Clause 69: Direction to change name: supplementary provisions

165.     This clause replaces section 28(4) and (5) of the 1985 Act as they apply to section 28(2). It provides for deadlines for the Secretary of State's giving the direction and for the company's compliance. It makes failure to comply an offence.

Similarity to other name in which person has goodwill

166.     These clauses respond to the CLR recommendation (Final Report, paragraph 11.50) that there be provision so that a person can apply for a company to be directed to change its name if the applicant can show that the name was chosen with the principal intention of seeking monies from him or preventing him using the name where it is one in which he has previously acquired reputation or goodwill.

Clause 70: Objection to company's registered name

167.     This clause is a new provision. It provides for any person, not just a company, to object to a company names adjudicator if a company's name is similar to a name in which the objector has goodwill. There is list of circumstances raising a presumption that a name was adopted legitimately. The respondent must show that one of these applies, or otherwise that he acted in good faith or that the interests of the applicant are not significantly affected (for example, where the applicant has hardly used the name at all). The objection will be upheld if the respondent cannot do so, or if the objector can show that the name was registered either to obtain money from him or to prevent him using the name.

Clause 71: Company names adjudicators

168.     This clause is a new provision. It provides power for the Secretary of State to appoint company names adjudicators and their staff and to finance their activities. One of the adjudicators is to be appointed Chief Adjudicator.

Clause 72: Procedural rules

169.     This clause is a new provision. It provides power to make regulations for the proceedings before a company names adjudicator. The list of matters which the rules may cover is not exhaustive. It also confers on the Chief Adjudicator power to determine any matter that could be the subject of the rules made under this power.

Clause 73: Order requiring name to be changed

170.     This clause is a new provision. If an objection made under clause 70 is upheld, then the adjudicator is to direct the company with the offending name to change its name to one that does not similarly offend. A deadline must be set for the change. If the offending name is not changed, then the adjudicator will determine a new name for the company.

Clause 74: Appeal from adjudicator's decision

171.     This clause is a new provision. It enables a company that has received a direction from the company names adjudicator to appeal to a court against the decision. The court will either uphold or reverse the adjudicator's decision.

CHAPTER 4: OTHER POWERS OF THE SECRETARY OF STATE

Clause 75: Provision of misleading information etc

172.     This clause replaces section 28(3) of the 1985 Act and, insofar as it supports that section, section 28 (4) - (6). It provides power for the Secretary of State to direct a company to change its name within a specified period in two circumstances. First, if misleading information was given to enable the adoption of the name. Second, if an undertaking or assurance given to enable the adoption of the name has not been fulfilled. The direction can only be made up to five years after the adoption of the name. It is an offence not to comply with the direction.

Clause 76: Misleading indication of activities

173.     This clause replaces section 32 of the 1985 Act. It provides power for the Secretary of State to direct a company to change its name, regardless of how long the company has had the name, in the specified circumstances. The circumstances are that, in his opinion, not only does the name give a misleading indication of the nature of the company's activities but also that the public are likely to suffer harm as a result. It is an offence not to comply with the direction but the company is able to appeal to the court, who may either confirm the direction or set it aside.

174.     The clause also sets time limits for compliance with the direction (6 weeks) and the application to the court (3 weeks). If the court confirms the direction, it specifies the deadline for compliance.

CHAPTER 5: CHANGE OF NAME

Clause 77: Change of name

175.     This clause replaces section 28(1) of the 1985 Act. Under the existing provision, companies can only change their names:

• by special resolution; or

• following a direction by the Secretary of State in the restricted circumstances provided by section 31 of the 1985 Act which apply only to companies exempt from their name concluding in "limited."

176.     This clause provides for two further means:

• whatever means are provided in the company's articles (this means that the company will be able to determine the procedures for changing its own name);

• by an order of the company names adjudicator if an objection under clause 73 is upheld.

Clause 78: Change of name by special resolution

177.     This clause is a new provision. It requires the company to notify the registrar of a special resolution for a change of name. This requirement is in addition to the obligation under Chapter 3 of Part 3 to forward a copy of the special resolution to the registrar. Subsections (2) and (3) address the particular situation where a company has passed a special resolution to change its name but the change is not to take place until some other event has occurred (e.g. a merger). It introduces a special procedure for such a special resolution. This clause does not provide a means by which a company can reserve a name. Rather it provides for the situation where a special resolution to change a name has been passed - and therefore must be notified - but where its conditions have not been met. The statutory restrictions on the choice of name, including the prohibition of a the new name being the same as a name already on the register, will be applied only after this clause's requirements have been satisfied. Subsection (3) provides that the Registrar will not act on the notice to change the name until she has been notified that the specified event has occurred and that she can do so as soon as she receives such notice.

