter debentures issued by a company to which subsection (2) applies are treated as shares in the company if they carry voting rights.

      (2) This subsection applies to a company that has voting shares, or debentures carrying voting rights, which are admitted to trading on a regulated market.

      (3) In this Chapter, in relation to debentures treated as shares by virtue of subsection (1)—

        (a) references to the holder of shares or a shareholder are to be read accordingly;

        (b) references to shares being allotted are to be read as references to debentures being issued.’.


Interpretation

Margaret Hodge

NC369

    To move the following Clause:—

      ‘(1) In this Chapter—

      “the company” means the company whose shares are the subject of a takeover offer;

      “date of the offer” means—

      (m) where the offer is published, the date of publication;

      (n) where the offer is not published, or where any notices of the offer are given before the date of publication, the date when notices of the offer (or the first such notices) are given;

      “non-voting shares” means shares that are not voting shares;

      “offeror” means (subject to section (Joint offers)) the person making a takeover offer;

      “voting rights” means rights to vote at general meetings of the company, including rights that arise only in certain circumstances;

      “voting shares” means shares carrying voting rights.

      (2) For the purposes of this Chapter a person contracts unconditionally to acquire shares if his entitlement under the contract to acquire them is not (or is no longer) subject to conditions or if all conditions to which it was subject have been met.

      A reference to a contract becoming unconditional is to be read accordingly.’.


 
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Prepared: 20 July 2006