sc1902007.507-513

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

S.C.D.  Standing Committee Proceedings: 20th July 2006
507

Company Law Reform Bill–[ [], continued

(b)
references to title to securities include any legal or equitable interest in

securities;

(c)
references to a transfer of title include a transfer by way of security;

(d)
references to transfer without a written instrument include, in relation to

bearer securities, transfer without delivery.’.

Power to make regulations

Margaret Hodge

Added  nc275

To move the following Clause:—

‘(1)
The power to make regulations under this Chapter is exercisable by the Treasury

and the Secretary of State, either jointly or concurrently.

(2)
References in this Chapter to the authority having power to make regulations

shall accordingly be read as references to both or either of them, as the case may

require.

(3)
Regulations under this Chapter are subject to affirmative resolution procedure.’.

Provision enabling procedures for evidencing and transferring title

Margaret Hodge

Added  nc276

To move the following Clause:—

‘(1)
Provision may be made by regulations for enabling title to securities to be

evidenced and transferred without a written instrument.

(2)
The regulations may make provision—

(a)
for procedures for recording and transferring title to securities, and

(b)
for the regulation of those procedures and the persons responsible for or

involved in their operation.

(3)
The regulations must contain such safeguards as appear to the authority making

the regulations appropriate for the protection of investors and for ensuring that

competition is not restricted, distorted or prevented.

(4)
The regulations may, for the purpose of enabling or facilitating the operation of

the procedures provided for by the regulations, make provision with respect to the

rights and obligations of persons in relation to securities dealt with under the

procedures.

(5)
The regulations may include provision for the purpose of giving effect to—

(a)
the transmission of title to securities by operation of law;

(b)
any restriction on the transfer of title to securities arising by virtue of the

provisions of any enactment or instrument, court order or agreement;

(c)
any power conferred by any such provision on a person to deal with

securities on behalf of the person entitled.

S.C.D.  Standing Committee Proceedings: 20th July 2006
508

Company Law Reform Bill–[ [], continued

(6)
The regulations may make provision with respect to the persons responsible for

the operation of the procedures provided for by the regulations—

(a)
as to the consequences of their insolvency or incapacity, or

(b)
as to the transfer from them to other persons of their functions in relation

to those procedures.’.

Provision requiring arrangements to be adopted

Margaret Hodge

Added  nc277

To move the following Clause:—

‘(1)
Regulations under this Chapter may make provision—

(a)
enabling the members of a company or of any designated class of

companies to adopt, by ordinary resolution, arrangements under which

title to securities is required to be evidenced and transferred without a

written instrument; or

(b)
requiring companies, or any designated class of companies, to adopt such

arrangements.

(2)
The regulations may make such provision—

(a)
in respect of all securities issued by a company, or

(b)
in respect of all securities of a specified description.

(3)
The arrangements provided for by regulations making such provision as is

mentioned in subsection (1) must not be such that a person who, but for the

arrangements would be entitled—

(a)
to have his name entered in the company’s register of members, or

(b)
to give instructions in respect of any securities,


ceases to be so entitled.

(4)
The regulations may—

(a)
prohibit the issue of any certificate by the company in respect of the issue

or transfer of securities,

(b)
require the provision by the company to holders of securities of

statements (at specified intervals or on specified occasions) of the

securities held in their name, and

(c)
make provision as to the matters of which any such certificate or

statement is, or is not, evidence.

(5)
In this section—

(a)
references to a designated class of companies are to a class designated in

the regulations or by order under section (Provision requiring

arrangements to be adopted: order-making powers); and

(b)
“specified” means specified in the regulations.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
509

Company Law Reform Bill–[ [], continued

Provision requiring arrangements to be adopted: order-making powers

Margaret Hodge

Added  nc278

To move the following Clause:—

‘(1)
The authority having power to make regulations under this Chapter may by

order—

(a)
designate classes of companies for the purposes of section (Provision

requiring arrangements to be adopted) (provision requiring

arrangements to be adopted);

(b)
provide that, in relation to securities of a specified description—

(i)
in a designated class of companies, or

(ii)
in a specified company or class of companies,


specified provisions of regulations made under this Chapter by virtue of

that section either do not apply or apply subject to specified

modifications.

