sc1902007.388-394

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

S.C.D.  Standing Committee Proceedings: 20th July 2006
388

Company Law Reform Bill–[ [], continued

(5)
For the company’s duties as to the issue of share certificates etc, see Part 21

(certification and transfer of securities)’.

Return of allotment by limited company

Margaret Hodge

Added  NC60

To move the following Clause:—

‘(1)
This section applies to a company limited by shares and to a company limited by

guarantee and having a share capital.

(2)
The company must, within one month of making an allotment of shares, deliver

to the registrar for registration a return of the allotment.

(3)
The return must—

(a)
contain the prescribed information, and

(b)
be accompanied by a statement of capital.

(4)
The statement of capital must state with respect to the company’s share capital at

the date to which the return is made up—

(a)
the total number of shares of the company,

(b)
the aggregate nominal value of those shares,

(c)
for each class of shares—

(i)
prescribed particulars of the rights attached to the shares,

(ii)
the total number of shares of that class, and

(iii)
the aggregate nominal value of shares of that class, and

(d)
the amount paid up and the amount (if any) unpaid on each share

(whether on account of the nominal value of the share or by way of

premium).’.

Return of allotment by unlimited company allotting new class of shares

Margaret Hodge

Added  NC61

To move the following Clause:—

‘(1)
This section applies to an unlimited company that allots shares of a class with

rights that are not in all respects uniform with shares previously allotted.

(2)
The company must, within one month of making such an allotment, deliver to the

registrar for registration a return of the allotment.

(3)
The return must contain the prescribed particulars of the rights attached to the

shares.

(4)
For the purposes of this section shares are not to be treated as different from

shares previously allotted by reason only that the former do not carry the same

S.C.D.  Standing Committee Proceedings: 20th July 2006
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Company Law Reform Bill–[ [], continued

rights to dividends as the latter during the twelve months immediately following

the former’s allotment.’.

Offence of failure to make return

Margaret Hodge

Added  NC62

To move the following Clause:—

‘(1)
If a company makes default in complying with—

section (return of allotment by limited company) (return of allotment of

shares by limited company), or

section (return of allotment by unlimited company of new class of shares)

(return of allotment of new class of shares by unlimited company),


an offence is committed by every officer of the company who is in default.

(2)
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-

tenth of the statutory maximum.

(3)
In the case of default in delivering to the registrar within one month after the

allotment the return required by section (return of allotment of shares by limited

company) or (return of allotment of new class of shares by unlimited company)—

(a)
any person liable for the default may apply to the court for relief, and

(b)
the court, if satisfied—

(i)
that the omission to deliver the document was accidental or due

to inadvertence, or

(ii)
that it is just and equitable to grant relief,


may make an order extending the time for delivery of the document for

such period as the court thinks proper.’.

When shares are allotted

Margaret Hodge

Added  NC63

To move the following Clause:—

‘For the purposes of the Companies Acts shares in a company are taken to be

allotted when a person acquires the unconditional right to be included in the

company’s register of members in respect of the shares.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
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Company Law Reform Bill–[ [], continued

Provisions about allotment not applicable to shares taken on formation

Margaret Hodge

Added  NC64

To move the following Clause:—

‘The provisions of this Chapter have no application in relation to the taking of

shares by the subscribers to the memorandum on the formation of the company.’.

Meaning of “equity securities” and related expressions

Margaret Hodge

Added  Nc65

To move the following Clause:—

‘(1)
In this Chapter—

“equity securities” means—

(c)
ordinary shares in the company, or

(d)
rights to subscribe for, or to convert securities into, ordinary

shares in the company;

“ordinary shares” means shares other than shares that as respects dividends

and capital carry a right to participate only up to a specified amount in a

distribution.

(2)
References in this Chapter to the allotment of equity securities include—

(a)
the grant of a right to subscribe for, or to convert any securities into,

ordinary shares in the company, and

(b)
the sale of ordinary shares in the company that immediately before the

sale are held by the company as treasury shares.’.

Existing shareholders’ right of pre-emption

Margaret Hodge

Added  NC66

To move the following Clause:—

‘(1)
A company must not allot equity securities to a person on any terms unless—

(a)
it has made an offer to each person who holds ordinary shares in the

company to allot to him on the same or more favourable terms a

proportion of those securities that is as nearly as practicable equal to the

proportion in nominal value held by him of the ordinary share capital of

the company, and

(b)
the period during which any such offer may be accepted has expired or

the company has received notice of the acceptance or refusal of every

offer so made.

S.C.D.  Standing Committee Proceedings: 20th July 2006
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Company Law Reform Bill–[ [], continued

(2)
Securities that a company has offered to allot to a holder of ordinary shares may

be allotted to him, or anyone in whose favour he has renounced his right to their

allotment, without contravening subsection (1)(b).

(3)
If subsection (1) applies in relation to the grant of such a right, it does not apply

in relation to the allotment of shares in pursuance of that right.

(4)
Shares held by the company as treasury shares are disregarded for the purposes

of this section, so that—

(a)
the company is not treated as a person who holds ordinary shares, and

(b)
the shares are not treated as forming part of the ordinary share capital of

the company.

(5)
This section is subject to—

(a)
sections (Exception to pre-emption right: bonus shares) to (Exception to

pre-emption right: securities held under employees’ share scheme)

(exceptions to pre-emption right),

(b)
sections (Exclusion of requirements by private companies) and

(Exclusion of pre-emption right: articles conferring corresponding right)

(exclusion of rights of pre-emption),

(c)
sections (Disapplication of pre-emption rights: private company with

only one class of shares) to (Disapplication of pre-emption rights: sale

of treasury shares) (disapplication of pre-emption rights), and

(d)
section (Saving for certain older pre-emption requirements) (saving for

certain older pre-emption procedures).’.

