sc1902007.479-485

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

S.C.D.  Standing Committee Proceedings: 20th July 2006
479

Company Law Reform Bill–[ [], continued

Resolution authorising payment: disclosure of directors’ statement and auditors’ report

Margaret Hodge

Added  NC222

To move the following Clause:—

‘(1)
This section applies to a resolution under section (Payment to be approved by

special resolution) (resolution authorising payment out of capital for redemption

or purchase of own shares).

(2)
The directors’ statement and auditors’ report under section (Directors’ statement

and auditor’s report) 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 at the meeting.

(3)
The resolution is ineffective if this requirement is not complied with.’.

Public notice of proposed payment

Margaret Hodge

Added  NC223

To move the following Clause:—

‘(1)
Within the week immediately following the date of the resolution under section

(Payment to be approved by special resolution) the company must cause to be

published in the Gazette a notice—

(a)
stating that the company has approved a payment out of capital for the

purpose of acquiring its own shares by redemption or purchase or both

(as the case may be),

(b)
specifying—

(i)
the amount of the permissible capital payment for the shares in

question, and

(ii)
the date of the resolution,

(c)
stating that the directors’ statement and auditor’s report required by

section (Directors’ statement and auditor’s report) are available for

inspection at the company’s registered office, and

(d)
stating that any creditor of the company may at any time within the five

weeks immediately following the date of the resolution apply to the court

under section (Application to court to cancel resolution) for an order

preventing the payment.

(2)
Within the week immediately following the date of the resolution the company

must also either—

(a)
cause a notice to the same effect as that required by subsection (1) to be

published in an appropriate national newspaper, or

(b)
give notice in writing to that effect to each of its creditors.

(3)
“An appropriate national newspaper” means a newspaper circulating throughout

the part of the United Kingdom in which the company is registered.

(4)
Not later than the day on which the company—

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Company Law Reform Bill–[ [], continued

(a)
first publishes the notice required by subsection (1), or

(b)
if earlier, first publishes or gives the notice required by subsection (2),


the company must deliver to the registrar a copy of the directors’ statement and

auditor’s report required by section (Directors’ statement and auditor’s report).’.

Directors’ statement and auditor’s report to be available for inspection

Margaret Hodge

Added  NC224

To move the following Clause:—

‘(1)
The directors’ statement and auditor’s report must be kept available for inspection

at the company’s registered office throughout the period—

(a)
beginning with the day on which the company—

(i)
first publishes the notice required by section (Public notice of

proposed payment)(1), or

(ii)
if earlier, first publishes or gives the notice required by section

(Public notice of proposed payment)(2), and

(b)
ending five weeks after the date of the resolution for payment out of

capital.

(2)
They must be open to the inspection of any member or creditor of the company

without charge.

(3)
If an inspection under subsection (2) is refused, an offence is committed by—

(a)
the company, and

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

(4)
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.

(5)
In the case of a refusal of an inspection required by subsection (2), the court may

by order compel an immediate inspection.’.

Application to court to cancel resolution

Margaret Hodge

Added  NC225

To move the following Clause:—

‘(1)
Where a private company passes a special resolution approving a payment out of

capital for the redemption or purchase of any of its shares—

(a)
any member of the company (other than one who consented to or voted

in favour of the resolution), and

(b)
any creditor of the company,


may apply to the court for the cancellation of the resolution.

(2)
The application—

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Company Law Reform Bill–[ [], continued

(a)
must be made within five weeks after the passing of the resolution, and

(b)
may be made on behalf of the persons entitled to make it by such one or

more of their number as they may appoint in writing for the purpose.

(3)
On an application under this section the court may if it thinks fit—

(a)
adjourn the proceedings in order that an arrangement may be made to the

satisfaction of the court—

(i)
for the purchase of the interests of dissentient members, or

(ii)
for the protection of dissentient creditors, and

(b)
give such directions and make such orders as it thinks expedient for

facilitating or carrying into effect any such arrangement.

(4)
Subject to that, the court must make an order either cancelling or confirming the

resolution, and may do so on such terms and conditions as it thinks fit.

