Clause 100: Application and accompanying documents
212. This clause replaces section 53(1)(b) of the 1985 Act. It prescribes the documents/information that must accompany the application for re-registration as a public company. There is currently no requirement for a statutory declaration (or electronic equivalent) where a public company re-registers as a private limited company. Consistent with the approach taken in the Bill with other forms of re-registration, in future the application for re-registration as a private limited company must be accompanied by a statement of compliance (see note on clause 13).
Clause 101: Issue of certificate of incorporation on re-registration
213. This clause replaces section 55 of the 1985 Act. As now, where the registrar is satisfied that a company is entitled to be re-registered as a private limited 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 private limited company and the change to its name and any amendments that were required to be made to the articles take effect.
214. As now, the certificate of incorporation on re-registration issued under this clause is conclusive evidence that the company is now a private limited company and that the requirements of the Bill as regards re-registration have been met.
Private limited company becoming unlimited
Clause 102: Re-registration of private limited company as unlimited
215. This clause replaces section 49(1)-(2) and (9), of the 1985 Act. As now, this clause permits a private company that is limited by shares or, as the case may be, by guarantee, to re-register as an unlimited private company, providing that certain conditions are met (see subsection (2)) and all of the members have given their assent to the company being so re-registered. In the case of a deceased member, assent may be given by the personal representative of the deceased member's estate. Where a member is bankrupt, assent may be given by his trustee in bankruptcy (to the exclusion of the member in question).
216. An "unlimited company" is a company not having any limit on the liability of its members.
217. As now, where the company proposing to re-register as an unlimited company, it may not re-register as such if it has previously been re-registered as limited (having previously been unlimited) or as unlimited (having previously been limited).
218. The application for re-registration as an unlimited company must be accompanied by a statement of compliance (see note on clause 13).
Clause 103: Application and accompanying documents
219. This clause replaces section 49(4)-(8A) of the 1985 Act. It prescribes the contents of the application for re-registration and the documents/information that must accompany this application. The current requirement for a statutory declaration made by the directors on application for re-registration as an unlimited company is replaced by a requirement for a statement of compliance. Unlike other statements of compliance made under the Bill (see, for example, clause 13) the statement of compliance made on application for re-registration as an unlimited company must contain a statement made by the directors confirming that:
- the persons by whom or on whose behalf the form of assent is authenticated constitute the whole membership of the company; and
- if any of the members have not authenticated that form themselves, that the directors have taken all reasonable steps to satisfy themselves that each person who authenticated it on behalf of a member was lawfully empowered to do so.
220. The contents of the directors' statement carry forward the provisions of section 49(8) of the 1985 Act (prescribed form of assent to company being registered as unlimited).
Clause 104: Issue of certificate of incorporation on re-registration
221. This clause replaces section 50 of the 1985 Act. As now, where the registrar is satisfied that a company is entitled to be re-registered as an unlimited 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 an unlimited company and the change to its name and any amendments that were required to be made to the articles take effect.
222. As now, the certificate of incorporation on re-registration is conclusive evidence that the company is now an unlimited company and that the requirements of the Bill as regards re-registration have been met.
Unlimited private company becoming limited
Clause 105: Re-registration of unlimited company as limited
223. This clause replaces section 51(1)-(3) and (6) of the 1985 Act. As now, this clause permits an unlimited company to re-register as a private limited company if certain conditions are met (see subsection (2)). As now, a re-registration from unlimited to limited requires a special resolution of the company's members, (which must specify whether the company is to be limited by shares or limited by guarantee). The company must also make such changes to its name and articles as are required to reflect the change in the company's status. As is presently the case under section 51(6), this clause does not permit the re-registration of an unlimited company as a public company (this clause provides for the re-registration of an unlimited company as a private limited company).
Clause 106: Application and accompanying documents
224. This clause replaces section 51(3), (4) and (5) of the 1985 Act. It prescribes the contents of the application for re-registration and the documents/information that must accompany this application. Where the company is to be limited by guarantee, subsection (2)(b) requires the application for re-registration to be accompanied by a "statement of guarantee" (see note on clause 11). It should be noted that there is no requirement for a statement of capital and initial shareholdings where the company is to be limited by shares. This is unnecessary because the company will be required to make a return of allotments to the registrar, under clause 545 (Return of allotment by limited company) as soon as it allots shares subsequent to its registration and the return must be accompanied by a statement of capital.
