sc1902007.486-492

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

S.C.D.  Standing Committee Proceedings: 20th July 2006
486

Company Law Reform Bill–[ [], continued

Treasury shares: notice of cancellation

Margaret Hodge

Added  NC234

To move the following Clause:—

‘(1)
Where shares held by a company as treasury shares are cancelled, the company

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

cancelled.


This does not apply to shares that are cancelled forthwith on their acquisition by

the company (see section (Notice to registrar of cancellation of shares)).

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

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

(b)
the date on which they were cancelled.

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

return.

(4)
The notice must be accompanied by a statement of capital.

(5)
The statement of capital must state with respect to the company’s share capital

immediately following the cancellation—

(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).

(6)
If default is made in complying with this section an offence is committed by every

officer of the company who is in default.

(7)
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: treatment of proceeds of sale

Margaret Hodge

Added  Nc235

To move the following Clause:—

‘(1)
Where shares held as treasury shares are sold, the proceeds of sale must be dealt

with in accordance with this section.

(2)
If the proceeds of sale are equal to or less than the purchase price paid by the

company for the shares, the proceeds are treated for the purposes of Part

(Distributions) (distributions) as a realised profit of the company.

(3)
If the proceeds of sale exceed the purchase price paid by the company—

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

(a)
an amount equal to the purchase price paid is treated as a realised profit

of the company for the purposes of that Part, and

(b)
the excess must be transferred to the company’s share premium account.

(4)
For the purposes of this section—

(a)
the purchase price paid by the company must be determined by the

application of a weighted average price method, and

(b)
if the shares were allotted to the company as fully paid bonus shares, the

purchase price paid for them is treated as nil.’.

Treasury shares: offences

Margaret Hodge

Added  Nc236

To move the following Clause:—

‘(1)
If a company contravenes any of the provisions of this Chapter (except section

(Treasury shares: notice of cancellation) (notice of cancellation)), 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—

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

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

The capital redemption reserve

Margaret Hodge

Added  nc237

To move the following Clause:—

‘(1)
Where under this Part shares of a limited company are redeemed or purchased

wholly out of the company’s profits, the amount by which the company’s issued

share capital is diminished—

(a)
on cancellation of the shares redeemed or purchased (see section

(Redeemed shares treated as cancelled) or (Treatment of shares

purchased)(3)), or

(b)
on cancellation of shares held as treasury shares (see section (Treasury

shares: cancellation),


must be transferred to a reserve, called the “capital redemption reserve”.

(2)
Where—

(a)
the shares are redeemed or purchased wholly or partly out of the proceeds

of a fresh issue, and

(b)
the aggregate amount of the proceeds is less than the aggregate nominal

value of the shares redeemed or purchased,


the amount of the difference must be transferred to the capital redemption reserve.

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

(3)
Subsection (2) does not apply in the case of a private company if, in addition to

the proceeds of the fresh issue, the company applies a payment out of capital

under Chapter (Redemption or purchase by private company out of capital) in

making the purchase of shares.

(4)
The company may use the capital redemption reserve to pay up new shares to be

allotted to members as fully paid bonus shares.

(5)
Subject to that, the provisions of the Companies Acts relating to the reduction of

a company’s share capital apply as if the capital redemption reserve were part of

its paid up share capital.’.

Accounting consequences of payment out of capital

Margaret Hodge

Added  nc238

To move the following Clause:—

‘(1)
This section applies where a payment out of capital is made in accordance with

Chapter (Redemption or purchase by private company out of capital) (redemption

or purchase of own shares by private company out of capital).

(2)
If the permissible capital payment is less than the nominal amount of the shares

redeemed or purchased, the amount of the difference must be transferred to the

company’s capital redemption reserve.

(3)
If the permissible capital payment is greater than the nominal amount of the

shares redeemed or purchased—

(a)
the amount of any capital redemption reserve, share premium account or

fully paid share capital of the company, and

(b)
any amount representing unrealised profits of the company for the time

being standing to the credit of any revaluation reserve maintained by the

company,


may be reduced by a sum not exceeding (or by sums not in total exceeding) the

amount by which the permissible capital payment exceeds the nominal amount of

the shares.

(4)
Where the proceeds of a fresh issue are applied by the company in making a

redemption or purchase of its own shares in addition to a payment out of capital

under this Chapter, the references in subsections (2) and (3) to the permissible

capital payment are to be read as referring to the aggregate of that payment and

those proceeds.’.

Effect of company’s failure to redeem or purchase

Margaret Hodge

Added  nc239

To move the following Clause:—

‘(1)
This section applies where a company—

(a)
issues shares on terms that they are or are liable to be redeemed, or

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

(b)
agrees to purchase any of its shares.

(2)
The company is not liable in damages in respect of any failure on its part to

redeem or purchase any of the shares.


This is without prejudice to any right of the holder of the shares other than his

right to sue the company for damages in respect of its failure.

(3)
The court shall not grant an order for specific performance of the terms of

redemption or purchase if the company shows that it is unable to meet the costs

of redeeming or purchasing the shares in question out of distributable profits.

(4)
If the company is wound up and at the commencement of the winding up any of

the shares have not been redeemed or purchased, the terms of redemption or

purchase may be enforced against the company.


