sc1902007.409-415

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

S.C.D.  Standing Committee Proceedings: 20th July 2006
409

Company Law Reform Bill–[ [], continued

(ii)
section 110 of the Insolvency Act 1986 (c. 45) or Article 96 of

the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405

(N.I. 19)) (liquidator in winding up accepting shares as

consideration for sale of company property), and

(b)
“company”, except in reference to company A, includes any body

corporate.’.

Exception to valuation requirement: merger

Margaret Hodge

Added  NC100

To move the following Clause:—

‘(1)
Section (Public company: valuation of non-cash consideration for shares)

(valuation of non-cash consideration) does not apply to the allotment of shares by

a company in connection with a proposed merger with another company.

(2)
A proposed merger is where one of the companies proposes to acquire all the

assets and liabilities of the other in exchange for the issue of shares or other

securities of that one to shareholders of the other, with or without any cash

payment to shareholders.

(3)
In this section “company”, in reference to the other company, includes any body

corporate.’.

Non-cash consideration for shares: requirements as to valuation and report

Margaret Hodge

Added  NC101

To move the following Clause:—

‘(1)
The provisions of sections (Valuation by independent person) to (Valuer entitled

to full disclosure) (general provisions as to independent valuation and report)

apply to the valuation and report required by section (Public company: valuation

of non-cash consideration for shares) (public company: valuation of non-cash

consideration for shares).

(2)
The valuer’s report must state—

(a)
the nominal value of the shares to be wholly or partly paid for by the

consideration in question;

(b)
the amount of any premium payable on the shares;

(c)
the description of the consideration and, as respects so much of the

consideration as he himself has valued, a description of that part of the

consideration, the method used to value it and the date of the valuation;

(d)
the extent to which the nominal value of the shares and any premium are

to be treated as paid up—

(i)
by the consideration;

(ii)
in cash.

(3)
The valuer’s report must contain or be accompanied by a note by him—

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Company Law Reform Bill–[ [], continued

(a)
in the case of a valuation made by a person other than himself, that it

appeared to himself reasonable to arrange for it to be so made or to accept

a valuation so made,

(b)
whoever made the valuation that the method of valuation was reasonable

in all the circumstances,

(c)
that it appears to the valuer that there has been no material change in the

value of the consideration in question since the valuation, and

(d)
that, on the basis of the valuation, the value of the consideration, together

with any cash by which the nominal value of the shares or any premium

payable on them is to be paid up, is not less than so much of the aggregate

of the nominal value and the whole of any such premium as is treated as

paid up by the consideration and any such cash.

(4)
Where the consideration to be valued is accepted partly in payment up of the

nominal value of the shares and any premium and partly for some other

consideration given by the company, section (Public company: valuation of non-

cash consideration for shares) and the preceding provisions of this section apply

as if references to the consideration accepted by the company included the

proportion of that consideration that is properly attributable to the payment up of

that value and any premium.

(5)
In such a case—

(a)
the valuer must carry out, or arrange for, such other valuations as will

enable him to determine that proportion, and

(b)
his report must state what valuations have been made under this

subsection and also the reason for, and method and date of, any such

valuation and any other matters which may be relevant to that

determination.’.

Copy of report to be delivered to registrar

Margaret Hodge

Added  NC102

To move the following Clause:—

‘(1)
A company to which a report is made under section (Public company: valuation

of non-cash consideration for shares) as to the value of any consideration for

which, or partly for which, it proposes to allot shares must deliver a copy of the

report to the registrar for registration.

(2)
The copy must be delivered at the same time that the company files the return of

the allotment of those shares under section (Return of allotment by limited

company) (return of allotment by limited company).

(3)
If default is made in complying with subsection (1) or (2), an offence is

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

(4)
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.

(5)
In the case of default in delivering to the registrar any document as required by

this section, any person liable for the default may apply to the court for relief.

(6)
The court, if satisfied—

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

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

inadvertence, or

(b)
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.’.

Public company: agreement for transfer of non-cash asset in initial period

Margaret Hodge

Added  NC103

To move the following Clause:—

‘(1)
A public company formed as such must not enter into an agreement —

(a)
with a person who is a subscriber to the company’s memorandum,

(b)
for the transfer by him to the company, or another, before the end of the

company’s initial period of one or more non-cash assets, and

(c)
under which the consideration for the transfer to be given by the company

is at the time of the agreement equal in value to one-tenth or more of the

company’s issued share capital.


unless the conditions referred to below have been complied with.