Communication of pre-emption offers to shareholders

Margaret Hodge

Added  NC67

To move the following Clause:—

‘(1)
This section has effect as to the manner in which offers required by section

(Existing shareholders’ right of pre-emption) are to be made to holders of a

company’s shares.

(2)
The offer may be made in hard copy or electronic form.

(3)
If the holder is the holder of a share warrant, the offer may be made by causing it,

or a notice specifying where a copy of it can be obtained or inspected, to be

published in the Gazette.

(4)
The offer must state a period of not less than 21 days during which it may be

accepted and the offer shall not be withdrawn before the end of that period.

(5)
The Secretary of State may by regulations made by statutory instrument—

(a)
reduce the period specified in subsection (4) (but not to less than 14

days), or

(b)
increase that period.

(6)
A statutory instrument containing regulations made under subsection (5) is

subject to affirmative resolution procedure.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
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Company Law Reform Bill–[ [], continued

Liability of company and officers in case of contravention

Margaret Hodge

Added  NC68

To move the following Clause:—

‘(1)
This section applies where there is a contravention of—

section (Existing shareholders’ right of pre-emption) (existing

shareholders’ right of pre-emption), or

section (Communication of pre-emption offers to shareholders)

(communication of pre-emption offers to shareholders).

(2)
The company and every officer of it who knowingly authorised or permitted the

contravention are jointly and severally liable to compensate any person to whom

an offer should have been made in accordance with those provisions for any loss,

damage, costs or expenses which the person has sustained or incurred by reason

of the contravention.

(3)
No proceedings to recover any such loss, damage, costs or expenses shall be

commenced after the expiration of two years—

(a)
from the delivery to the registrar of companies of the return of allotment

in question, or

(b)
where equity securities other than shares are granted, from the date of the

grant.

Exception to pre-emption right: bonus shares

Margaret Hodge

Added  NC69

To move the following Clause:—

‘Section (Existing shareholders’ right of pre-emption)(1) (existing shareholders’

right of pre-emption) does not apply in relation to—

(a)
the allotment of bonus shares, or

(b)
the grant of a right to subscribe for, or to convert securities into, bonus

shares.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
393

Company Law Reform Bill–[ [], continued

Exception to pre-emption right: issue for non-cash consideration

Margaret Hodge

Added  NC70

To move the following Clause:—

‘Section (Existing shareholders’ right of pre-emption)(1) (existing shareholders’

right of pre-emption) does not apply to a particular allotment of equity securities

if these are, or are to be, wholly or partly paid up otherwise than in cash.’.

Exception to pre-emption right: securities held under employees’ share scheme

Margaret Hodge

Added  NC71

To move the following Clause:—

‘Section (Existing shareholders’ right of pre-emption) (existing shareholders’

right of pre-emption) does not apply to the allotment of securities that would,

apart from any renunciation or assignment of the right to their allotment, be held

under an employees’ share scheme.’.

Exclusion of requirements by private companies

Margaret Hodge

Added  NC72

To move the following Clause:—

‘(1)
All or any of the requirements of—

(a)
section (Existing shareholders’ right of pre-emption) (existing

shareholders’ right of pre-emption), or

(b)
section (Communication of pre-emption offers to shareholders)

(communication of pre-emption offers to shareholders),


may be excluded by provision contained in the articles of a private company.

(2)
They may be excluded—

(a)
generally in relation to the allotment by the company of equity securities,

or

(b)
in relation to allotments of a particular description.

(3)
Any requirement or authorisation contained in the articles of a private company

that is inconsistent with either of those sections is treated for the purposes of this

section as a provision excluding that section.

(4)
A provision to which section (Exclusion of pre-emption right: articles conferring

corresponding right) applies (exclusion of pre-emption right: corresponding right

S.C.D.  Standing Committee Proceedings: 20th July 2006
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Company Law Reform Bill–[ [], continued

conferred by articles) is not to be treated as inconsistent with section (Existing

shareholders’ right of pre-emption).’.

Exclusion of pre-emption right: articles conferring corresponding right

Margaret Hodge

Added  NC73

To move the following Clause:—

‘(1)
The provisions of this section apply where, in a case in which section (Existing

shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption)

would otherwise apply—

(a)
a company’s articles contain provision (“pre-emption provision”)

prohibiting the company from allotting ordinary shares of a particular

class unless it has complied with the condition that it makes such an offer

as is described in section (Existing shareholders’ right of pre-

emption)(1) to each person who holds ordinary shares of that class, and

(b)
in accordance with that provision—

(i)
the company makes an offer to allot shares to such a holder, and

(ii)
he or anyone in whose favour he has renounced his right to their

allotment accepts the offer.

(2)
In that case, section (Existing shareholders’ right of pre-emption) does not apply

to the allotment of those shares and the company may allot them accordingly.

(3)
The provisions of section (Communication of pre-emption offers to shareholders)

(communication of pre-emption offers to shareholders) apply in relation to offers

made in pursuance of the pre-emption provision of the company’s articles.


This is subject to section (Exclusion of requirements by private companies)

(exclusion of requirements by private companies).

(4)
If there is contravention of the pre-emption provision of the company’s articles,

the company, and every officer of it who knowingly authorised or permitted the

contravention, are jointly and severally liable to compensate any person to whom

an offer should have been made under the provision for any loss, damage, costs

or expenses which the person has sustained or incurred by reason of the

contravention.

(5)
No proceedings to recover any such loss, damage, costs or expenses shall be

commenced after the expiration of two years—

(a)
from the delivery to the registrar of companies of the return of allotment,

or

(b)
where equity securities other than shares are granted, from the date of the

grant.’.