(2)
In subsection (1) “specified” means specified in the order.

(3)
An order under this section is subject to negative resolution procedure.’.

Provision that may be included in regulations

Margaret Hodge

Added  nc279

To move the following Clause:—

‘Regulations under this Chapter may—

(a)
modify or exclude any provision of any enactment or instrument, or any

rule of law;

(b)
apply, with such modifications as may be appropriate, the provisions of

any enactment or instrument (including provisions creating criminal

offences);

(c)
require the payment of fees, or enable persons to require the payment of

fees, of such amounts as may be specified in the regulations or

determined in accordance with them;

(d)
empower the authority making the regulations to delegate to any person

willing and able to discharge them any functions of the authority under

the regulations.’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
510

Company Law Reform Bill–[ [], continued

Duty to consult

Margaret Hodge

Added  nc280

To move the following Clause:—

‘Before making—

(a)
regulations under this Chapter, or

(b)
any order under section (Provision requiring arrangements to be

adopted: order making powers),

the authority having power to make regulations under this Chapter must carry out

such consultation as appears to it to be appropriate.’.

Meaning of “distribution”

Margaret Hodge

Added  nc281

To move the following Clause:—

‘(1)
In this Part “distribution” means every description of distribution of a company’s

assets to its members, whether in cash or otherwise, subject to the following

exceptions.

(2)
The following are not distributions for the purposes of this Part—

(a)
an issue of shares as fully or partly paid bonus shares;

(b)
the reduction of share capital—

(i)
by extinguishing or reducing the liability of any of the members

on any of the company’s shares in respect of share capital not

paid up, or

(ii)
by paying off paid up share capital;

(c)
the redemption or purchase of any of the company’s own shares out of

capital (including the proceeds of any fresh issue of shares) or out of

unrealised profits in accordance with Chapter (Redeemable shares) or

(Purchase of own shares) of Part (Acquisition by limited company of its

own shares);

(d)
a distribution of assets to members of the company on its winding up.’.

Distributions to be made only out of profits available for the purpose

Margaret Hodge

Added  nc282

To move the following Clause:—

‘(1)
A company may only make a distribution out of profits available for the purpose.

(2)
A company’s profits available for distribution are its accumulated, realised

profits, so far as not previously utilised by distribution or capitalisation, less its

S.C.D.  Standing Committee Proceedings: 20th July 2006
511

Company Law Reform Bill–[ [], continued

accumulated, realised losses, so far as not previously written off in a reduction or

reorganisation of capital duly made.

(3)
Subsection (2) has effect subject to sections (Distributions by investment

companies out of accumulated revenue profits) and (Power to extend provisions

relating to investment companies) (investment companies etc: distributions out of

accumulated revenue profits).’.

Net asset restriction on distributions by public companies

Margaret Hodge

Added  nc283

To move the following Clause:—

‘(1)
A public company may only make a distribution—

(a)
if the amount of its net assets is not less than the aggregate of its called-

up share capital and undistributable reserves, and

(b)
if, and to the extent that, the distribution does not reduce the amount of

those assets to less than that aggregate.

(2)
For this purpose a company’s “net assets” means the aggregate of the company’s

assets less the aggregate of its liabilities.

(3)
“Liabilities” here includes—

(a)
where the relevant accounts are Companies Act accounts, provisions of a

kind specified for the purposes of this subsection by regulations under

section 378;

(b)
where the relevant accounts are IAS accounts, provisions of any kind.

(4)
A company’s undistributable reserves are—

(a)
its share premium account;

(b)
its capital redemption reserve;

(c)
the amount by which its accumulated, unrealised profits (so far as not

previously utilised by capitalisation) exceed its accumulated, unrealised

losses (so far as not previously written off in a reduction or reorganisation

of capital duly made);

(d)
any other reserve that the company is prohibited from distributing—

(i)
by any enactment (other than one contained in this Part), or

(ii)
by its articles.


The reference in paragraph (c) to capitalisation does not include a transfer of

profits of the company to its capital redemption reserve.

(5)
A public company must not include any uncalled share capital as an asset in any

accounts relevant for purposes of this section.

(6)
Subsection (1) has effect subject to sections (Distributions by investment

companies out of accumulated revenue profits) and (Power to extend provisions

relating to investment companies) (investment companies etc: distributions out of

accumulated revenue profits).’.