Clause 79: Change of name by means provided for in company's articles

178.     This clause is a new provision, supplementing the new provision (clause 77(1)(b)) whereby a company may change its name by any means provided for in its articles. Subsection (1) requires the company to provide the registrar with both a notice of the name change and a statement that the change has been made in accordance with the company's articles. Subsection (2) ensures the registrar can act on the notice to change the name as soon as she receives it.

Clause 80: Change of name: registration and issue of new certificate of incorporation

179.     This clause, which partly replaces section 28(6) of the 1985 Act, provides for the procedures that the registrar must perform before a company's proposed new name is effective. Subsection (2) provides for the checks both that the name meets all the requirements for a company's name in this Part of the Act and that the necessary documents have been provided. Subsection (3) provides for the company to be issued a certificate of incorporation with the new name.

Clause 81: Change of name: effect

180.     This clause, which replaces section 28(6) in part and section 28(7) of the 1985 Act, provides that the new name is effective as soon as the altered certificate of incorporation is issued. It also provides that the change of name does not affect the company's rights or obligations or legal proceedings by or against it in its previous name.

CHAPTER 6: TRADING DISCLOSURES

Clause 82: Requirement to disclose company name etc

181.     This clause replaces sections 348(1), 349(1) and 351(1)&(2) of the 1985 Act and, insofar as it applies to companies, section 4(1) of the Business Names Act 1985. It provides power for the Secretary of State to make regulations requiring every company:

• to display a sign with its name and specified other information at specified locations;

• to include its name and specified other information in specified documents and communications;

• to provide its name and specified other information to those who request it in the course of business (this is a new provision insofar as it applies to companies doing business under their registered names).

Clause 83: Civil consequences of failure to make required disclosure

182.     This clause replaces section 349(4) of the 1985 Act and, insofar as it applies to companies, section 5 of the Business Names Act 1985. As recommended by the CLR (Final Report, paragraph 11.57), it follows the precedent of the Business Names Act as regards the civil remedy for failure to comply with the information requirements

made in regulations under clause 82. This differs from the 1985 Act in that the right to compensation is limited to when the breach has resulted in financial loss.

Clause 84: Criminal consequences of failure to make required disclosures

183.     This clause replaces sections 348(2), 349(2) and (3) and 351(5) of the 1985 Act and, insofar as it applies to companies, part of section 7 of the Business Names Act 1985. It makes it an offence not to comply with the requirements, to be specified in Regulations, for every company to disclose its name and specified other information.

Clause 85: Minor variations in form of name to be left out of account

184.     This clause is a new provision. It means that the company's name as used to comply with the disclosure requirements need not be exactly the same as the registered name. The permitted differences are the case of the letters, the use of punctuation, accents, etc and formatting. However the differences must not result in there being a risk of confusion.

PART 6: A COMPANY'S REGISTERED OFFICE

Clause 86: A company's registered office

185.     This clause replaces section 287(1) of the 1985 Act. It requires every company to have a registered office and for that office to be the company's address to which communications and notices may be sent. Clause 790 provides that the service of a document on a company is effective if it is sent to its registered office.

Clause 87: Change of address of registered office

186.     This clause replaces section 287(3), (4), (5) and (6) of the 1985 Act. It retains the procedure in the 1985 Act for a company wishing to change the address of its registered office where both the new and old addresses are in the same part of the UK, i.e. Northern Ireland, Scotland, or England and Wales. In the case of a Welsh company (see clause 88) both the new and old addresses must be in Wales. The company must give notice to the registrar of the intended address.

187.     The change of registered office does not take effect until the new address is on the public record: this is to ensure that there cannot be any period during which a company does not have an address that is effective for the service of documents on the company. Subsection (2) provides for a fortnight overlap between the new and old addresses: during this period, both addresses are effective for the service of documents on the company. Subsection (3) provides the company with a fortnight, starting from the date of the notice under subsection (2), in which to make changes arising from changing the address of its registered office (for example, to its documents for correspondence, etc). Subsection (4) covers the possibility of an unplanned change in registered office, for example in the event of a fire. It provides the company with a fortnight in which to regularise its arrangements as regards the duty in subsection (3)(a) (the duty of a company to make available for inspection at its registered office any register, index or other document). It provides the company with a 14 day breathing space where they are not be treated as having failed to comply with the duty to make certain records available for inspection at their registered office.

188.     Subsections (3) and (4) are necessary as there are criminal sanctions if the company fails to make certain records available for inspection at its registered office or to comply with requirements to include its address in certain documents (such requirements may be imposed by regulations under clause 82 (requirement to disclose company name etc)).