(2)
The company’s “initial period” means the period of two years beginning with the

date of the company being issued with a certificate under section (Public

company: requirement as to minimum share capital) (trading certificate).

(3)
The conditions are those specified in—

section (Agreement for transfer of non-cash asset: requirement of

independent valuation) (requirement of independent valuation), and

section (Agreement for transfer of non-cash asset: requirement of approval

by members) (requirement of approval by members).

(4)
This section does not apply where—

(a)
it is part of the company’s ordinary business to acquire, or arrange for

other persons to acquire, assets of a particular description, and

(b)
the agreement is entered into by the company in the ordinary course of

that business.

(5)
This section does not apply to an agreement entered into by the company under

the supervision of the court or of an officer authorised by the court for the

purpose.’.

Agreement for transfer of non-cash asset: requirement of independent valuation

Margaret Hodge

Added  NC104

To move the following Clause:—

‘(1)
The following conditions must have been complied with—

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

(a)
the consideration to be received by the company, and any consideration

other than cash to be given by the company, must have been

independently valued in accordance with the provisions of this Chapter,

(b)
the valuer’s report must have been made to the company during the six

months immediately preceding the date of the agreement, and

(c)
a copy of the report must have been sent to the other party to the proposed

agreement not later than the date on which copies have to be circulated to

members under section (Agreement for transfer of non-cash asset:

requirement of approval by members)(3).

(2)
The reference in subsection (1)(a) to the consideration to be received by the

company is to the asset to be transferred to it or, as the case may be, to the

advantage to the company of the asset’s transfer to another person.

(3)
The reference in subsection (1)(c) to the other party to the proposed agreement is

to the person referred to in section (Public company: agreement for transfer of

non-cash asset in initial period)(1)(a).


If he has received a copy of the report under section (Agreement for transfer of

non-cash asset: requirement of approval by members) in his capacity as a

member of the company, it is not necessary to send another copy under this

section.

(4)
This section does not affect any requirement to value any consideration for

purposes of section (Public company: valuation of non-cash consideration for

shares) (valuation of non-cash consideration for shares).’.

Agreement for transfer of non-cash asset: requirements as to valuation and report

Margaret Hodge

Added  NC105

To move the following Clause:—

‘(1)
The provisions of sections (Valuation by independent person) to (Valuer entitled

to full disclosure) (general provisions as to independent valuation and report)

apply to the valuation and report required by section (Agreement for transfer of

non-cash asset: requirement of independent valuation) (public company: transfer

of non-cash asset).

(2)
The valuer’s report must state—

(a)
the consideration to be received by the company, describing the asset in

question (specifying the amount to be received in cash) and the

consideration to be given by the company (specifying the amount to be

given in cash), and

(b)
the method and date of valuation.

(3)
The valuer’s report must contain or be accompanied by a note by him—

(a)
in the case of a valuation made by a person other than himself, that it

appeared to himself reasonable to arrange for it to be so made or to accept

a valuation so made,

(b)
whoever made the valuation, that the method of valuation was reasonable

in all the circumstances,

(c)
that it appears to the valuer that there has been no material change in the

value of the consideration in question since the valuation, and

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Company Law Reform Bill–[ [], continued

(d)
that, on the basis of the valuation, the value of the consideration to be

received by the company is not less than the value of the consideration to

be given by it.

(4)
Any reference in section (Agreement for transfer of non-cash asset: requirement

of independent valuation) or this section to consideration given for the transfer of

an asset includes consideration given partly for its transfer.

(5)
In such a case—

(a)
the value of any consideration partly so given is to be taken as the

proportion of the consideration properly attributable to its transfer,

(b)
the valuer must carry out or arrange for such valuations of anything else

as will enable him to determine that proportion, and

(c)
his report must state what valuations have been made for that purpose and

also the reason for and method and date of any such valuation and any

other matters which may be relevant to that determination.’.

Agreement for transfer of non-cash asset: requirement of approval by members

Margaret Hodge

Added  NC106

To move the following Clause:—

‘(1)
The following conditions must have been complied with—

(a)
the terms of the agreement must have been approved by an ordinary

resolution of the company,

(b)
the requirements of this section must have been complied with as respects

the circulation to members of copies of the valuer’s report under section

(Agreement for transfer of non-cash asset: requirement of independent

valuation), and

(c)
a copy of the proposed resolution must have been sent to the other party

to the proposed agreement.

