sc1902007.437-443

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

S.C.D.  Standing Committee Proceedings: 20th July 2006
437

Company Law Reform Bill–[ [], continued

(2)
In forming those opinions, the directors must take into account all of the

company’s liabilities (including any contingent or prospective liabilities).

(3)
The solvency statement must be in the prescribed form and must state—

(a)
the date on which it is made, and

(b)
the name of each director of the company.

(4)
If the directors make a solvency statement without having reasonable grounds for

the opinions expressed in it, and the statement is delivered to the registrar, an

offence is committed by every director who is in default.

(5)
A person guilty of an offence under subsection (4) 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).’.

Registration of resolution and supporting documents

Margaret Hodge

Added  NC149

To move the following Clause:—

‘(1)
Within 15 days after the resolution for reducing share capital is passed the

company must deliver to the registrar—

(a)
a copy of the solvency statement, and

(b)
a statement of capital.


This is in addition to the copy of the resolution itself that is required to be

delivered to the registrar under Chapter 3 of Part 3.

(2)
The statement of capital must state with respect to the company’s share capital as

reduced by the resolution—

(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).

(3)
The registrar must register the documents delivered to him under subsection (1)

on receipt.

(4)
The resolution does not take effect until those documents are registered.

(5)
The company must also deliver to the registrar, within 15 days after the resolution

is passed, a statement by the directors confirming that the solvency statement

was—

S.C.D.  Standing Committee Proceedings: 20th July 2006
438

Company Law Reform Bill–[ [], continued

(a)
made not more than 15 days before the date on which the resolution was

passed, and

(b)
provided to members in accordance with section (Reduction of capital

supported by solvency statement)(2) or (3).

(6)
The validity of a resolution is not affected by—

(a)
a failure to deliver the documents required to be delivered to the registrar

under subsection (1) within the time specified in that subsection, or

(b)
a failure to comply with subsection (5).

(7)
If the company delivers to the registrar a solvency statement that was not

provided to members in accordance with section (Reduction of capital supported

by solvency statement)(2) or (3), an offence is committed by every officer of the

company who is in default.

(8)
If default is made in complying with this section, an offence is committed by—

(a)
the company, and

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

(9)
A person guilty of an offence under subsection (7) or (8) is liable—

(a)
on conviction on indictment, to a fine;

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

Application to court for order of confirmation

Margaret Hodge

Added  NC150

To move the following Clause:—

‘(1)
Where a company has passed a resolution for reducing share capital, it may apply

to the court for an order confirming the reduction.

(2)
If the proposed reduction of capital involves either—

(a)
diminution of liability in respect of unpaid share capital, or

(b)
the payment to a shareholder of any paid-up share capital,


section (Creditors entitled to object to reduction) applies (creditors entitled to

object to reduction) unless the court directs otherwise.

(3)
The court may, if having regard to any special circumstances of the case it thinks

proper to do so, direct that section (Creditors entitled to object to reduction) is not

to apply as regards any class or classes of creditors.

(4)
The court may direct that section (Creditors entitled to object to reduction) is to

apply in any other case.’.

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

Creditors entitled to object to reduction

Margaret Hodge

Added  NC151

To move the following Clause:—

‘(1)
Where this section applies (see section (Application to court for order of

confirmation)(2) and (4)), every creditor of the company who at the date fixed by

the court is entitled to any debt or claim that, if that date were the commencement

of the winding up of the company would be admissible in proof against the

company, is entitled to object to the reduction of capital.

(2)
The court shall settle a list of creditors entitled to object.

(3)
For that purpose the court—

(a)
shall ascertain, as far as possible without requiring an application from

any creditor, the names of those creditors and the nature and amount of

their debts or claims, and

(b)
may publish notices fixing a day or days within which creditors not

entered on the list are to claim to be so entered or are to be excluded from

the right of objecting to the reduction of capital.

