sc1902007.395-401

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

S.C.D.  Standing Committee Proceedings: 20th July 2006
395

Company Law Reform Bill–[ [], continued

Disapplication of pre-emption rights:private company with only one class of shares

Margaret Hodge

Added  NC74

To move the following Clause:—

‘(1)
The directors of a private company that has only one class of shares may be given

power by the articles, or by a special resolution of the company, to allot equity

securities of that class as if section (Existing shareholders’ right of pre-emption)

(existing shareholders’ right of pre-emption)—

(a)
did not apply to the allotment, or

(b)
applied to the allotment with such modifications as the directors may

determine.

(2)
Where the directors make an allotment under this section, the provisions of this

Chapter have effect accordingly.’.

Disapplication of pre-emption rights:directors acting under general authorisation

Margaret Hodge

Added  NC75

To move the following Clause:—

‘(1)
Where the directors of a company are generally authorised for the purposes of

section (Power of directors to allot shares etc: authorisation by company) (power

of directors to allot shares etc: authorisation by company), they may be given

power by the articles, or by a special resolution of the company, to allot equity

securities pursuant to that authorisation as if section (Existing shareholders’ right

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

(a)
did not apply to the allotment, or

(b)
applied to the allotment with such modifications as the directors may

determine.

(2)
Where the directors make an allotment under this section, the provisions of this

Chapter have effect accordingly.

(3)
The power conferred by this section ceases to have effect when the authorisation

to which it relates—

(a)
is revoked or

(b)
would (if not renewed) expire.


But if the authorisation is renewed the power may also be renewed, for a period

not longer than that for which the authorisation is renewed, by a special resolution

of the company.

(4)
Notwithstanding that the power conferred by this section has expired, the

directors may allot equity securities in pursuance of an offer or agreement

previously made by the company if the power enabled the company to make an

offer or agreement that would or might require equity securities to be allotted

after it expired.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
396

Company Law Reform Bill–[ [], continued

Disapplication of pre-emption rights by special resolution

Margaret Hodge

Added  NC76

To move the following Clause:—

‘(1)
Where the directors of a company are authorised for the purposes of section

(Power of directors to allot shares etc: authorisation by company) (power of

directors to allot shares etc: authorisation by company), whether generally or

otherwise, the company may by special resolution resolve that section (Existing

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

emption)—

(a)
does not apply to a specified allotment of equity securities to be made

pursuant to that authorisation, or

(b)
applies to the allotment with such modifications as may be specified in

the resolution.

(2)
Where such a resolution is passed the provisions of this Chapter have effect

accordingly.

(3)
A special resolution under this section ceases to have effect when the

authorisation to which it relates—

(a)
is revoked or

(b)
would (if not renewed) expire.


But if the authorisation is renewed the resolution may also be renewed, for a

period not longer than that for which the authorisation is renewed, by a special

resolution of the company.

(4)
Notwithstanding that any such resolution has expired, the directors may allot

equity securities in pursuance of an offer or agreement previously made by the

company if the resolution enabled the company to make an offer or agreement

that would or might require equity securities to be allotted after it expired.

(5)
A special resolution under this section, or a special resolution to renew such a

resolution, must not be proposed unless—

(a)
it is recommended by the directors, and

(b)
the directors have complied with the following provisions.

(6)
Before such a resolution is proposed, the directors must make a written statement

setting out—

(a)
their reasons for making the recommendation,

(b)
the amount to be paid to the company in respect of the equity securities

to be allotted, and

(c)
the directors’ justification of that amount.

(7)
The directors’ statement must—

(a)
if the resolution is proposed as a written resolution, be sent or submitted

to every eligible member at or before the time at which the proposed

resolution is sent or submitted to him;

(b)
if the resolution is proposed at a general meeting, be circulated to the

members entitled to notice of the meeting with that notice.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
397

Company Law Reform Bill–[ [], continued

Liability for false statement in directors’ statement

Margaret Hodge

Added  NC77

To move the following Clause:—

‘(1)
This section applies in relation to a directors’ statement under section

(Disapplication of pre-emption rights by special resolution) (special resolution

disapplying pre-emption rights) that is sent, submitted or circulated under

subsection (7) of that section.