(2)
The reference in subsection (1)(c) to the other party to the proposed agreement is

to the person referred to in section (Public company: agreement for transfer of

non-cash asset in initial period)(1)(a).

(3)
The requirements of this section as to circulation of copies of the valuer’s report

are as follows—

(a)
if the resolution is proposed as a written resolution, copies of the valuer’s

report must 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, copies of the valuer’s

report must be circulated to the members entitled to notice of the meeting

not later than the date on which notice of the meeting is given.’.

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

Copy of resolution to be delivered to registrar

Margaret Hodge

Added  NC107

To move the following Clause:—

‘(1)
A company that has passed a resolution under section (Agreement for transfer of

non-cash asset: requirement of approval by members) with respect to the transfer

of an asset must, within 15 days of doing so, deliver to the registrar a copy of the

resolution together with the valuer’s report required by that section.

(2)
If a company fails to comply with subsection (1), an offence is committed by—

(a)
the company, and

(b)
every officer of the company who is in default.

(3)
A person guilty of an offence under this section is liable on summary conviction

to a fine not exceeding level 3 on the standard scale and, for continued

contravention, a daily default fine not exceeding one-tenth of level 3 on the

standard scale.’.

Adaptation of provisions in relation to company re-registering as public

Margaret Hodge

Added  NC108

To move the following Clause:—

‘The provisions of sections (Public company: agreement for transfer of non-cash

asset in initial period) to (Copy of resolution to be delivered to registrar) (public

companies: transfer of non-cash assets) apply with the following adaptations in

relation to a company re-registered as a public company—

(a)
the reference in section (Public company: agreement for transfer of non-

cash asset in initial period)(1)(a) to a person who is a subscriber to the

company’s memorandum shall be read as a reference to a person who is

a member of the company on the date of re-registration;

(b)
the reference in section (Public company: agreement for transfer of non-

cash asset in initial period)(2) to the date of the company being issued

with a certificate under section (Public company: requirement as to

minimum share capital) (trading certificate) shall be read as a reference

to the date of re-registration.’.

Agreement for transfer of non-cash asset: effect of contravention

Margaret Hodge

Added  NC109

To move the following Clause:—

‘(1)
This section applies where a public company enters into an agreement in

contravention of section (Public company: agreement for transfer of non-cash

asset in initial period) and either—

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Company Law Reform Bill–[ [], continued

(a)
the other party to the agreement has not received the valuer’s report

required to be sent to him, or

(b)
there has been some other contravention of the requirements of this

Chapter that the other party to the agreement knew or ought to have

known amounted to a contravention.

(2)
In those circumstances—

(a)
the company is entitled to recover from that person any consideration

given by it under the agreement, or an amount equal to the value of the

consideration at the time of the agreement, and

(b)
the agreement, so far as not carried out, is void.

(3)
If the agreement is or includes an agreement for the allotment of shares in the

company, then—

(a)
whether or not the agreement also contravenes section (Public company:

valuation of non-cash consideration for shares) (valuation of non-cash

consideration for shares), this section does not apply to it in so far as it is

for the allotment of shares, and

(b)
the allottee is liable to pay the company an amount equal to the aggregate

of the nominal value of the shares and the whole of any premium (or, if

the case so requires, so much of that aggregate as is treated as paid up by

the consideration), with interest at the appropriate rate.’.

Liability of subsequent holders of shares

Margaret Hodge

Added  NC110

To move the following Clause:—

‘(1)
If a person becomes a holder of shares in respect of which—

(a)
there has been a contravention of section (Public company: valuation of

non-cash consideration for shares) (public company: valuation of non-

cash consideration for shares), and

(b)
by virtue of that contravention another is liable to pay any amount under

the provision contravened,


that person is also liable to pay that amount (jointly and severally with any other

person so liable), unless he is exempted from liability under subsection (3) below.

(2)
If a company enters into an agreement in contravention of section (Public

company: agreement for transfer of non-cash asset in initial period) and—

(a)
the agreement is or includes an agreement for the allotment of shares in

the company,

(b)
a person becomes a holder of shares allotted under the agreement, and

(c)
by virtue of the agreement and allotment under it another person is liable

to pay an amount under section (Agreement for transfer of non-cash

asset: effect of contravention),

the person who becomes the holder of the shares is also liable to pay that amount

(jointly and severally with any other person so liable), unless he is exempted from

liability under subsection (3) below.

This applies whether or not the agreement also contravenes section (Public

company: valuation of non-cash consideration for shares).