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

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Company Law Reform Bill[ [], continued

 
 

(3)    

A person otherwise liable under subsection (1) or (2) is exempted from that

 

liability if either—

 

(a)    

he is a purchaser for value and, at the time of the purchase, he did not

 

have actual notice of the contravention concerned, or

 

(b)    

he derived title to the shares (directly or indirectly) from a person who

 

became a holder of them after the contravention and was not liable under

 

subsection (1).

 

(4)    

References in this section to a holder, in relation to shares in a company, include

 

any person who has an unconditional right—

 

(a)    

to be included in the company’s register of members in respect of those

 

shares, or

 

(b)    

to have an instrument of transfer of the shares executed in his favour.’.

 


 

Power of court to grant relief

 

Margaret Hodge

 

Added  NC111

 

To move the following Clause:—

 

‘(1)    

A person who—

 

(a)    

is liable to a company under any provision of this Chapter in relation to

 

payment in respect of any shares in the company, or

 

(b)    

is liable to a company by virtue of an undertaking given to it in, or in

 

connection with, payment for any shares in the company,

 

may apply to the court to be exempted in whole or in part from the liability.

 

(2)    

In the case of a liability within subsection (1)(a), the court may exempt the

 

applicant from the liability only if and to the extent that it appears to the court just

 

and equitable to do so having regard to—

 

(a)    

whether the applicant has paid, or is liable to pay, any amount in respect

 

of—

 

(i)    

any other liability arising in relation to those shares under any

 

provision of this Chapter, or

 

(ii)    

any liability arising by virtue of any undertaking given in or in

 

connection with payment for those shares;

 

(b)    

whether any person other than the applicant has paid or is likely to pay,

 

whether in pursuance of any order of the court or otherwise, any such

 

amount;

 

(c)    

whether the applicant or any other person—

 

(i)    

has performed in whole or in part, or is likely so to perform any

 

such undertaking, or

 

(ii)    

has done or is likely to do any other thing in payment or part

 

payment for the shares.

 

(3)    

In the case of a liability within subsection (1)(b), the court may exempt the

 

applicant from the liability only if and to the extent that it appears to the court just

 

and equitable to do so having regard to—

 

(a)    

whether the applicant has paid or is liable to pay any amount in respect

 

of liability arising in relation to the shares under any provision of this

 

Chapter;


 
 

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

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Company Law Reform Bill[ [], continued

 
 

(b)    

whether any person other than the applicant has paid or is likely to pay,

 

whether in pursuance of any order of the court or otherwise, any such

 

amount.

 

(4)    

In determining whether it should exempt the applicant in whole or in part from

 

any liability, the court must have regard to the following overriding principles—

 

(a)    

that a company that has allotted shares should receive money or money’s

 

worth at least equal in value to the aggregate of the nominal value of

 

those shares and the whole of any premium or, if the case so requires, so

 

much of that aggregate as is treated as paid up;

 

(b)    

subject to this, that where such a company would, if the court did not

 

grant the exemption, have more than one remedy against a particular

 

person, it should be for the company to decide which remedy it should

 

remain entitled to pursue.

 

(5)    

If a person brings proceedings against another (“the contributor”) for a

 

contribution in respect of liability to a company arising under any provision of

 

this Chapter and it appears to the court that the contributor is liable to make such

 

a contribution, the court may, if and to the extent that it appears to it, just and

 

equitable to do so having regard to the respective culpability (in respect of the

 

liability to the company) of the contributor and the person bringing the

 

proceedings—

 

(a)    

exempt the contributor in whole or in part from his liability to make such

 

a contribution, or

 

(b)    

order the contributor to make a larger contribution than, but for this

 

subsection, he would be liable to make.

 

(6)    

Where a person is liable to a company under section (Agreement for transfer of

 

non-cash asset: effect of contravention)(2) (agreement for transfer of non-cash

 

asset: effect of contravention), the court may, on application, exempt him in

 

whole or in part from that liability if and to the extent that it appears to the court

 

to be just and equitable to do so having regard to any benefit accruing to the

 

company by virtue of anything done by him towards the carrying out of the

 

agreement mentioned in that subsection.’.

 


 

Penalty for contravention of this Chapter

 

Margaret Hodge

 

Added  NC112

 

To move the following Clause:—

 

‘(1)    

This section applies where a company contravenes——

 

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

 

(public company allotting shares for non-cash consideration), or

 

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

 

period) (public company entering into agreement for transfer of non-cash

 

asset).

 

(2)    

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—

 

(a)    

on conviction on indictment, to a fine;


 
 

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

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Company Law Reform Bill[ [], continued

 
 

(b)    

on summary conviction, to a fine not exceeding the statutory maximum.’.

