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

556

 

Company Law Reform Bill[ [], continued

 
 

(a)    

the shares to which the offer relates included shares falling within

 

paragraph (b) of subsection (6), and

 

(b)    

in relation to shares falling within that paragraph, the words “by virtue of

 

acceptances of the offer” in subsection (2) or (4) were omitted.

 

(8)    

Where a takeover offer is made and, during the period beginning with the date of

 

the offer and ending when the offer can no longer be accepted, the offeror—

 

(a)    

acquires or unconditionally contracts to acquire any of the shares to

 

which the offer relates, but

 

(b)    

does not do so by virtue of acceptances of the offer,

 

    

then, if subsection (10) applies, the offeror is treated for the purposes of this

 

section as having acquired or contracted to acquire those shares by virtue of

 

acceptances of the offer.

 

(9)    

Where a takeover offer is made and, during the period beginning with the date of

 

the offer and ending when the offer can no longer be accepted, an associate of the

 

offeror acquires or unconditionally contracts to acquire any of the shares to which

 

the offer relates, then, if subsection (10) applies, those shares are treated for the

 

purposes of this section as shares to which the offer relates.

 

(10)    

This subsection applies if—

 

(a)    

at the time the shares are acquired or contracted to be acquired as

 

mentioned in subsection (8) or (9) (as the case may be), the value of the

 

consideration for which they are acquired or contracted to be acquired

 

(“the acquisition consideration”) does not exceed the value of the

 

consideration specified in the terms of the offer, or

 

(b)    

those terms are subsequently revised so that when the revision is

 

announced the value of the acquisition consideration, at the time

 

mentioned in paragraph (a), no longer exceeds the value of the

 

consideration specified in those terms.’.

 


 

Further provision about notices given under section (Right of offeror to buy out minority

 

shareholder)

 

Margaret Hodge

 

Added  nc358

 

To move the following Clause:—

 

‘(1)    

A notice under section (Right of offeror to buy out minority shareholder) must be

 

given in the prescribed manner.

 

(2)    

No notice may be given under section (Right of offeror to buy out minority

 

shareholder)(2) or (4) after the end of—

 

(a)    

the period of three months beginning with the day after the last day on

 

which the offer can be accepted, or

 

(b)    

the period of six months beginning with the date of the offer, where that

 

period ends earlier and the offer is one to which subsection (3) below

 

applies.

 

(3)    

This subsection applies to an offer if the time allowed for acceptance of the offer

 

is not governed by rules under section 643(1) that give effect to Article 7 of the

 

Takeovers Directive.

 

    

In this subsection “the Takeovers Directive” has the same meaning as in section

 

643.


 
 

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

557

 

Company Law Reform Bill[ [], continued

 
 

(4)    

At the time when the offeror first gives a notice under section (Right of offeror to

 

buy out minority shareholder) in relation to an offer, he must send to the

 

company—

 

(a)    

a copy of the notice, and

 

(b)    

a statutory declaration by him in the prescribed form, stating that the

 

conditions for the giving of the notice are satisfied.

 

(5)    

Where the offeror is a company (whether or not a company within the meaning

 

of this Act) the statutory declaration must be signed by a director.

 

(6)    

A person commits an offence if—

 

(a)    

he fails to send a copy of a notice or a statutory declaration as required by

 

subsection (4), or

 

(b)    

he makes such a declaration for the purposes of that subsection knowing

 

it to be false or without having reasonable grounds for believing it to be

 

true.

 

(7)    

It is a defence for a person charged with an offence for failing to send a copy of

 

a notice as required by subsection (4) to prove that he took reasonable steps for

 

securing compliance with that subsection.

 

(8)    

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

 

(a)    

on conviction on indictment, to imprisonment for a term not exceeding

 

two years or a fine (or both);

 

(b)    

on summary conviction—

 

(i)    

in England and Wales, to imprisonment for a term not exceeding

 

twelve months or to a fine not exceeding the statutory maximum

 

(or both) and, for continued contravention, a daily default fine

 

not exceeding one-fiftieth of the statutory maximum;

 

(ii)    

in Scotland or Northern Ireland, to imprisonment for a term not

 

exceeding six months, or to a fine not exceeding the statutory

 

maximum (or both) and, for continued contravention, a daily

 

default fine not exceeding one-fiftieth of the statutory

 

maximum.’.

 


 

Effect of notice under section (Right of offeror to buy out minority shareholder)

 

Margaret Hodge

 

Added  nc359

 

To move the following Clause:—

 

‘(1)    

Subject to section (Applications to the court), this section applies where the

 

offeror gives a shareholder a notice under section (Right of offeror to buy out

 

minority shareholder).