When shares are redeemed or purchased under this subsection, they are treated as

cancelled.

(5)
Subsection (4) does not apply if—

(a)
the terms provided for the redemption or purchase to take place at a date

later than that of the commencement of the winding up, or

(b)
during the period—

(i)
beginning with the date on which the redemption or purchase

was to have taken place, and

(ii)
ending with the commencement of the winding up,


the company could not at any time have lawfully made a distribution

equal in value to the price at which the shares were to have been

redeemed or purchased.

(6)
There shall be paid in priority to any amount that the company is liable under

subsection (4) to pay in respect of any shares—

(a)
all other debts and liabilities of the company (other than any due to

members in their character as such), and

(b)
if other shares carry rights (whether as to capital or as to income) that are

preferred to the rights as to capital attaching to the first-mentioned shares,

any amount due in satisfaction of those preferred rights.


Subject to that, any such amount shall be paid in priority to any amounts due to

members in satisfaction of their rights (whether as to capital or income) as

members.’.

Meaning of “distributable profits”

Margaret Hodge

Added  nc240

To move the following Clause:—

‘In this Part (except in Chapter (Financial assistance for purchase of own shares)

(financial assistance): see section (Definitions for this Chapter) “distributable

profits”, in relation to the making of any payment by a company, means profits

out of which the company could lawfully make a distribution (within the meaning

given by section (Distributions to be made only out of profits available for the

purpose)) equal in value to the payment.’.

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

General power to make further provision by regulations

Margaret Hodge

Added  nc241

To move the following Clause:—

‘(1)
The Secretary of State may by regulations modify the provisions of this Part.

(2)
The regulations may—

(a)
amend or repeal any of the provisions of this Part, or

(b)
make such other provision as appears to the Secretary of State

appropriate in place of any of the provisions of this Part.

(3)
Regulations under this section may make consequential amendments or repeals

in other provisions of this Act, or in other enactments.

(4)
Regulations under this section are subject to affirmative resolution procedure.’.

Meaning of “debenture”

Margaret Hodge

Added  NC242

To move the following Clause:—

‘In the Companies Acts “debenture” includes debenture stock, bonds and any

other securities of a company, whether or not constituting a charge on the assets

of the company.’.

Perpetual debentures

Margaret Hodge

Added  NC243

To move the following Clause:—

‘(1)
A condition contained in debentures, or in a deed for securing debentures, is not

invalid by reason only that the debentures are thereby made—

(a)
irredeemable, or

(b)
redeemable only—

(i)
on the happening of a contingency (however remote), or

(ii)
on the expiration of a period (however long),


any rule of equity to the contrary notwithstanding.

(2)
Subsection (1) applies to debentures whenever issued and to deeds whenever

executed.’.

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

Enforcement of contract to subscribe for debentures

Margaret Hodge

Added  nc244

To move the following Clause:—

‘A contract with a company to take up and pay for debentures of the company

may by enforced by an order for specific performance.’.

Registration of allotment of debentures

Margaret Hodge

Added  Nc245

To move the following Clause:—

‘(1)
A company must register an allotment of debentures as soon as practicable and in

any event within two months after the date of the allotment.

(2)
If a company fails to comply with this section, 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.

(4)
For the duties of the company as to the issue of the debentures, or certificates of

debenture stock, see Part 22 (certification and transfer of securities).’.

Debentures to bearer (Scotland)

Margaret Hodge

Added  Nc246

To move the following Clause:—

‘Notwithstanding anything in the statute of the Scots Parliament of 1696, chapter

25, debentures to bearer issued in Scotland are valid and binding according to

their terms.’.

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

Register of debenture holders

Margaret Hodge

Added  Nc247

To move the following Clause:—

‘(1)
Any register of debenture holders of a company that is kept by the company must

be kept available for inspection—

(a)
at the company’s registered office, or

(b)
at another place in the part of the United Kingdom in which the company

is registered.

(2)
A company must give notice to the registrar of the place where any such register

is kept available for inspection and of any change in that place.

(3)
No such notice is required if the register has, at all times since it came into

existence, been kept available for inspection at the company’s registered office.

(4)
If a company makes default for 14 days in complying with subsection (2), 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 in the case of continued

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

standard scale.

(6)
References in this section to a register of debenture holders include a duplicate—

(a)
of a register of debenture holders that is kept outside the United

Kingdom, or

(b)
of any part of such a register.’.

Register of debenture holders: right to inspect and require copy

Margaret Hodge

Added  nc248

To move the following Clause:—

‘(1)
Every register of debenture holders of a company must, except when duly closed,

be open to the inspection—

(a)
of the registered holder of any such debentures, or any holder of shares

in the company, without charge, and

(b)
of any other person on payment of such fee as may be prescribed.

(2)
Any person may require a copy of the register, or any part of it, on payment of

such fee as may be prescribed.

(3)
A person seeking to exercise either of the rights conferred by this section must

make a request to the company to that effect.

(4)
The request must contain the following information—

(a)
in the case of an individual, his name and address;

(b)
in the case of an organisation, the name and address of an individual

responsible for making the request on behalf of the organisation;

(c)
the purpose for which the information is to be used; and