sc1902007.451-457

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

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

(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 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.’.

Application of provisions to company re-registering as public company

Margaret Hodge

Added  NC172

To move the following Clause:—

‘(1)
This section applies where, after shares in a private company—

(a)
are forfeited in pursuance of the company’s articles or are surrendered to

the company in lieu of forfeiture,

(b)
are acquired by the company (otherwise than by any of the methods

permitted by this Part), the company having a beneficial interest in the

shares,

(c)
are acquired by a nominee of the company from a third party without

financial assistance being given directly or indirectly by the company, the

company having a beneficial interest in the shares, or

(d)
are acquired by a person with financial assistance given to him, directly

or indirectly, by the company for the purpose of or in connection with the

acquisition, the company having a beneficial interest in the shares,


the company is re-registered as a public company.

(2)
In that case the provisions of sections (Duty to cancel shares in public company

held by or for the company) to (Offence in case of failure to cancel shares or re-

register) apply to the company as if it had been a public company at the time of

the forfeiture, surrender or acquisition, subject to the following modification.

(3)
The modification is that the period specified in section (Duty to cancel shares in

public company held by or for the company)(3)(a), (b) or (c) (period for

complying with obligations under that section) runs from the date of the re-

registration of the company as a public company.’.

Accounting treatment of shares held by public company or nominee

Margaret Hodge

Added  NC173

To move the following Clause:—

‘(1)
Where—

(a)
a public company, or a nominee of a public company, acquires shares in

the company, and

(b)
those shares are shown in a balance sheet of the company as an asset,

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Company Law Reform Bill–[ [], continued


an amount equal to the value of the shares must be transferred out of profits

available for dividend to a reserve fund and is not then available for distribution.

(2)
Subsection (1) applies to an interest in shares as it applies to shares.


As it so applies the reference to the value of the shares shall be read as a reference

to the value to the company of its interest in the shares.’.

Public companies: general rule against lien or charge on own shares

Margaret Hodge

Added  Nc174

To move the following Clause:—

‘(1)
A lien or other charge of a public company on its own shares (whether taken

expressly or otherwise) is void, except as permitted by this section.

(2)
In the case of any description of company, a charge is permitted if the shares are

not fully paid up and the charge is for an amount payable in respect of the shares.

(3)
In the case of a company whose ordinary business—

(a)
includes the lending of money, or

(b)
consists of the provision of credit or the bailment (in Scotland, hiring) of

goods under a hire purchase agreement, or both,


a charge is permitted (whether the shares are fully paid or not) if it arises in

connection with a transaction entered into by the company in the ordinary course

of that business.

(4)
In the case of a company that has been re-registered as a public company, a charge

is permitted if it was in existence immediately before the application for re-

registration.’.

Interests to be disregarded in determining whether company has beneficial interest

Margaret Hodge

Added  NC175

To move the following Clause:—

‘In determining for the purposes of this Chapter whether a company has a

beneficial interest in shares, there shall be disregarded any such interest as is

mentioned in—

section (Residual interest under pension scheme or employees’ share

scheme) (residual interest under pension scheme or employees’ share

scheme),

section (Employer’s charges and other rights of recovery) (employer’s

charges and other rights of recovery) or

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

section (Rights as personal representative or trustee) (rights as personal

representative or trustee).’.

Residual interest under pension scheme or employees’ share scheme

Margaret Hodge

Added  NC176

To move the following Clause:—

‘(1)
Where the shares are held on trust for the purposes of a pension scheme or

employees’ share scheme, there shall be disregarded any residual interest of the

company that has not vested in possession.

(2)
A “residual interest” means a right of the company to receive any of the trust

property in the event of—

(a)
all the liabilities arising under the scheme having been satisfied or

provided for, or

(b)
the company ceasing to participate in the scheme, or

(c)
the trust property at any time exceeding what is necessary for satisfying

the liabilities arising or expected to arise under the scheme.

(3)
In subsection (2)—

(a)
the reference to a right includes a right dependent on the exercise of a

discretion vested by the scheme in the trustee or another person, and

(b)
the reference to liabilities arising under a scheme includes liabilities that

have resulted, or may result, from the exercise of any such discretion.