 

(2)    

The offeror is entitled and bound to acquire the shares to which the notice relates

 

on the terms of the offer.

 

(3)    

Where the terms of an offer are such as to give the shareholder a choice of

 

consideration, the notice must give particulars of the choice and state—

 

(a)    

that the shareholder may, within six weeks from the date of the notice,

 

indicate his choice by a written communication sent to the offeror at an

 

address specified in the notice, and

 

(b)    

which consideration specified in the offer will apply if he does not

 

indicate a choice.


 
 

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

558

 

Company Law Reform Bill[ [], continued

 
 

    

The reference in subsection (2) to the terms of the offer is to be read accordingly.

 

(4)    

Subsection (3) applies whether or not any time-limit or other conditions

 

applicable to the choice under the terms of the offer can still be complied with.

 

(5)    

If the consideration offered to or (as the case may be) chosen by the shareholder—

 

(a)    

is not cash and the offeror is no longer able to provide it, or

 

(b)    

was to have been provided by a third party who is no longer bound or able

 

to provide it,

 

    

the consideration is to be taken to consist of an amount of cash, payable by the

 

offeror, which at the date of the notice is equivalent to the consideration offered

 

or (as the case may be) chosen.

 

(6)    

At the end of six weeks from the date of the notice the offeror must

 

immediately—

 

(a)    

send a copy of the notice to the company, and

 

(b)    

pay or transfer to the company the consideration for the shares to which

 

the notice relates.

 

    

Where the consideration consists of shares or securities to be allotted by the

 

offeror, the reference in paragraph (b) to the transfer of the consideration is to be

 

read as a reference to the allotment of the shares or securities to the company.

 

(7)    

If the shares to which the notice relates are registered, the copy of the notice sent

 

to the company under subsection (6)(a) must be accompanied by an instrument of

 

transfer executed on behalf of the holder of the shares by a person appointed by

 

the offeror.

 

    

On receipt of that instrument the company must register the offeror as the holder

 

of those shares.

 

(8)    

If the shares to which the notice relates are transferable by the delivery of

 

warrants or other instruments, the copy of the notice sent to the company under

 

subsection (6)(a) must be accompanied by a statement to that effect.

 

    

On receipt of that statement the company must issue the offeror with warrants or

 

other instruments in respect of the shares, and those already in issue in receipt of

 

the shares become void.

 

(9)    

The company must hold any money or other consideration received by it under

 

subsection (6)(b) on trust for the person who, before the offeror acquired them,

 

was entitled to the shares in respect of which the money or other consideration

 

was received.

 

    

Section (Further provision about consideration held on trust under section

 

(Effect of notice under section (Right of offeror to buy out minority

 

shareholder))(9)) contains further provision about how the company should deal

 

with such money or other consideration.’.

 


 

Further provision about consideration held on trust under section (Effect of notice under

 

section (Right of offeror to buy out minority shareholder))(9)

 

Margaret Hodge

 

Added  nc360

 

To move the following Clause:—

 

‘(1)    

This section applies where an offeror pays or transfers consideration to the

 

company under section (Effect of notice under section (Right of offeror to buy out

 

minority shareholder))(6).


 
 

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

559

 

Company Law Reform Bill[ [], continued

 
 

(2)    

The company must pay into a separate bank account that complies with

 

subsection (3)—

 

(a)    

any money it receives under paragraph (b) of section (Effect of notice

 

under section (Right of offeror to buy out minority shareholder))(6), and

 

(b)    

any dividend or other sum accruing from any other consideration it

 

receives under that paragraph.

 

(3)    

A bank account complies with this subsection if the balance on the account—

 

(a)    

bears interest at an appropriate rate, and

 

(b)    

can be withdrawn by such notice (if any) as is appropriate.

 

(4)    

If—

 

(a)    

the person entitled to the consideration held on trust by virtue of section

 

(Effect of notice under section (Right of offeror to buy out minority

 

shareholder))(9) cannot be found, and

 

(b)    

subsection (5) applies,

 

    

the consideration (together with any interest, dividend or other benefit that has

 

accrued from it) must be paid into court.

 

(5)    

This subsection applies where—

 

(a)    

reasonable enquiries have been made at reasonable intervals to find the

 

person, and

 

(b)    

twelve years have elapsed since the consideration was received, or the

 

company is wound up.

 

(6)    

In relation to a company registered in Scotland, subsections (7) and (8) apply

 

instead of subsection (4).

