sc1902007.465-471

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

S.C.D.  Standing Committee Proceedings: 20th July 2006
465

Company Law Reform Bill–[ [], continued

(a)
they are listed under Part 6 of the Financial Services and Markets Act

2000 (c. 8), or

(b)
the company has been afforded facilities for dealings in the shares to take

place on the exchange—

(i)
without prior permission for individual transactions from the

authority governing that investment exchange, and

(ii)
without limit as to the time during which those facilities are to be

available.

(4)
A purchase is a “market purchase” if it is made on a recognised investment

exchange and is not an off-market purchase by virtue of subsection (2)(b).

(5)
In this section “recognised investment exchange” means a recognised investment

exchange (within the meaning of Part 18 of the Financial Services and Markets

Act 2000 (c. 8)) other than an overseas exchange (within the meaning of that

Part).’.

Authority for off-market purchase

Margaret Hodge

Added  Nc198

To move the following Clause:—

‘(1)
A company may only make an off-market purchase of its own shares in pursuance

of a contract approved in advance in accordance with this section.

(2)
Either—

(a)
the terms of the proposed contract must be authorised by special

resolution of the company before the contract is entered into, or

(b)
the purchase must be in pursuance of a contingent purchase contract

authorised by special resolution of the company before it was entered

into.

(3)
A “contingent purchase contract” means a contract, entered into by the company

and relating to shares in the company, that does not amount to a contract to

purchase the shares but under which the company may (subject to any conditions)

become entitled or obliged to purchase the shares.

(4)
The authority conferred by a resolution under this section may be varied, revoked

or from time to time renewed by a special resolution of the company.

(5)
In the case of a public company a resolution conferring, varying or renewing

authority must specify a date on which the authority is to expire, which must not

be later than 18 months after the date on which the resolution is passed.

(6)
A resolution conferring, varying, revoking or renewing authority under this

section is subject to—

section (Resolution authorising off-market purchase: exercise of voting

rights) (exercise of voting rights), and

section Resolution authorising off-market purchase: disclosure of details of

contract) (disclosure of details of contract).’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
466

Company Law Reform Bill–[ [], continued

Resolution authorising off-market purchase: exercise of voting rights

Margaret Hodge

Added  Nc199

To move the following Clause:—

‘(1)
This section applies to a resolution to confer, vary, revoke or renew authority for

the purposes of section (Authority for off-market purchase) (authority for off-

market purchase of own shares).

(2)
Where the resolution is proposed as a written resolution, a member who holds

shares to which the resolution relates is not an eligible member.

(3)
Where the resolution is proposed at a meeting of the company, it is not effective

if—

(a)
any member of the company holding shares to which the resolution

relates exercises the voting rights carried by any of those shares in voting

on the resolution, and

(b)
the resolution would not have been passed if he had not done so.

(4)
For this purpose—

(a)
a member who holds shares to which the resolution relates is regarded as

exercising the voting rights carried by those shares not only if he votes in

respect of them on a poll on the question whether the resolution shall be

passed, but also if he votes on the resolution otherwise than on a poll;

(b)
notwithstanding anything in the company’s articles, any member of the

company may demand a poll on that question;

(c)
a vote and a demand for a poll by a person as proxy for a member are the

same respectively as a vote and a demand by the member.’.

Resolution authorising off-market purchase: disclosure of details of contract

Margaret Hodge

Added  NC200

To move the following Clause:—

‘(1)
This section applies in relation to a resolution to confer, vary, revoke or renew

authority for the purposes of section (Authority for off-market purchase)

(authority for off-market purchase of own shares).

(2)
A copy of the proposed contract (if it is in writing) or a memorandum setting out

its terms (if it is not) must be made available to members—

(a)
in the case of a written resolution, by being sent or submitted to every

eligible member at or before the time at which the proposed resolution is

sent or submitted to him;

(b)
in the case of a resolution at a meeting, by being made available for

inspection by members of the company both—

(i)
at the company’s registered office for not less than 15 days

ending with the date of the meeting, and

(ii)
at the meeting itself.

(3)
A memorandum of contract terms so made available must include the names of

the members holding shares to which the contract relates.

S.C.D.  Standing Committee Proceedings: 20th July 2006
467

Company Law Reform Bill–[ [], continued

(4)
A copy of the contract so made available must have annexed to it a written

memorandum specifying such of those names as do not appear in the contract

itself.