 


 

Enforceability of undertakings to do work etc

 

Margaret Hodge

 

Added  NC113

 

To move the following Clause:—

 

‘(1)    

An undertaking given by any person, in or in connection with payment for shares

 

in a company, to do work or perform services or to do any other thing, if it is

 

enforceable by the company apart from this Chapter, is so enforceable

 

notwithstanding that there has been a contravention in relation to it of a provision

 

of this Chapter.

 

(2)    

This is without prejudice to section (Power of court to grant relief) (power of

 

court to grant relief etc in respect of liabilities).’.

 


 

The appropriate rate of interest

 

Margaret Hodge

 

Added  Nc114

 

To move the following Clause:—

 

‘(1)    

For the purposes of this Chapter the “appropriate rate” of interest is 5% per annum

 

or such other rate as may be specified by order made by the Secretary of State.

 

(2)    

An order under this section is subject to negative resolution procedure.’.

 


 

Application of share premiums

 

Margaret Hodge

 

Added  Nc115

 

To move the following Clause:—

 

‘(1)    

If a company issues shares at a premium, whether for cash or otherwise, a sum

 

equal to the aggregate amount or value of the premiums on those shares must be

 

transferred to an account called “the share premium account”.

 

(2)    

Where, on issuing shares, a company has transferred a sum to the share premium

 

account, it may use that sum to write off—

 

(a)    

the expenses of the issue of those shares;

 

(b)    

any commission paid on the issue of those shares.

 

(3)    

The company may use the share premium account to pay up new shares to be

 

allotted to members as fully paid bonus shares.


 
 

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Company Law Reform Bill[ [], continued

 
 

(4)    

Subject to subsections (2) and (3), the provisions of the Companies Acts relating

 

to the reduction of a company’s share capital apply as if the share premium

 

account were part of its paid-up share capital.

 

(5)    

This section has effect subject to—

 

section (Group reconstruction relief) (group reconstruction relief);

 

section (Merger relief) (merger relief);

 

section (Power to make further provision by regulations) (power to make

 

further provisions by regulations).

 

(6)    

In this Chapter “the issuing company” means the company issuing shares as

 

mentioned in subsection (1) above.’.

 


 

Group reconstruction relief

 

Margaret Hodge

 

Added  NC116

 

To move the following Clause:—

 

‘(1)    

This section applies where the issuing company—

 

(a)    

is a wholly owned subsidiary of another company (“the holding

 

company”), and

 

(b)    

allots shares—

 

(i)    

to the holding company or

 

(ii)    

to another wholly-owned subsidiary of the holding company,

 

    

in consideration for the transfer to the issuing company of non-cash

 

assets of a company (“the transferor company”) that is a member of the

 

group of companies that comprises the holding company and all its

 

wholly-owned subsidiaries.

 

(2)    

Where the shares in the issuing company allotted in consideration for the transfer

 

are issued at a premium, the issuing company is not required by section

 

(Application of share premiums) to transfer any amount in excess of the minimum

 

premium value to the share premium account.

 

(3)    

The minimum premium value means the amount (if any) by which the base value

 

of the consideration for the shares allotted exceeds the aggregate nominal value

 

of the shares.

 

(4)    

The base value of the consideration for the shares allotted is the amount by which

 

the base value of the assets transferred exceeds the base value of any liabilities of

 

the transferor company assumed by the issuing company as part of the

 

consideration for the assets transferred.

 

(5)    

For the purposes of this section—

 

(a)    

the base value of assets transferred is taken as—

 

(i)    

the cost of those assets to the transferor company, or

 

(ii)    

if less, the amount at which those assets are stated in the

 

transferor company’s accounting records immediately before the

 

transfer;


 
 

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

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Company Law Reform Bill[ [], continued

 
 

(b)    

the base value of the liabilities assumed is taken as the amount at which

 

they are stated in the transferor company’s accounting records

 

immediately before the transfer.’.

 


 

Merger relief

 

Margaret Hodge

 

Added  NC117

 

To move the following Clause:—

 

‘(1)    

This section applies where the issuing company has secured at least a 90% equity

 

holding in another company in pursuance of an arrangement providing for the

 

allotment of equity shares in the issuing company on terms that the consideration

 

for the shares allotted is to be provided—

 

(a)    

by the issue or transfer to the issuing company of equity shares in the

 

other company, or

 

(b)    

by the cancellation of any such shares not held by the issuing company.

 

(2)    

If the equity shares in the issuing company allotted in pursuance of the

 

arrangment in consideration for the acquisition or cancellation of equity shares in

 

the other company are issued at a premium, section (Application of share

 

premiums) does not apply to the premiums on those shares.