S.C.D.  Standing Committee Proceedings: 20th July 2006
512

Company Law Reform Bill–[ [], continued

Distributions by investment companies out of accumulated revenue profits

Margaret Hodge

Added  nc284

To move the following Clause:—

‘(1)
An investment company may make a distribution out of its accumulated, realised

revenue profits if the following conditions are met.

(2)
It may make such a distribution only if, and to the extent that, its accumulated,

realised revenue profits, so far as not previously utilised by a distribution or

capitalisation, exceed its accumulated revenue losses (whether realised or

unrealised), so far as not previously written off in a reduction or reorganisation of

capital duly made.

(3)
It may make such a distribution only—

(a)
if the amount of its assets is at least equal to one and a half times the

aggregate of its liabilities, and

(b)
if, and to the extent that, the distribution does not reduce that amount to

less than one and a half times that aggregate.

(4)
For this purpose a company’s liabilities include—

(a)
in the case of Companies Act accounts, provisions of a kind specified for

the purposes of this subsection by regulations under section 378;

(b)
in the case of IAS accounts, provisions of any kind.

(5)
The following conditions must also be met—

(a)
the company’s shares must be listed on a recognised UK investment

exchange;

(b)
during the relevant period it must not have—

(i)
distributed any capital profits otherwise than by way of the

redemption or purchase of any of the company’s own shares in

accordance with Chapter (Redeemable shares) or (Purchase of

own shares) of Part (Acquisition by limited company of its own

shares), or

(ii)
applied any unrealised profits or any capital profits (realised or

unrealised) in paying up debentures or amounts unpaid on its

issued shares;

(c)
it must have given notice to the registrar under section (Meaning of

“investment company”)(1) (notice of intention to carry on business as an

investment company)—

(i)
before the beginning of the relevant period, or

(ii)
as soon as reasonably practicable after the date of its

incorporation.

(6)
For the purposes of this section—

(a)
“recognised UK 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 investment exchange

within the meaning of that Part; and

(b)
the “relevant period” is the period beginning with—

(i)
the first day of the accounting reference period immediately

preceding that in which the proposed distribution is to be made,

or

(ii)
where the distribution is to be made in the company’s first

accounting reference period, the first day of that period,


and ending with the date of the distribution.

S.C.D.  Standing Committee Proceedings: 20th July 2006
513

Company Law Reform Bill–[ [], continued

(7)
The company must not include any uncalled share capital as an asset in any

accounts relevant for purposes of this section.’.

Meaning of “investment company”

Margaret Hodge

Added  nc285

To move the following Clause:—

‘(1)
In this Part an “investment company” means a public company that—

(a)
has given notice (which has not been revoked) to the registrar of its

intention to carry on business as an investment company, and

(b)
since the date of that notice has complied with the following

requirements.

(2)
Those requirements are—

(a)
that the business of the company consists of investing its funds mainly in

securities, with the aim of spreading investment risk and giving members

of the company the benefit of the results of the management of its funds;

(b)
that the condition in section (Investment company: condition as to

holdings in other companies) is met as regards holdings in other

companies;

(c)
that distribution of the company’s capital profits is prohibited by its

articles of association;

(d)
that the company has not retained, otherwise than in compliance with this

Part, in respect of any accounting reference period more than 15% of the

income it derives from securities.

(3)
Subsection (2)(c) does not require an investment company to be prohibited by its

articles from redeeming or purchasing its own shares in accordance with Chapter

(Redeemable shares) or (Purchase of own shares) of Part (Acquisition by limited

company of its own shares) out of its capital profits.)

(4)
Notice to the registrar under this section may be revoked at any time by the

company on giving notice to the registrar that it no longer wishes to be an

investment company within the meaning of this section.

(5)
On giving such a notice, the company ceases to be such a company.’.

Investment company: condition as to holdings in other companies

Margaret Hodge

Added  nc286

To move the following Clause:—

‘(1)
The condition referred to in section (Meaning of “investment company”)(2)(b)

(requirements to be complied with by investment company) is that none of the

company’s holdings in companies (other than those that are for the time being

investment companies) represents more than 15% by value of the company’s

investments.