Clause 107: Issue of certificate of incorporation on re-registration
225. This clause replaces section 52 of the 1985 Act. As now, it provides that, where the registrar is satisfied that a company is entitled to be re-registered as a private 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 private limited company and the change to its name and any amendments that were required to be made to the articles take effect.
226. As now, the certificate of incorporation on re-registration issued under this clause is conclusive evidence that the company is now a private limited company and that the requirements of the Bill as regards re-registration have been met.
Public company becoming private and unlimited
Clause 108: Re-registration of public company as private and unlimited
227. This clause is a new provision, which, as recommended by the CLR (Final Report, paragraph 11.6), enables a public company to re-register as a private unlimited company with a share capital without first having to re-register as a private limited company. The conditions specified in subsection (2) must be met and all of the members must give their assent to the company being so re-registered. In the case of a deceased member, assent may be given by the personal representative of the deceased member's estate. Where a member is bankrupt, assent may be given by his trustee in bankruptcy (to the exclusion of the member in question).
228. A public company may not re-register as an unlimited private company under this clause if it has previously been re-registered as limited or as unlimited (see subsection (2)).
Clause 109: Application and accompanying documents
229. This clause is a new provision. It prescribes the contents of the application for re-registration from public to unlimited private and the documents/information that must accompany this application. There is a requirement for a statement of compliance (see note on clause 13) and, in contrast to the statements of compliance that are required elsewhere in the Bill, the statement of compliance that is required here must contain a statement made by the directors confirming that:
- the persons by whom or on whose behalf the form of assent is authenticated constitute the whole membership of the company; and
- if any of the members have not authenticated that form themselves, that the directors have taken all reasonable steps to satisfy themselves that each person who authenticated it on behalf of a member was lawfully empowered to do so.
230. This mirrors the requirements of the directors' statement in clause 103 (Private limited company becoming unlimited: application and accompanying documents).
Clause 110: Issue of certificate of incorporation on re-registration
231. Where the registrar is satisfied that a public company is entitled to be re-registered as an unlimited private 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 private unlimited company and the change to its name and any amendments that were made to the articles take effect.
232. The certificate of incorporation on re-registration is conclusive evidence that the company is now a private unlimited company and that the requirements of the Bill as regards re-registration have been met.
PART 8: MEMBERS OF A COMPANY
233. The provisions of this Part replace sections 22 and 23 and, with the exception of section 362, Chapter 2 of Part 11 of the 1985 Act.
CHAPTER 1: THE MEMBERS OF A COMPANY
Clause 111: The members of a company
234. This clause replaces section 22 of the 1985 Act. There are additional words to make it clear that the subscribers to the memorandum become members on registration of the company, even if the company fails to enter their names in the register of members.
CHAPTER 2: REGISTER OF MEMBERS
General
Clause 112: Register of members
235. This clause replaces section 352(1)-(5) of the 1985 Act. The only new provision is subsection (5) which makes it clear that for the purposes of this Chapter, joint holders of a share fall to be treated as a single member, although all their names must be stated in the register.
Clause 113: Register to be kept available for inspection
236. This clause replaces section 353 of the 1985 Act. Currently, the register of members is required to be kept at the registered office of the company, except that if the company has appointed a third party to maintain or update the register, it may be kept at the office where that work is done, subject to that office being in the jurisdiction where the company is registered. Under the Bill the requirement (here and in relation to other registers) is to keep the register available for inspection at a specified location. It is immaterial where the work of compiling or updating the register is carried out.
Clause 114: Index of members
237. This clause replaces section 354 of the 1985 Act. There is no change in the obligation of a company with more than 50 members to maintain an index of the names of the members (which the company is obliged to do unless the register itself is kept in such a form as to constitute an index).
Clause 115: Rights to inspect and require copies
238. This clause replaces section 356 of the 1985 Act. The CLR recommended that information in a company's register of members should be made available only for certain specified purposes (Final Report, paragraph 11.44). This clause follows this recommendation. It modifies the rights of inspection and to be provided with copies of the register of members and its index Clause 788 provides power for the Secretary of State to make regulations about the inspection of records and provision of copies and to set fees. Subsections (3) and (4), which are new, require those seeking to inspect or to be provided with a copy of the register of members to provide their names and addresses, the purpose for which the information will be used, and, if the access is sought on behalf of others, similar information for them.