Welsh companies

Clause 88: Welsh companies

189.     This clause provides a definition of a Welsh company. A company can be set up as a Welsh company by delivering to the registrar a statement on formation that its registered office is to be situated in Wales (see subsection (2)(b) of clause 9). Subsection (2) retains the existing provision whereby a company may become a Welsh company by passing a special resolution (so that the register states that its registered office is to be situated "in Wales"). As recommended by the CLR, subsection (3) provides a mechanism whereby a company can cease to be a Welsh company (i.e. so that the register states that its registered office is to be situated in "England and Wales"). This is new. At present, while a company may choose to restrict the address of its registered office to Wales on formation or subsequently by special resolution, it is not possible under the 1985 Act for a Welsh company to drop the restriction so that its registered office address can be changed to anywhere in England and Wales.

190.     Welsh companies may deliver documents to the registrar in Welsh (see clause 712). Welsh companies may also end their company name with Welsh versions of the statutory indicators of legal status. For example, "cyfyngedig" in place of "limited" or "c.c.c." in place of "p.l.c." (see clauses 59 and 60). When a company ceases to be a Welsh company using the procedure under this clause, it may no longer take advantage of these provisions.

191.     Where a company passes a special resolution under subsection (2) or (3) (and so becomes or ceases to be Welsh company) subsection (4) provides that the registrar will amend the register and issue the company with a new certificate of incorporation.

PART 7: RE-REGISTRATION AS A MEANS OF ALTERING A COMPANY'S STATUS

192.     This Part of the Bill is about the re-registration of companies. It replaces equivalent provisions in Part 2 of the 1985 Act. There are some substantive changes as well as amendments reflecting the new provisions of the Bill about registration.

Introductory

Clause 89: Alteration of status by re-registration

193.     This clause provides for various ways under the Bill by which a company may alter its status. As recommended by the CLR (Final Report, paragraph 11.16) it retains the current possibilities for re-registration, but there is one significant change to the 1985 Act regime: in line with the recommendations of the CLR (Final Report, paragraph 11.16), in future a public company will be able to re-register as an unlimited private company without first having to re-register as private limited - see clause 108 (Re-registration of public company as private and unlimited).

Private company becoming public

Clause 90: Re-registration of private company as public

194.     This clause replaces section 43(1)(a) and (2), and section 48 of the 1985 Act. It enables a private company (whether limited or unlimited) to re-register as a public company providing that certain conditions are met. These conditions are set out in subsections (2)-(4). They include a requirement for the company to make such alterations to its name and articles of association ("articles") as are necessary to reflect the fact that the company will be a public company. This will be particularly important for private companies formed under the Bill who are using the model articles: in particular, the new model articles for private companies limited by shares formed under the Bill will be written with such companies in mind and are unlikely to be suitable for use by a newly re-registered public company - see note on clause 19 (Power of Secretary of State to prescribe model articles).

195.     As now (see section 48 of the 1985 Act), an unlimited private company with a share capital will be able to re-register as a public company and this is reflected in subsection (4) of this clause.

196.     Subsection (2)(e) retains the requirement that a private company may not re-register as a public company if it has previously re-registered as an unlimited company.

Clause 91: Requirements as to share capital

197.     This clause replaces sections 45 and 47(3) of the 1985 Act. It sets out the requirements as to share capital of a company that it is proposing to re-register as a public company. These requirements carry forward the provisions of current companies' legislation, for example, the company's share capital must not be less than the authorised minimum (defined in clause 538) and each of the company's allotted shares must be paid up at least as to a quarter of the nominal value of that share and the whole of any premium on in.

198.     Subsection (5) of this clause replaces section 47(3) of the 1985 Act. It provides that the registrar must not issue a new certificate of incorporation on re-registration if the court has made an order confirming a reduction of capital which has the effect of bringing the company's allotted share capital below the authorised minimum (which remains at £50,000) or if the company has reduced its capital via the new solvency statement procedure for capital reductions (see clause 571) or in connection with a redenomination of share capital (see clause 590).

Clause 92: Requirements as to net assets

199.     This clause replaces section 43(3)(b)-(c) and (4) and section 46 of the 1985 Act. It makes no substantive changes to these provisions and the requirements as to net assets for a public company remain unchanged (as now, these are determined by reference to the company's most recent balance sheet).

Clause 93: Recent allotment of shares for non-cash consideration

200.     This clause replaces section 44 of the 1985 Act. It does not make any substantive changes to the provisions of that section and, as now, where there has been an allotment of shares for non-cash consideration between the date of the balance sheet required under clause 92 (Requirements as to net assets) and the date that the company passed the resolution to re-register as a public company, the registrar will not entertain an application for re-registration unless the consideration for the allotment has been valued in accordance with section 108 of the 1985 Act (valuation and report).