(4)
For the purposes of this section a residual interest vests in possession—

(a)
in a case within subsection (2)(a), on the occurrence of the event

mentioned there (whether or not the amount of the property receivable

pursuant to the right is ascertained);

(b)
in a case within subsection (2)(b) or (c), when the company becomes

entitled to require the trustee to transfer to it any of the property

receivable pursuant to that right.

(5)
Where by virtue of this section shares are exempt from section (Treatment of

shares held by nominee) or (Liability of others where nominee fails to make

payment in respect of shares) (shares held by company’s nominee) at the time

they are taken, issued or acquired but the residual interest in question vests in

possession before they are disposed of or fully paid up, those sections apply to the

shares as if they had been taken, issued or acquired on the date on which that

interest vests in possession.

(6)
Where by virtue of this section shares are exempt from sections (Duty to cancel

shares in public company held by or for the company) to (Application of

provisions to company re-registering as public company) (shares held by or for

public company) at the time they are acquired but the residual interest in question

vests in possession before they are disposed of, those sections apply to the shares

as if they had been acquired on the date on which the interest vests in possession.’.

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

Employer’s charges and other rights of recovery

Margaret Hodge

Added  NC177

To move the following Clause:—

‘(1)
Where the shares are held on trust for the purposes of a pension scheme there shall

be disregarded—

(a)
any charge or lien on, or set-off against, any benefit or other right or

interest under the scheme for the purpose of enabling the employer or

former employer of a member of the scheme to obtain the discharge of a

monetary obligation due to him from the member;

(b)
any right to receive from the trustee of the scheme, or as trustee of the

scheme to retain, an amount that can be recovered or retained under

section 61 of the Pension Schemes Act 1993 (c. 48) or section 57 of the

Pension Schemes (Northern Ireland) Act 1993 (deduction of

contributions equivalent premium from refund of scheme contributions),

or otherwise, as reimbursement or partial reimbursement for any

contributions equivalent premium paid in connection with the scheme

under Part 3 of that Act.

(2)
Where the shares are held on trust for the purposes of an employees’ share

scheme, there shall be disregarded any charge or lien on, or set-off against, any

benefit or other right or interest under the scheme for the purpose of enabling the

employer or former employer of a member of the scheme to obtain the discharge

of a monetary obligation due to him from the member.’.

Rights as personal representative or trustee

Margaret Hodge

Added  Nc178

To move the following Clause:—

‘Where the company is a personal representative or trustee, there shall be

disregarded any rights that the company has in that capacity including, in

particular—

(a)
any right to recover its expenses or be remunerated out of the estate or

trust property, and

(b)
any right to be indemnified out of that property for any liability incurred

by reason of any act or omission of the company in the performance of

its duties as personal representative or trustee.’.

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

Meaning of “pension scheme”

Margaret Hodge

Added  NC179

To move the following Clause:—

‘(1)
In this Chapter “pension scheme” means a scheme for the provision of benefits

consisting of or including relevant benefits for or in respect of employees or

former employees.

(2)
In subsection (1) “relevant benefits” means any pension, lump sum, gratuity or

other like benefit given or to be given on retirement or on death or in anticipation

of retirement or, in connection with past service, after retirement or death.’.

Application of provisions to directors

Margaret Hodge

Added  NC180

To move the following Clause:—

‘For the purposes of this Chapter references to “employer” and “employee”, in

the context of a pension scheme or employees’ share scheme, shall be read as if

a director of a company were employed by it.’.

Meaning of “financial assistance”

Margaret Hodge

Added  NC181

To move the following Clause:—

‘(1)
In this Chapter “financial assistance” means—

(a)
financial assistance given by way of gift,

(b)
financial assistance given—

(i)
by way of guarantee, security or indemnity (other than an

indemnity in respect of the indemnifier’s own neglect or default),

or

(ii)
by way of release or waiver,

(c)
financial assistance given—

(i)
by way of a loan or any other agreement under which any of the

obligations of the person giving the assistance are to be fulfilled

at a time when in accordance with the agreement any obligation

of another party to the agreement remains unfulfilled, or

(ii)
by way of the novation of, or the assignment (in Scotland,

assignation) of rights arising under, a loan or such other

agreement, or

(d)
any other financial assistance given by a company where—

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

(i)
the net assets of the company are reduced to a material extent by

the giving of the assistance, or

(ii)
the company has no net assets.