Clause 116: Register of members: response to request for inspection or copy
239. This clause provides a procedure by which the company can refer the matter to the court if it thinks that the request may not be for a proper purpose. It replaces the 10-day deadline for compliance with a 5-day period within which the company must either comply with the request or apply to the court for relief from the obligation. If the company opts for the latter, then subsections (3), (4) and (5) apply. Under subsection (3), if the court is satisfied that the access to the register of members is not sought for a proper purpose, it will relieve the company of the obligation to meet the request and may require that the person who made the request pays the company's costs. Under subsection (4), the court may also prospectively relieve the company of the obligation to meet other requests for similar purposes. If the court does not make an order under subsection (3), or the proceedings are discontinued, then, under subsection (5), the company must immediately comply with the request.
Clause 117: Register of members: refusal of inspection or default in providing copy
240. This clause retains the existing sanctions for failure to comply with a request. They do not apply if the court has directed that the company need not comply with the request.
Clause 118: Register of members: offences in connection with request for or disclosure of information.
241. This is a new provision. It creates two offences. First, in relation to the new requirement in clause to provide information in a request for access, it is an offence knowingly or recklessly to make a statement that is misleading, false or deceptive in a material particular. Second, it is an offence to disclose information from a company's
register of members to another person knowing or having reason to suspect that the other person may use the information for a purpose that is not a proper purpose.
Clause 119: Information as to state of register and index
242. This is a new provision. It implements the CLR recommendation that companies be required to advise anyone exercising their right of inspection or right to demand a copy of the register of index whether the information is up-to-date and, if not, the date to which it has been made up (Final Report, paragraph 11.43). Failure to provide this information renders the company and any officer in default liable to a fine.
Clause 120: Removal of entries relating to former members
243. This clause replaces section 352(6) of the 1985 Act. Based on a recommendation by the CLR (Final Report, paragraph 11.40), it reduces the period for which the entry of a past member must be kept from 20 years to 10 years.
Special cases
Clause 121: Share warrants
244. This clause replaces section 355 of the 1985 Act and implements the CLR recommendation (Completing the Structure, paragraph 5.41) in making clear that shares need not first be issued in registered form, but can be issued directly in warrant to bearer form.
Clause 122: Single member companies
245. This clause replaces section 352A of the 1985 Act, which implements the Twelfth Company Law Directive (89/667/EEC) on single member private limited liability companies. This clause requires a statement to be entered in a company's register of members that it has only one member if that is the case on incorporation or at a later date - if the latter, the date on which it so became must also be entered. It also requires a statement that the company has ceased to have only one member together with the date of the increase.
Clause 123: Company holding its own shares as treasury shares
246. This clause replaces section 352(3A) as regards the entries required to be made in the register of members where a company holds treasury shares. The effect of that provision is unchanged.
Supplementary
Clause 124: Power of court to rectify register
247. This clause replaces section 359 of the 1985 Act. There is no change of substance.
Clause 125: Trusts not to be entered on register
248. This clause replaces section 360 of the 1985 Act. The only change is in consequence of its extension to Northern Ireland.
Clause 126: Register to be evidence
249. This clause replaces section 361 of the 1985 Act. Its effect is unchanged.
Clause 127: Time limit for claims arising from entry in register
250. This clause replaces section 352(7) of the 1985 Act. Based on a recommendation by the CLR (Final Report, paragraph 11.40), it reduces the time limit for claims relating to entries in the register from 20 years to 10 years.
Clause 128: Overseas branch registers
251. This clause provides that nothing in this Chapter affects the power of a company to keep an overseas register under section 362 of and Schedule 14 to the 1985 Act. Those provisions remain in force. Subsection (2) provides power to make provision by regulations relating to these registers, subject to negative resolution procedure.
CHAPTER 3: PROHIBITION ON SUBSIDIARY BEING MEMBER OF ITS HOLDING COMPANY
252. This Chapter is a restatement of the provisions of section 23 of the 1985 Act and Part 1 of Schedule 2 as it applies for the purposes of that section. There is no change of substance.
Clauses 129 to 135: Prohibition on subsidiary being member of its holding company
253. Clause 129 prohibits a company from holding shares of its own holding company. The prohibition applies to all bodies corporate. Clause 128 is a saving for certain shares acquired before the date the prohibition originally came into force.