(2)
A person who knowingly or recklessly authorises or permits the inclusion of any

matter that is misleading, false or deceptive in a material particular in such a

statement commits an offence.

(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).’.

Disapplication of pre-emption rights: sale of treasury shares

Margaret Hodge

Added  NC78

To move the following Clause:—

‘(1)
This section applies in relation to a sale of shares that is an allotment of equity

securities by virtue of section (Meaning of “equity securities” and related

expressions)(2)(b) (sale of shares held by company as treasury shares).

(2)
The directors of a company may be given power by the articles, or by a special

resolution of the company, to allot equity securities as if section (Existing

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

emption)—

(a)
did not apply to the allotment, or

(b)
applied to the allotment with such modifications as the directors may

determine.

(3)
The provisions of section (Disapplication of pre-emption rights:directors acting

under general authorisation)(2) and (4) apply in that case as they apply to a case

within subsection (1) of that section.

(4)
The company may by special resolution resolve that section (Existing

shareholders’ right of pre-emption)—

(a)
shall not apply to a specified allotment of securities, or

(b)
shall apply to the allotment with such modifications as may be specified

in the resolution.

S.C.D.  Standing Committee Proceedings: 20th July 2006
398

Company Law Reform Bill–[ [], continued

(5)
The provisions of section (Disapplication of pre-emption rights by special

resolution)(2) and (4) to (7) apply in that case as they apply to a case within

subsection (1) of that section.’.

References to holder of shares in relation to offer

Margaret Hodge

Added  NC79

To move the following Clause:—

‘(1)
In this Chapter, in relation to an offer to allot securities required by—

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

shareholders’ right of pre-emption), or

(b)
any provision to which section (Exclusion of pre-emption right: articles

conferring corresponding right) applies (articles conferring

corresponding right),


a reference (however expressed) to the holder of shares of any description is to

whoever was the holder of shares of that description at the close of business on a

date to be specified in the offer.

(2)
The specified date must fall within the period of 28 days immediately before the

date of the offer.’.

Saving for other restrictions on offer or allotment

Margaret Hodge

Added  NC80

To move the following Clause:—

‘(1)
The provisions of this Chapter are without prejudice to any other enactment by

virtue of which a company is prohibited (whether generally or in specified

circumstances) from offering or alloting equity securities to any person.

(2)
Where a company cannot by virtue of such an enactment offer or allot equity

securities to a holder of ordinary shares of the company, those shares are

disregarded for the purposes of section (Existing shareholders’ right of pre-

emption) (existing shareholders’ right of pre-emption), so that—

(a)
the person 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.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
399

Company Law Reform Bill–[ [], continued

Saving for certain older pre-emption requirements

Margaret Hodge

Added  NC81

To move the following Clause:—

‘(1)
In the case of a public company the provisions of this Chapter do not apply to an

allotment of equity securities that are subject to a pre-emption requirement in

relation to which section 96(1) of the Companies Act 1985 (c. 6) or Article 106(1)

of the Companies (Northern Ireland) Order 1986 applied immediately before the

commencement of this Chapter.

(2)
In the case of a private company a pre-emption requirement to which section

96(3) of the Companies Act 1985 (c. 6) or Article 106(3) of the Companies

(Northern Ireland) Order 1986, Order applied immediately before the

commencement of this Chapter shall have effect, so long as the company remains

a private company, as if it were contained in the company’s articles.

(3)
A pre-emption requirement to which section 96(4) of the Companies Act 1985

(c. 6) or Article 106(4) of the Companies (Northern Ireland) Order 1986 applied

immediately before the commencement of this section shall be treated for the

purposes of this Chapter above as if it were contained in the company’s articles.’.

Provisions about pre-emption not applicable to shares taken on formation

Margaret Hodge

Added  NC82

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.’.