Clause 94: Application and accompanying documents

201.     This clause replaces section 43(1)(b), (2)(a), (3)(a) and (e) and (3A) of the 1985 Act. It prescribes the contents of the application for re-registration. There is one important change, which is required as a result of the abolition of the current requirement for private companies to have a company secretary - see clause 253 (Private company not required to have a secretary). In future, where a private company is proposing to re-register as a public company the application for re-registration must include a statement of the company's proposed secretary. The contents of this statement are prescribed in clause 95.

202.     Clause 90 (Re-registration of private company as public) replaces the present requirement for a statutory declaration (or its electronic equivalent) which is presently contained in subsections 43(3)(e) and (3A) of the 1985 Act with a requirement to make a simple statement of compliance (see paragraph 54).

Clause 95: Statement of proposed secretary

203.     This clause is a new provision, which is required as a result of the abolition of the requirement for private companies to have a company secretary. Where a private company is proposing to re-register as a public company, the application for re-registration must include details of the person or persons who will act as company secretary or joint secretaries on re-registration. The statement of proposed secretary must also contain a consent, given by the person or each of the persons named in the statement, to act as company secretary or joint secretaries. If all the partners in a firm

are to be joint secretaries, one partner in the firm may give consent to act on behalf of all of the partners.

Clause 96: Issue of certificate of incorporation on re-registration

204.     This clause replaces section 47 of the 1985 Act. As now, where the registrar is satisfied that a company is entitled to be re-registered as a public company, she will issue a new certificate of incorporation (which must state that it is being issued on the re-registration of the company). On the issue of a new certificate of incorporation under this clause: the company becomes a public company; the change to its name and any amendments that were made to the company's articles take effect; and the person (or persons) named as secretary (or joint secretaries) in the statement of proposed secretary (see clause 95: Statement of proposed secretary) is deemed to have been appointed as such.

205.     As now, the certificate of incorporation on re-registration is conclusive evidence that the company is now a public company and that the requirements of the Bill as regards re-registration have been met.

Public company becoming private

Clause 97: Re-registration of public company as private limited company

206.     This clause replaces section 53 of the 1985 Act. It enables a public company to re-register as a private limited company if the conditions specified in subsection (2) are met. The conditions are the same as those which are presently set out in section 53 but there are two important changes:

• Consistent with the approach taken elsewhere in the Bill, for example the clauses on the re-registration of a private company as public, subsection (1)(c)(ii) of this clause introduces a new requirement for a statement of compliance (see note on clause 13: Statement of compliance).

• Subsection (2) introduces new provisions which enables the registrar to process an application for the re-registration of a company from public to private limited within the 28-day period during which dissenting members may apply to the court, under clause 98 (Application to court to cancel resolution), for an order cancelling the resolution for re-registration, providing that she is satisfied that such an application cannot be made. This change reflects the registrar's current practice.

207.     As now, the company must make such changes to its name and articles as are necessary in connection with it becoming a private company limited by shares or, as the case may be, a private company limited by guarantee.

Clause 98: Application to court to cancel resolution

208.     This clause replaces section 54(1)-(3), (5)-(6), (8) of the 1985 Act. As now, where a public company has passed a special resolution to re-register as a private limited company, the requisite majority of the company's members (see subsection (1)) may apply to the court for the cancellation of this resolution. Such an application to the court must be made within 28 days of the resolution to re-register being passed and on hearing the application the court may confirm or cancel the resolution or make such other order as it thinks fit.

Clause 99: Notice to registrar of court application or order

209.     This clause replaces section 54(4) (7) and (10) of the 1985 Act. It makes it clear that, as now, where an application is made to the court under clause 98 (that is, to cancel a resolution for re-registration as a private limited company), the company must immediately give notice to the registrar. Similarly, where the court has made an order in connection with such an application, the company must deliver a copy of that order to the registrar within 15 days of the order being made (or such longer time as the court may direct).

210.     Subsection (1) of this clause is a new provision which requires the dissenting members, on making an application to court seeking to cancel the resolution for re-registration from public to private, to give notice direct to the registrar. This ensures that that the registrar is aware of any applications which have been made under clause 98 (Application to court to cancel resolution) and therefore will enable the registrar to process the application for re-registration without further delay where she is satisfied that no application to court may be made - see note on clause 97 (Re-registration of public company as private limited company).

211.     Subsection (4) carries forward the offence in section 54(10) of the 1985 Act. Where the company fails to give notice to the registrar or fails to deliver a copy of the order made by the court under clause 98 (Application to court to cancel resolution to the registrar) within the prescribed time limits (see subsection (2) and (3)), the company and every officer of the company who is in default commits an offence. The penalty for this offence is set out in subsection (5).