(4)
If a creditor entered on the list whose debt or claim is not discharged or has not

determined does not consent to the reduction, the court may, if it thinks fit,

dispense with the consent of that creditor on the company securing payment of

his debt or claim.

(5)
For this purpose the debt or claim must be secured by appropriating (as the court

may direct) the following amount—

(a)
if the company admits the full amount of the debt or claim or, though not

admitting it, is willing to provide for it, the full amount of the debt or

claim;

(b)
if the company does not admit, and is not willing to provide for, the full

amount of the debt or claim, or if the amount is contingent or not

ascertained, an amount fixed by the court after the like enquiry and

adjudication as if the company were being wound up by the court.’.

Offences in connection with list of creditors

Margaret Hodge

Added  NC152

To move the following Clause:—

‘(1)
If an officer of the company—

(a)
intentionally or recklessly—

(i)
conceals the name of a creditor entitled to object to the reduction

of capital, or

(ii)
misrepresents the nature or amount of the debt or claim of a

creditor, or

(b)
is knowingly concerned in any such concealment or misrepresentation,


he commits an offence.

(2)
A person guilty of an offence under this section is liable—

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

(a)
on conviction on indictment, to a fine;

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

Court order confirming reduction

Margaret Hodge

Added  NC153

To move the following Clause:—

‘(1)
The court may make an order confirming the reduction of capital on such terms

and conditions as it thinks fit.

(2)
The court must not confirm the reduction unless it is satisfied, with respect to

every creditor of the company who is entitled to object to the reduction of capital

that either—

(a)
his consent to the reduction has been obtained, or

(b)
his debt or claim has been discharged, or has determined or has been

secured.

(3)
Where the court confirms the reduction, it may order the company to publish (as

the court directs) the reasons for reduction of capital, or such other information in

regard to it as the court thinks expedient with a view to giving proper information

to the public, and (if the court thinks fit) the causes that led to the reduction.

(4)
The court may, if for any special reason it thinks proper to do so, make an order

directing that the company must, during such period (commencing on or at any

time after the date of the order) as is specified in the order, add to its name as its

last words the words “and reduced”.


If such an order is made, those words are, until the end of the period specified in

the order, deemed to be part of the company’s name.’.

Registration of order and statement of capital

Margaret Hodge

Added  NC154

To move the following Clause:—

‘(1)
The registrar, on production of an order of the court confirming the reduction of

a company’s share capital and the delivery of a copy of the order and of a

statement of capital (approved by the court), shall register the order and

statement.


This is subject to section (Public company reducing capital below authorised

minimum) (public company reducing capital below authorised minimum).

(2)
The statement of capital must state with respect to the company’s share capital as

altered by the order—

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

(b)
the aggregate nominal value of those shares,

(c)
for each class of shares—

S.C.D.  Standing Committee Proceedings: 20th July 2006
441

Company Law Reform Bill–[ [], continued

(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).

(3)
The resolution for reducing share capital, as confirmed by the court’s order, takes

effect—

(a)
in the case of a reduction of share capital that forms part of a compromise

or arrangement sanctioned by the court under Part (Arrangements and

reconstructions) (arrangements and reconstructions)—

(i)
on delivery of the order and statement of capital to the registrar,

or

(ii)
if the court so orders, on the registration of the order and

statement of capital;

(b)
in any other case, on the registration of the order and statement of capital.

(4)
Notice of the registration of the order and statement of capital must be published

in such manner as the court may direct.

(5)
The registrar must certify the registration of the order and statement of capital.

(6)
The certificate—

(a)
must be signed by the registrar or authenticated by the registrar’s official

seal, and

(b)
is conclusive evidence—

(i)
that the requirements of this Act with respect to the reduction of

share capital have been complied with, and

(ii)
that the company’s share capital is as stated in the statement of

capital.’.