(5)
If the court confirms the resolution, it may by order alter or extend any date or

period of time specified—

(a)
in the resolution, or

(b)
in any provision of this Chapter applying to the redemption or purchase

to which the resolution relates.

(6)
The court’s order may, if the court thinks fit—

(a)
provide for the purchase by the company of the shares of any of its

members and for the reduction accordingly of the company’s capital, and

(b)
make any alteration in the company’s articles that may be required in

consequence of that provision.

(7)
The court’s order may, if the court thinks fit, require the company not to make

any, or any specified, amendments of its articles without the leave of the court.’.

Notice to registrar of court application or order

Margaret Hodge

Added  NC226

To move the following Clause:—

‘(1)
On making an application under section (Application to court to cancel

resolution) (application to court to cancel resolution) the applicants, or the person

making the application on their behalf, must immediately give notice to the

registrar.


This is without prejudice to any provision of rules of court as to service of notice

of the application.

(2)
On being served with notice of any such application, the company must

immediately give notice to the registrar.

(3)
Within 15 days of the making of the court’s order on the application, or such

longer period as the court may at any time direct, the company must deliver to the

registrar a copy of the order.

(4)
If a company fails to comply with subsection (2) or (3) an offence is committed

by—

(a)
the company, and

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

(5)
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

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Company Law Reform Bill–[ [], continued

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

standard scale.’.

When payment out of capital to be made

Margaret Hodge

Added  NC227

To move the following Clause:—

‘(1)
The payment out of capital must be made—

(a)
no earlier than five weeks after the date on which the resolution under

section (Payment to be approved by special resolution) is passed, and

(b)
no more than seven weeks after that date.

(2)
This is subject to any exercise of the court’s powers under section (Application to

court to cancel resolution)(5) (power to alter or extend time where resolution

confirmed after objection).’.

Treasury shares

Margaret Hodge

Added  NC228

To move the following Clause:—

‘(1)
This section applies where—

(a)
a limited company makes a purchase of its own shares in accordance with

Chapter (Purchase of own shares),

(b)
the purchase is made out of distributable profits, and

(c)
the shares are qualifying shares.

(2)
For this purpose “qualifying shares” means shares that—

(a)
are included in the official list in accordance with the provisions of Part

6 of the Financial Services and Markets Act 2000 (c. 8),

(b)
are traded on the market known as the Alternative Investment Market

established under the rules of London Stock Exchange plc,

(c)
are officially listed in an EEA State, or

(d)
are traded on a regulated market.


In paragraph (a) “the official list” has the meaning given in section 103(1) of the

Financial Services and Markets Act 2000 (c. 8).

(3)
Where this section applies the company may—

(a)
hold the shares (or any of them), or

(b)
deal with any of them, at any time, in accordance with section (Treasury

shares: disposal) or (Treasury shares: cancellation).

(4)
Where shares are held by the company, the company must be entered in its

register of members as the member holding the shares.

(5)
In the Companies Acts references to a company holding shares as treasury shares

are to the company holding shares that—

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Company Law Reform Bill–[ [], continued

(a)
were (or are treated as having been) purchased by it in circumstances in

which this section applies, and

(b)
have been held by the company continuously since they were so

purchased (or treated as purchased).’.

Treasury shares: maximum holdings

Margaret Hodge

Added  NC229

To move the following Clause:—

‘(1)
Where a company has shares of only one class, the aggregate nominal value of

shares held as treasury shares must not at any time exceed 10% of the nominal

value of the issued share capital of the company at that time.

(2)
Where the share capital of a company is divided into shares of different classes,

the aggregate nominal value of the shares of any class held as treasury shares must

not at any time exceed 10% of the nominal value of the issued share capital of the

shares of that class at that time.

(3)
If subsection (1) or (2) is contravened by a company, the company must dispose

of or cancel the excess shares, in accordance with section (Treasury shares:

disposal), before the end of the period of twelve months beginning with the date

on which that contravention occurs.


The “excess shares” means such number of the shares held by the company as

treasury shares at the time in question as resulted in the limit being exceeded.