Public companies: allotment where issue not fully subscribed

Margaret Hodge

Added  NC83

To move the following Clause:—

‘(1)
No allotment shall be made of shares of a public company offered for subscription

unless—

(a)
the issue is subscribed for in full, or

(b)
the offer is made on terms that the shares subscribed for may be

allotted—

(i)
in any event, or

(ii)
if specified conditions are met (and those conditions are met).

(2)
If shares are prohibited from being allotted by subsection (1) and 40 days have

elapsed after the first making of the offer, all money received from applicants for

shares must be repaid to them forthwith, without interest.

S.C.D.  Standing Committee Proceedings: 20th July 2006
400

Company Law Reform Bill–[ [], continued

(3)
If any of the money is not repaid within 48 days after the first making of the offer,

the directors of the company are jointly and severally liable to repay it, with

interest at the rate for the time being specified under section 17 of the Judgments

Act 1838 (c. 110) from the expiration of the 48th day.


A director is not so liable if he proves that the default in the repayment of the

money was not due to any misconduct or negligence on his part.

(4)
This section applies in the case of shares offered as wholly or partly payable

otherwise than in cash as it applies in the case of shares offered for subscription.

(5)
In that case—

(a)
the references in subsection (1) to subscription shall be construed

accordingly;

(b)
references in subsections (2) and (3) to the repayment of money received

from applicants for shares include—

(i)
the return of any other consideration so received (including, if

the case so requires, the release of the applicant from any

undertaking), or

(ii)
if it is not reasonably practicable to return the consideration, the

payment of money equal to its value at the time it was so

received;

(c)
references to interest apply accordingly.

(6)
Any condition requiring or binding an applicant for shares to waive compliance

with any requirement of this section is void.’.

Public companies: effect of irregular allotment where issue not fully subscribed

Margaret Hodge

Added  NC84

To move the following Clause:—

‘(1)
An allotment made by a public company to an applicant in contravention of

section (Public companies: allotment where issue not fully subscribed) (public

companies: allotment where issue not fully subscribed) is voidable at the instance

of the applicant within one month after the date of the allotment, and not later.

(2)
It is so voidable even if the company is in the course of being wound up.

(3)
A director of a public company who knowingly contravenes, or permits or

authorises the contravention of, any provision of section (Public companies:

allotment where issue not fully subscribed) with respect to allotment is liable to

compensate the company and the allottee respectively for any loss, damages,

costs or expenses that the company or allottee may have sustained or incurred by

the contravention.

(4)
Proceedings to recover any such loss, damages, costs or expenses may not be

brought more than two years after the date of the allotment.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
401

Company Law Reform Bill–[ [], continued

Shares not to be allotted at a discount

Margaret Hodge

Added  NC85

To move the following Clause:—

‘(1)
A company’s shares must not be allotted at a discount.

(2)
If shares are allotted in contravention of this section, the allottee is liable to pay

the company an amount equal to the amount of the discount, with interest at the

appropriate rate.’.

Provision for different amounts to be paid on shares

Margaret Hodge

Added  NC86

To move the following Clause:—

A company, if so authorised by its articles, may—

(a)
make arrangements on the issue of shares for a difference between the

shareholders in the amounts and times of payment of calls on their shares;

(b)
accept from any member the whole or part of the amount remaining

unpaid on any shares held by him, although no part of that amount has

been called up;

(c)
pay dividend in proportion to the amount paid up on each share where a

larger amount is paid up on some shares than on others.’.

General rule as to means of payment

Margaret Hodge

Added  NC87

To move the following Clause:—

‘(1)
Shares allotted by a company, and any premium on them, may be paid up in

money or money’s worth (including goodwill and know-how).

(2)
This section does not prevent a company—

(a)
from allotting bonus shares to its members, or

(b)
from paying up, with sums available for the purpose, any amounts for the

time being unpaid on any of its shares (whether on account of the nominal

value of the shares or by way of premium).

(3)
This section has effect subject to the following provisions of this Chapter

(additional rules for public companies).’.