Public company reducing capital below authorised minimum

Margaret Hodge

Added  NC155

To move the following Clause:—

‘(1)
This section applies where the court makes an order confirming a reduction of a

public company’s capital that has the effect of bringing the nominal value of its

allotted share capital below the authorised minimum (see section 538).

(2)
The registrar must not register the order unless either—

(a)
the court so directs, or

(b)
the company is first re-registered as a private company.

(3)
Section (Expedited procedure for re-registration as a private company) provides

an expedited procedure for re-registration in these circumstances.’.

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

Expedited procedure for re-registration as a private company

Margaret Hodge

Added  NC156

To move the following Clause:—

‘(1)
The court may authorise the company to be re-registered as a private company

without its having passed the special resolution required by section 97.

(2)
If it does so, the court must specify in the order the changes to the company’s

name and articles to be made in connection with the re-registration.

(3)
The company may then be re-registered as a private company if an application to

that effect is delivered to the registrar together with—

(a)
a copy of the court’s order, and

(b)
notice of the company’s name, and a copy of the company’s articles, as

altered by the court’s order.

(4)
On receipt of such an application the registrar must issue a certificate of

incorporation altered to meet the circumstances of the case.

(5)
The certificate must state that it is issued on re-registration and the date on which

it is issued.

(6)
On the issue of the certificate—

(a)
the company by virtue of the issue of the certificate becomes a private

company, and

(b)
the changes in the company’s name and articles take effect.

(7)
The certificate is conclusive evidence that the requirements of this Act as to re-

registration have been complied with.’.

Liability of members following reduction of capital

Margaret Hodge

Added  NC157

To move the following Clause:—

‘(1)
Where a company’s share capital is reduced a member of the company (past or

present) is not liable in respect of any share to any call or contribution exceeding

in amount the difference (if any) between—

(a)
the nominal amount of the share as notified to the registrar in the

statement of capital delivered under section (Registration of resolution

and supporting documents) or (Registration of order and statement of

capital), and

(b)
the amount paid on the share or the reduced amount (if any) which is

deemed to have been paid on it, as the case may be.

(2)
This is subject to section (Liability to creditor in case of omission from list of

creditors) (liability to creditor in case of omission from list).

(3)
Nothing in this section affects the rights of the contributories among themselves.’.

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

Liability to creditor in case of omission from list of creditors

Margaret Hodge

Added  NC158

To move the following Clause:—

‘(1)
This section applies where, in the case of a reduction of capital confirmed by the

court—

(a)
a creditor entitled to object to the reduction of share capital is by reason

of his ignorance—

(i)
of the proceedings for reduction of share capital, or

(ii)
of their nature and effect with respect to his debt or claim,


not entered on the list of creditors, and

(b)
after the reduction of capital the company is unable to pay the amount of

his debt or claim.

(2)
Every person who was a member of the company at the date on which the

resolution for reducing capital took effect under section (Registration of order

and statement of capital)(3) is liable to contribute for the payment of the debt or

claim an amount not exceeding that which he would have been liable to contribute

if the company had commenced to be wound up on the day before that date.

(3)
If the company is wound up, the court on the application of the creditor in

question, and proof of ignorance as mentioned in subsection (1)(a), may (if it

thinks fit)—

(a)
settle accordingly a list of persons liable to contribute under this section,

and

(b)
make and enforce calls and orders on them as if they were ordinary

contributories in a winding up.

(4)
The reference in subsection (1)(b) to a company being unable to pay the amount

of a debt or claim has the same meaning as in section 123 of the Insolvency Act

1986 (c. 45) or Article 103 of the Insolvency (Northern Ireland) Order 1989

(S.I. 1989/2405 (N.I. 19)).’.

Shares no bar to damages against company

Margaret Hodge

Added  NC159

To move the following Clause:—

‘A person is not debarred from obtaining damages or other compensation from a

company by reason only of his holding or having held shares in the company or

any right to apply or subscribe for shares or to be included in the company’s

register of members in respect of shares.’.