 

(3)    

Where the arrangement also provides for the allotment of any shares in the issuing

 

company on terms that the consideration for those shares is to be provided—

 

(a)    

by the issue or transfer to the issuing company of non-equity shares in the

 

other company, or

 

(b)    

by the cancellation of any such shares in that company not held by the

 

issuing company,

 

    

relief under subsection (2) extends to any shares in the issuing company allotted

 

on those terms in pursuance of the arrangement.

 

(4)    

This section does not apply in a case falling within section (Group reconstruction

 

relief) (group reconstruction relief).’.

 


 

Merger relief: meaning of 90% equity holding

 

Margaret Hodge

 

Added  NC118

 

To move the following Clause:—

 

‘(1)    

The following provisions have effect to determine for the purposes of section

 

(Merger relief) (merger relief) whether a company (“company A”) has secured a

 

90% equity holding in another company (“company B”) in pursuance of such an

 

arrangement as is mentioned in subsection (1) of that section.

 

(2)    

Company A has a 90% equity holding in company B if in consequence of an

 

acquisition or cancellation of equity shares in company B (in pursuance of that

 

arrangement) it holds equity shares in company B of an aggregate amount equal

 

to 90% or more of the nominal value of that company’s equity share capital.


 
 

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Company Law Reform Bill[ [], continued

 
 

(3)    

For this purpose—

 

(a)    

it is immaterial whether any of those shares were acquired in pursuance

 

of the arrangement; and

 

(b)    

shares in company B held by the company as treasury shares are excluded

 

in determining the nominal value of company B’s share capital.

 

(4)    

Where the equity share capital of company B is divided into different classes of

 

shares, company A is not regarded as having a 90% equity holding in company B

 

unless the requirements of subsection (2) are met in relation to each of those

 

classes of shares taken separately.

 

(5)    

For the purposes of this section shares held by—

 

(a)    

a company that is company A’s holding company or subsidiary, or

 

(b)    

a subsidiary of company A’s holding company, or

 

(c)    

its or their nominees,

 

    

are treated as held by company A.’.

 


 

Power to make further provision by regulations

 

Margaret Hodge

 

Added  NC119

 

To move the following Clause:—

 

‘(1)    

The Secretary of State may by regulations make such provision as he thinks

 

appropriate—

 

(a)    

for relieving companies from the requirements of section (Application of

 

share premiums) (application of share premiums) in relation to premiums

 

other than cash premiums;

 

(b)    

for restricting or otherwise modifying any relief from those requirements

 

provided by this Chapter.

 

(2)    

Regulations under this section are subject to affirmative resolution procedure.’.

 


 

Relief may be reflected in company’s balance sheet

 

Margaret Hodge

 

Added  NC120

 

To move the following Clause:—

 

‘An amount corresponding to the amount representing the premiums, or part of

 

the premiums, on shares issued by a company that by virtue of any relief under

 

this Chapter is not included in the company’s share premium account may also be

 

disregarded in determining the amount at which any shares or other consideration

 

provided for the shares issued is to be included in the company’s balance sheet.’

 



 
 

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

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Company Law Reform Bill[ [], continued

 
 

Interpretation of this Chapter

 

Margaret Hodge

 

Added  NC121

 

To move the following Clause:—

 

‘(1)    

In this Chapter—

 

“arrangement” means any agreement, scheme or arrangement (including an

 

arrangement sanctioned in accordance with—

 

(e)    

Part (Arrangements and reconstructions) (arrangements and

 

reconstructions), or

 

(f)    

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));

 

“company”, except in reference to the issuing company, includes any body

 

corporate;

 

“equity shares” means shares comprised in a company’s equity share

 

capital, and “non-equity shares” means shares (of any class) that are not

 

so comprised;

 

“the issuing company” has the meaning given by section (Application of

 

share premiums)(6).

 

(2)    

References in this Chapter (however expressed) to—

 

(a)    

the acquisition by a company of shares in another company, and

 

(b)    

the issue or allotment of shares to, or the transfer of shares to or by, a

 

company,

 

    

include (respectively) the acquisition of shares by, and the issue or allotment or

 

transfer of shares to or by, a nominee of that company.

 

    

The reference in section (Group reconstruction relief) to the transferor company

 

shall be read accordingly.

 

(3)    

References in this Chapter to the transfer of shares in a company include the

 

transfer of a right to be included in the company’s register of members in respect

 

of those shares.’.

 


 

Alteration of share capital of limited company

 

Margaret Hodge

 

Added  NC122

 

To move the following Clause:—

 

‘(1)    

A limited company having a share capital may not alter its share capital except in

 

the following ways.

 

(2)    

The company may—

 

(a)    

increase its share capital by allotting new shares in accordance with this

 

Part, or

 

(b)    

reduce its share capital in accordance with Chapter (Reduction of share

 

capital) of this Part.

 

(3)    

The company may—


 
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