(5)
The resolution is not validly passed if the requirements of this section are not

complied with.’.

Variation of contract for off-market purchase

Margaret Hodge

Added  NC201

To move the following Clause:—

‘(1)
A company may only agree to a variation of a contract authorised under section

(Authority for off-market purchase) (authority for off-market purchase) if the

variation is approved in advance in accordance with this section.

(2)
The terms of the variation must be authorised by a special resolution of the

company before it is agreed to.

(3)
That authority may be varied, revoked or from time to time renewed by a special

resolution of the company.

(4)
In the case of a public company a resolution conferring, varying or renewing

authority must specify a date on which the authority is to expire, which must not

be later than 18 months after the date on which the resolution is passed.

(5)
A resolution conferring, varying, revoking or renewing authority under this

section is subject to—

section (Resolution authorising variation: exercise of voting rights)

(exercise of voting rights), and

section (Resolution authorising variation: disclosure of details of variation)

(disclosure of details of variation).’.

Resolution authorising variation: exercise of voting rights

Margaret Hodge

Added  NC202

To move the following Clause:—

‘(1)
This section applies to a resolution to confer, vary, revoke or renew authority for

the purposes of section (Variation of contract for off-market purchase) (variation

of contract for off-market purchase of own shares).

(2)
Where the resolution is proposed as a written resolution, a member who holds

shares to which the resolution relates is not an eligible member.

(3)
Where the resolution is proposed at a meeting of the company, it is not effective

if—

(a)
any member of the company holding shares to which the resolution

relates exercises the voting rights carried by any of those shares in voting

on the resolution, and

(b)
the resolution would not have been passed if he had not done so.

S.C.D.  Standing Committee Proceedings: 20th July 2006
468

Company Law Reform Bill–[ [], continued

(4)
For this purpose—

(a)
a member who holds shares to which the resolution relates is regarded as

exercising the voting rights carried by those shares not only if he votes in

respect of them on a poll on the question whether the resolution shall be

passed, but also if he votes on the resolution otherwise than on a poll;

(b)
notwithstanding anything in the company’s articles, any member of the

company may demand a poll on that question; and

(c)
a vote and a demand for a poll by a person as proxy for a member are the

same respectively as a vote and a demand by the member.’.

Resolution authorising variation: disclosure of details of variation

Margaret Hodge

Added  NC203

To move the following Clause:—

‘(1)
This section applies in relation to a resolution under section (Variation of contract

for off-market purchase) (variation of contract for off-market purchase of own

shares).

(2)
A copy of the proposed variation (if it is in writing) or a written memorandum

giving details of the proposed variation (if it is not) must be made available to

members—

(a)
in the case of a written resolution, by being sent or submitted to every

eligible member at or before the time at which the proposed resolution is

sent or submitted to him;

(b)
in the case of a resolution at a meeting, by being made available for

inspection by members of the company both—

(i)
at the company’s registered office for not less than 15 days

ending with the date of the meeting, and

(ii)
at the meeting itself.

(3)
There must also be made available as mentioned in subsection (2) a copy of the

original contract or, as the case may be, a memorandum of its terms, together with

any variations previously made.

(4)
A memorandum of the proposed variation so made available must include the

names of the members holding shares to which the variation relates.

(5)
A copy of the proposed variation so made available must have annexed to it a

written memorandum specifying such of those names as do not appear in the

variation itself.

(6)
The resolution is not validly passed if the requirements of this section are not

complied with.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
469

Company Law Reform Bill–[ [], continued

Release of company’s rights under contract for off-market purchase

Margaret Hodge

Added  NC204

To move the following Clause:—

‘(1)
An agreement by a company to release its rights under a contract approved under

section (Authority for off-market purchase) (authorisation of off-market

purchase) is void unless the terms of the release agreement are approved in

advance in accordance with this section.

(2)
The terms of the proposed agreement must be authorised by a special resolution

of the company before the agreement is entered into.

(3)
That authority may be varied, revoked or from time to time renewed by a special

resolution of the company.

(4)
In the case of a public company a resolution conferring, varying or renewing

authority must specify a date on which the authority is to expire, which must not

be later than 18 months after the date on which the resolution is passed.

(5)
The provisions of—

section (Resolution authorising variation: exercise of voting rights)

(exercise of voting rights), and

section (Resolution authorising variation: disclosure of details of variation)

(disclosure of details of variation),


apply to a resolution authorising a proposed release agreement as they apply to a

resolution authorising a proposed variation.’.