(4)
Where a company purchases qualifying shares out of distributable profits in

accordance with section (Treasury shares), a contravention by the company of

subsection (1) or (2) above does not render the acquisition void under section

(General rule against limited company acquiring its own shares) (general rule

against limited company acquiring its own shares).’.

Treasury shares: exercise of rights

Margaret Hodge

Added  Nc230

To move the following Clause:—

‘(1)
This section applies where shares are held by a company as treasury shares.

(2)
The company must not exercise any right in respect of the treasury shares, and

any purported exercise of such a right is void.


This applies, in particular, to any right to attend or vote at meetings.

(3)
No divided may be paid, and no other distribution (whether in cash or otherwise)

of the company’s assets (including any distribution of assets to members on a

winding up) may be made to the company, in respect of the treasury shares.

(4)
Nothing in this section prevents—

(a)
an allotment of shares as fully paid bonus shares in respect of the treasury

shares, or

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Company Law Reform Bill–[ [], continued

(b)
the payment of any amount payable on the redemption of the treasury

shares (if they are redeemable shares).

(5)
Shares allotted as fully paid bonus shares in respect of the treasury shares are

treated as if purchased by the company, at the time they were allotted, in

circumstances in which section (Treasury shares)(1) (treasury shares) applied.’.

Treasury shares: disposal

Margaret Hodge

Added  NC231

To move the following Clause:—

‘(1)
Where shares are held as treasury shares, the company may at any time—

(a)
sell the shares (or any of them) for a cash consideration, or

(b)
transfer the shares (or any of them) for the purposes of or pursuant to an

employees’ share scheme.

(2)
In subsection (1)(a) “cash consideration” means—

(a)
cash received by the company, or

(b)
a cheque received by the company in good faith that the directors have no

reason for suspecting will not be paid, or

(c)
a release of a liability of the company for a liquidated sum, or

(d)
an undertaking to pay cash to the company on or before a date not more

than 90 days after the date on which the company agrees to sell the

shares.


For this purpose “cash” includes foreign currency.

(3)
If the company receives a notice under section (Right of offeror to buy out

minority shareholder) (takeover offers: right of offeror to buy out minority

shareholders) that a person desires to acquire shares held by the company as

treasury shares, the company must not sell or transfer the shares to which the

notice relates except to that person.’,

Treasury shares: notice of disposal

Margaret Hodge

Added  Nc232

To move the following Clause:—

‘(1)
Where shares held by a company as treasury shares—

(a)
are sold, or

(b)
are transferred for the purposes of an employees’ share scheme,


the company must deliver a return to the registrar not later than 28 days after the

shares are disposed of.

(2)
The return must state with respect to shares of each class disposed of—

(a)
the number and nominal value of the shares, and

(b)
the date on which they were disposed of.

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Company Law Reform Bill–[ [], continued

(3)
Particulars of shares disposed of on different dates may be included in a single

return.

(4)
If default is made in complying with this section an offence is committed by every

officer of the company who is in default.

(5)
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.’.

Treasury shares: cancellation

Margaret Hodge

Added  Nc233

To move the following Clause:—

‘(1)
Where shares are held as treasury shares, the company may at any time cancel the

shares (or any of them).

(2)
If shares held as treasury shares cease to be qualifying shares, the company must

forthwith cancel the shares.

(3)
For this purpose shares are not to be regarded as ceasing to be qualifying shares

by virtue only of—

(a)
the suspension of their listing in accordance with the applicable rules in

the EEA state in which the shares are officially listed, or

(b)
the suspension of their trading in accordance with—

(i)
in the case of shares traded on the market known as the

Alternative Investment Market, the rules of London Stock

Exchange plc, and

(ii)
in any other case, the rules of the regulated market on which they

are traded.

(4)
If company cancels shares held as treasury shares, the amount of the company’s

share capital is reduced accordingly by the nominal amount of the shares

cancelled.

(5)
The directors may take any steps required to enable the company to cancel its

shares under this section without complying with the provisions of Chapter

(Reduction of share capital) of Part (A company’s share capital) (reduction of

share capital).’.