 

(7)    

If the person entitled to the consideration held on trust by virtue of section (Effect

 

of notice under section (Right of offeror to buy out minority shareholder))(9)

 

cannot be found and subsection (5) applies—

 

(a)    

the trust terminates,

 

(b)    

the company or (if the company is wound up) the liquidator must sell any

 

consideration other than cash and any benefit other than cash that has

 

accrued from the consideration, and

 

(c)    

a sum representing—

 

(i)    

the consideration so far as it is cash,

 

(ii)    

the proceeds of any sale under paragraph (b), and

 

(iii)    

any interest, dividend or other benefit that has accrued from the

 

consideration,

 

    

must be deposited in the name of the Accountant of Court in a separate

 

bank account complying with subsection (3) and the receipt for the

 

deposit must be transmitted to the Accountant of Court.

 

(8)    

Section 58 of the Bankruptcy (Scotland) Act 1985 (c. 66) (so far as consistent

 

with this Act) applies (with any necessary modifications) to sums deposited under

 

subsection (7) as it applies to sums deposited under section 57(1)(a) of that Act.

 

(9)    

The expenses of any such enquiries as are mentioned in subsection (5) may be

 

paid out of the money or other property held on trust for the person to whom the

 

enquiry relates.’.

 



 
 

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

560

 

Company Law Reform Bill[ [], continued

 
 

Right of minority shareholder to be bought out by offeror

 

Margaret Hodge

 

Added  nc361

 

To move the following Clause:—

 

‘(1)    

Subsections (2) and (3) apply in a case where a takeover offer relates to all the

 

shares in a company.

 

    

For this purpose a takeover offer relates to all the shares in a company if it is an

 

offer to acquire all the shares in the company within the meaning of section

 

(Meaning of “takeover offer”).

 

(2)    

The holder of any voting shares to which the offer relates who has not accepted

 

the offer may require the offeror to acquire those shares if, at any time before the

 

end of the period within which the offer can be accepted—

 

(a)    

the offeror has by virtue of acceptances of the offer acquired or

 

unconditionally contracted to acquire some (but not all) of the shares to

 

which the offer relates, and

 

(b)    

those shares, with or without any other shares in the company which he

 

has acquired or contracted to acquire (whether unconditionally or subject

 

to conditions being met)—

 

(i)    

amount to not less than 90% in value of all the voting shares in

 

the company (or would do so but for section (Debentures

 

carrying voting rights)(1)), and

 

(ii)    

carry not less than 90% of the voting rights in the company (or

 

would do so but for section (Debentures carrying voting

 

rights)(1)).

 

(3)    

The holder of any non-voting shares to which the offer relates who has not

 

accepted the offer may require the offeror to acquire those shares if, at any time

 

before the end of the period within which the offer can be accepted—

 

(a)    

the offeror has by virtue of acceptances of the offer acquired or

 

unconditionally contracted to acquire some (but not all) of the shares to

 

which the offer relates, and

 

(b)    

those shares, with or without any other shares in the company which he

 

has acquired or contracted to acquire (whether unconditionally or subject

 

to conditions being met), amount to not less than 90% in value of all the

 

shares in the company (or would do so but for section (Debentures

 

carrying voting rights)(1)).

 

(4)    

If a takeover offer relates to shares of one or more classes and at any time before

 

the end of the period within which the offer can be accepted—

 

(a)    

the offeror has by virtue of acceptances of the offer acquired or

 

unconditionally contracted to acquire some (but not all) of the shares of

 

any class to which the offer relates, and

 

(b)    

those shares, with or without any other shares of that class which he has

 

acquired or contracted to acquire (whether unconditionally or subject to

 

conditions being met)—

 

(i)    

amount to not less than 90% in value of all the shares of that

 

class, and

 

(ii)    

in a case where the shares of that class are voting shares, carry

 

not less than 90% of the voting rights carried by the shares of that

 

class,

 

    

the holder of any shares of that class to which the offer relates who has not

 

accepted the offer may require the offeror to acquire those shares.


 
 

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

561

 

Company Law Reform Bill[ [], continued

 
 

(5)    

For the purposes of subsections (2) to (4), in calculating 90% of the value of any

 

shares, shares held by the company as treasury shares are to be treated as having

 

been acquired by the offeror.

 

(6)    

Subsection (7) applies where—

 

(a)    

a shareholder exercises rights conferred on him by subsection (2), (3) or

 

(4),

 

(b)    

at the time when he does so, there are shares in the company which the

 

offeror has contracted to acquire subject to conditions being met, and in

 

relation to which the contract has not become unconditional, and

 

(c)    

the requirement imposed by subsection (2)(b), (3)(b) or (4)(b) (as the

 

case may be) would not be satisfied if those shares were not taken into

 

account.