Authority for market purchase

Margaret Hodge

Added  Nc205

To move the following Clause:—

‘(1)
A company may only make a market purchase of its own shares if the purchase

has first been authorised by a resolution of the company.

(2)
That authority—

(a)
may be general or limited to the purchase of shares of a particular class

or description, and

(b)
may be unconditional or subject to conditions.

(3)
The authority must—

(a)
specify the maximum number of shares authorised to be acquired, and

(b)
determine both the maximum and minimum prices that may be paid for

the shares.

(4)
The authority may be varied, revoked or from time to time renewed by a

resolution of the company.

(5)
A resolution conferring, varying or renewing authority must specify a date on

which it is to expire, which must not be later than 18 months after the date on

which the resolution is passed.

(6)
A company may make a purchase of its own shares after the expiry of the time

limit specified if—

(a)
the contract of purchase was concluded before the authority expired, and

S.C.D.  Standing Committee Proceedings: 20th July 2006
470

Company Law Reform Bill–[ [], continued

(b)
the terms of the authority permitted the company to make a contract of

purchase that would or might be executed wholly or partly after its

expiration.

(7)
A resolution to confer or vary authority under this section may determine either

or both the maximum and minimum price for purchase by—

(a)
specifying a particular sum, or

(b)
providing a basis or formula for calculating the amount of the price (but

without reference to any person’s discretion or opinion).’.

Copy of contract or memorandum to be available for inspection

Margaret Hodge

Added  NC206

To move the following Clause:—

‘(1)
This section applies where a company has entered into—

(a)
a contract approved under section (Authority for off-market purchase)

(authorisation of contract for off-market purchase), or

(b)
a contract for a purchase authorised under section (Authority for market

purchase) (authorisation of market purchase).

(2)
The company must keep available for inspection at its registered office—

(a)
a copy of the contract, or

(b)
if the contract is not in writing, a written memorandum setting out its

terms.

(3)
The copy or memorandum must be kept available for inspection from the

conclusion of the contract until the end of the period of ten years beginning

with—

(a)
the date on which the purchase of all the shares in pursuance of the

contract is completed or,

(b)
the date on which the contract otherwise determines.

(4)
Every copy or memorandum required to be kept under this section must be kept

open to inspection without charge—

(a)
by any member of the company, and

(b)
in the case of a public company, by any other person.

(5)
The provisions of this section apply to a variation of a contract as they apply to

the original contract.’.

Enforcement of right to inspect copy or memorandum

Margaret Hodge

Added  Nc207

To move the following Clause:—

‘(1)
If default is made in complying with section (Copy of contract or memorandum

to be available for inspection)(2) or (3), or an inspection required under section

S.C.D.  Standing Committee Proceedings: 20th July 2006
471

Company Law Reform Bill–[ [], continued

(Copy of contract or memorandum to be available for inspection)(4) is refused,

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

(2)
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.

(3)
In the case of refusal of an inspection required under section (Copy of contract or

memorandum to be available for inspection)(4) the court may by order compel an

immediate inspection.’.

No assignment of company’s right to purchase own shares

Margaret Hodge

Added  NC208

To move the following Clause:—

‘The rights of a company under a contract authorised under—

(a)
section (Authority for off-market purchase) (authority for off-market

purchase), or

(b)
section (Authority for market purchase) (authority for market purchase)

are not capable of being assigned.’.

Payments apart from purchase price to be made out of distributable profits

Margaret Hodge

Added  NC209

To move the following Clause:—

‘(1)
A payment made by a company in consideration of—

(a)
acquiring any right with respect to the purchase of its own shares in

pursuance of a contingent purchase contract approved under section

(Authority for off-market purchase) (authorisation of off-market

purchase),

(b)
the variation of any contract approved under that section, or

(c)
the release of any of the company’s obligations with respect to the

purchase of any of its own shares under a contract—

(i)
approved under section (Authority for off-market purchase), or

(ii)
authorised under section (Authority for market purchase)

(authorisation of market purchase),


must be made out of the company’s distributable profits.

(2)
If this requirement is not met in relation to a contract, then—

(a)
in a case within subsection (1)(a), no purchase by the company of its own

shares in pursuance of that contract may be made under this Chapter;