254. Clauses 131 to 135 provide for exceptions from the prohibition where the subsidiary is acting as personal representative or trustee, or as a dealer in securities.
Supplementary
255. Clauses 136 and 137 contain supplementary provisions.
PART 9: EXERCISE OF MEMBERS' RIGHTS
Clause 138: Enjoyment or exercise of members' rights
256. This clause is a new provision. It applies to companies whose shares or debt securities are admitted to trading on a "regulated market" (that term is defined in clause 813 (minor definitions) by reference to EC Directives).
257. Under the terms of the clause all such companies are deemed to have a provision in their articles by virtue of which a registered member can nominate someone else (or other people) to enjoy or exercise his rights as a member. This includes, for example, the right to receive accounts and reports and other documentation from the company and voting and other rights in connection with company meetings. The only exception is that only the registered member will be able validly to transfer shares.
258. People who are nominated in this way will not be able to enforce their rights directly against the company. The registered member will need to enforce the rights through the articles.
PART 10: COMPANY DIRECTORS
259. This Part replaces Part 10 of the 1985 Act (enforcement of fair dealing by directors), the provisions relating to directors in Part 9 of that Act and the provisions relating to confidentiality orders in Part 25 of that Act. It also introduces a statutory statement of directors' general duties to the company.
Who is a director?
260. Clause 233 defines a director as including any person occupying the position of director, by whatever name called. This is the same as the definition contained in section 741(1) of the 1985 Act. The Bill does not attempt a more detailed definition of a director because it is important to ensure that the term is applied to anybody who exercises real power within the company, particularly in relation to decision taking. The term "director" therefore includes:
- an executive director who has been properly appointed by the company;
- a non-executive director who has been properly appointed by the company;
- a de facto director (that is, a person who has assumed the status and functions of a company director even though he has not been properly appointed).
261. A "shadow director" is defined by clause 234 as "a person in accordance with whose directions or instructions the directors of the company are accustomed to act. A person is not to be regarded as a shadow director by reason only that the directors act on advice given by him in a professional capacity". This is the same as the definition contained in section 741(2) of the 1985 Act.
Powers of directors
262. This Part of the Bill does not generally directly give powers to the directors, but, under the draft model articles of association for private companies limited by shares, the directors' functions are:
- to manage the company's business; and
- to exercise all the powers of the company for any purpose connected with managing the company's business.
CHAPTER 1: APPOINTMENT AND REMOVAL OF DIRECTORS
Requirement to have directors
Clause 139: Companies required to have directors
263. This clause replaces section 282 of the 1985 Act. It distinguishes between private and public companies. It retains the requirement for a private company to have at least one director and requires all public companies to have at least two. There will no longer be an exception for public companies registered before 1st November 1929 (or before 1st January 1933 in Northern Ireland).
Clause 140: Companies required to have at least one director who is a natural person
264. This clause is a new provision. It introduces a requirement that every company have at least one director who is a natural person, ie an individual. Subject to this requirement being satisfied, any legal person, including a company, can be a director but one company cannot be the sole director of another company. Subsection (2) provides that the only director may be a corporation sole (for example, the Archbishop of Canterbury) or someone appointed on the basis of some other appointment that they hold.
Clause 141: Direction requiring company to make appointment
265. This clause is a new provision, enabling enforcement of the existing requirement for a private company to have at least one director and a public company to have at least two directors and the new requirement for every company to have at least one director who is an individual. Where it appears to the Secretary of State that one of these requirements is not met, the Secretary of State will be able to direct the company to comply by issuing a notice. It will be an offence not to comply.
Appointment
Clause 142: Minimum age for appointment as director
266. This clause is a new provision. It introduces a minimum age of 16 for a natural person to be a director. Subsection (2) provides that prohibition will not prevent the appointment of a younger person provided it is not to take effect until that person is 16. Subsection (3) provides that the age limit applies even if the director's appointment is a consequence of some other appointment. Subsection (5) provides that this prohibition on under age directors does not provide protection from criminal prosecution or civil liability if he or she were to act as director, i.e. as a de facto director, or if the company's directors usually act on that young person's instructions.
Clause 143: Power to provide for exceptions from minimum age requirement
267. This clause provides for an exception from the prohibition in clause 141 on anyone under 16 being appointed a director of a company. It provides a power for the Secretary of State to make regulations specifying circumstances in which a younger person may be a director. The regulations may differ for different parts of the UK.
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