 

(7)    

The shareholder is treated for the purposes of section (Effect of requirement under

 

section (Right of minority shareholder to be bought out by offeror)) as not having

 

exercised his rights under this section unless the requirement imposed by

 

paragraph (b) of subsection (2), (3) or (4) (as the case may be) would be satisfied

 

if—

 

(a)    

the reference in that paragraph to other shares in the company which the

 

offeror has contracted to acquire unconditionally or subject to conditions

 

being met were a reference to such shares which he has unconditionally

 

contracted to acquire, and

 

(b)    

the reference in that subsection to the period within which the offer can

 

be accepted were a reference to the period referred to in section (Further

 

provision about rights conferred by section (Right of minority

 

shareholder to be bought out by offeror))(2).

 

(8)    

A reference in subsection (2)(b), (3)(b), (4)(b), (6) or (7) to shares which the

 

offeror has acquired or contracted to acquire includes a reference to shares which

 

an associate of his has acquired or contracted to acquire.’.

 


 

Further provision about rights conferred by section (Right of minority shareholder to be

 

bought out by offeror)

 

Margaret Hodge

 

Added  nc362

 

To move the following Clause:—

 

‘(1)    

Rights conferred on a shareholder by subsection (2), (3) or (4) of section (Right

 

of minority shareholder to be bought out by offeror) are exercisable by a written

 

communication addressed to the offeror.

 

(2)    

Rights conferred on a shareholder by subsection (2), (3) or (4) of that section are

 

not exercisable after the end of the period of three months from—

 

(a)    

the end of the period within which the offer can be accepted, or

 

(b)    

if later, the date of the notice that must be given under subsection (3)

 

below.

 

(3)    

Within one month of the time specified in subsection (2), (3) or (4) (as the case

 

may be) of that section, the offeror must give any shareholder who has not

 

accepted the offer notice in the prescribed manner of—

 

(a)    

the rights that are exercisable by the shareholder under that subsection,

 

and

 

(b)    

the period within which the rights are exercisable.


 
 

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

562

 

Company Law Reform Bill[ [], continued

 
 

    

If the notice is given before the end of the period within which the offer can be

 

accepted, it must state that the offer is still open for acceptance.

 

(4)    

Subsection (3) does not apply if the offeror has given the shareholder a notice in

 

respect of the shares in question under section (Right of offeror to buy out

 

minority shareholder).

 

(5)    

An offeror who fails to comply with subsection (3) commits an offence.

 

    

If the offeror is a company, every officer of the company who is in default or to

 

whose neglect the failure is attributable also commits an offence.

 

(6)    

If an offeror other than a company is charged with an offence for failing to

 

comply with subsection (3), it is a defence for him to prove that he took all

 

reasonable steps for securing compliance with that subsection.

 

(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-

 

fiftieth of the statutory maximum.’.

 


 

Effect of requirement under section (Right of minority shareholder to be bought out by

 

offeror)

 

Margaret Hodge

 

Added  nc363

 

To move the following Clause:—

 

‘(1)    

Subject to section (Applications to the court), this section applies where a

 

shareholder exercises his rights under section (Right of minority shareholder to

 

be bought out by offeror) in respect of any shares held by him.

 

(2)    

The offeror is entitled and bound to acquire those shares on the terms of the offer

 

or on such other terms as may be agreed.

 

(3)    

Where the terms of an offer are such as to give the shareholder a choice of

 

consideration—

 

(a)    

the shareholder may indicate his choice when requiring the offeror to

 

acquire the shares, and

 

(b)    

the notice given to the shareholder under section (Further provision

 

about rights conferred by section (Right of minority shareholder to be

 

bought out by offeror))(3)—

 

(i)    

must give particulars of the choice and of the rights conferred by

 

this subsection, and

 

(ii)    

may state which consideration specified in the offer will apply if

 

he does not indicate a choice.

 

    

The reference in subsection (2) to the terms of the offer is to be read accordingly.

 

(4)    

Subsection (3) applies whether or not any time-limit or other conditions

 

applicable to the choice under the terms of the offer can still be complied with.

 

(5)    

If the consideration offered to or (as the case may be) chosen by the shareholder—

 

(a)    

is not cash and the offeror is no longer able to provide it, or

 

(b)    

was to have been provided by a third party who is no longer bound or able

 

to provide it,


 
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