(2)
“Net assets” here means the aggregate amount of the company’s assets less the

aggregate amount of its liabilities.

(3)
For this purpose a company’s liabilities include—

(a)
where the company draws up Companies Act individual accounts, any

provision of a kind specified for the purposes of this subsection by

regulations under section 378, and

(b)
where the company draws up IAS individual accounts, any provision

made in those accounts.’.

Assistance for acquisition of shares in public company

Margaret Hodge

Added  NC182

To move the following Clause:—

‘(1)
Where a person is acquiring or proposing to acquire shares in a public company,

it is not lawful for the company or any of its subsidiaries to give financial

assistance directly or indirectly for the purpose of the acquisition before or at the

same time as the acquisition takes place.

(2)
Subsection (1) does not prohibit a company from giving financial assistance for

the acquisition of shares in it or its holding company if—

(a)
the company’s principal purpose in giving the assistance is not to give it

for the purpose of any such acquisition, or

(b)
the giving of the assistance for that purpose is only an incidental part of

some larger purpose of the company,


and the assistance is given in good faith in the interests of the company.

(3)
Where—

(a)
a person has acquired shares in a company, and

(b)
a liability has been incurred (by that or another person) for the purpose of

the acquisition,


it is not lawful for the company or any of its subsidiaries to give financial

assistance directly or indirectly for the purpose of reducing or discharging the

liability if, at the time the assistance is given, the company is a public company.

(4)
Subsection (3) does not prohibit a company from giving financial assistance if—

(a)
the company’s principal purpose in giving the assistance is not to reduce

or discharge any liability incurred by a person for the purpose of the

acquisition of shares in the company or its holding company, or

(b)
the reduction or discharge of any such liability is only an incidental part

of some larger purpose of the company,


and the assistance is given in good faith in the interests of the company.

(5)
This section has effect subject to sections (Unconditional exceptions) and

(Conditional exceptions) (unconditional and conditional exceptions to

prohibition).’.

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

Assistance by public company for acquisition of shares in its private holding company

Margaret Hodge

Added  NC183

To move the following Clause:—

‘(1)
Where a person is acquiring or proposing to acquire shares in a private company,

it is not lawful for a public company that is a subsidiary of that company to give

financial assistance directly or indirectly for the purpose of the acquisition before

or at the same time as the acquisition takes place.

(2)
Subsection (1) does not prohibit a company from giving financial assistance for

the acquisition of shares in its holding company if—

(a)
the company’s principal purpose in giving the assistance is not to give it

for the purpose of any such acquisition, or

(b)
the giving of the assistance for that purpose is only an incidental part of

some larger purpose of the company,


and the assistance is given in good faith in the interests of the company.

(3)
Where—

(a)
a person has acquired shares in a private company, and

(b)
a liability has been incurred (by that or another person) for the purpose of

the acquisition,


it is not lawful for a public company that is a subsidiary of that company to give

financial assistance directly or indirectly for the purpose of reducing or

discharging the liability.

(4)
Subsection (3) does not prohibit a company from giving financial assistance if—

(a)
the company’s principal purpose in giving the assistance is not to reduce

or discharge any liability incurred by a person for the purpose of the

acquisition of shares in its holding company, or

(b)
the reduction or discharge of any such liability is only an incidental part

of some larger purpose of the company,


and the assistance is given in good faith in the interests of the company.

(5)
This section has effect subject to sections (Unconditional exceptions) and

(Conditional exceptions) (unconditional and conditional exceptions to

prohibition).’.

Prohibited financial assistance an offence

Margaret Hodge

Added  Nc184

To move the following Clause:—

‘(1)
If a company contravenes section (Assistance for acquisition of shares in public

company)(1) or (3) or section (Assistance by public company for acquisition of

shares in its private holding company)(1) or (3) (prohibited financial assistance)

an offence is committed by—

(a)
the company, and

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

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