sc1902007.563-569

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

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


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

offeror, which at the date when the shareholder requires the offeror to acquire the

shares is equivalent to the consideration offered or (as the case may be) chosen.’.

Applications to the court

Margaret Hodge

Added  nc364

To move the following Clause:—

‘(1)
Where a notice is given under section (Right of offeror to buy out minority

shareholder) to a shareholder the court may, on an application made by him,

order—

(a)
that the offeror is not entitled and bound to acquire the shares to which

the notice relates, or

(b)
that the terms on which the offeror is entitled and bound to acquire the

shares shall be such as the court thinks fit.

(2)
An application under subsection (1) must be made within six weeks from the date

on which the notice referred to in that subsection was given.


If an application to the court under subsection (1) is pending at the end of that

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

shareholder))(6) does not have effect until the application has been disposed of.

(3)
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, the

court may, on an application made by him or the offeror, order that the terms on

which the offeror is entitled and bound to acquire the shares shall be such as the

court thinks fit.

(4)
On an application under subsection (1) or (3)—

(a)
the court may not require consideration of a higher value than that

specified in the terms of the offer (“the offer value”) to be given for the

shares to which the application relates unless the holder of the shares

shows that the offer value would be unfair;

(b)
the court may not require consideration of a lower value than the offer

value to be given for the shares.

(5)
No order for costs or expenses may be made against a shareholder making an

application under subsection (1) or (3) unless the court considers that—

(a)
the application was unnecessary, improper or vexatious,

(b)
there has been unreasonable delay in making the application, or

(c)
there has been unreasonable conduct on the shareholder’s part in

conducting the proceedings on the application.

(6)
A shareholder who has made an application under subsection (1) or (3) must give

notice of the application to the offeror.

(7)
An offeror who is given notice of an application under subsection (1) or (3) must

give a copy of the notice to—

(a)
any person (other than the applicant) to whom a notice has been given

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

(b)
any person who has exercised his rights under section (Right of minority

shareholder to be bought out by offeror).

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Company Law Reform Bill–[ [], continued

(8)
An offeror who makes an application under subsection (3) must give notice of the

application to—

(a)
any person to whom a notice has been given under section (Right of

offeror to buy out minority shareholder);

(b)
any person who has exercised his rights under section (Right of minority

shareholder to be bought out by offeror).

(9)
Where a takeover offer has not been accepted to the extent necessary for entitling

the offeror to give notices under subsection (2) or (4) of section (Right of offeror

to buy out minority shareholder) the court may, on an application made by him,

make an order authorising him to give notices under that subsection if it is

satisfied that—

(a)
the offeror has after reasonable enquiry been unable to trace one or more

of the persons holding shares to which the offer relates,

(b)
the requirements of that subsection would have been met if the person, or

all the persons, mentioned in paragraph (a) above had accepted the offer,

and

(c)
the consideration offered is fair and reasonable.


This is subject to subsection (10).

(10)
The court may not make an order under subsection (9) unless it considers that it

is just and equitable to do so having regard, in particular, to the number of

shareholders who have been traced but who have not accepted the offer.’.

Joint offers

Margaret Hodge

Added  nc365

To move the following Clause:—

‘(1)
In the case of a takeover offer made by two or more persons jointly, this Chapter

has effect as follows.

(2)
The conditions for the exercise of the rights conferred by section (Right of offeror

to buy out minority shareholder) are satisfied—

(a)
in the case of acquisitions by virtue of acceptances of the offer, by the

joint offerors acquiring or unconditionally contracting to acquire the

necessary shares jointly;

(b)
in other cases, by the joint offerors acquiring or unconditionally

contracting to acquire the necessary shares either jointly or separately.

(3)
The conditions for the exercise of the rights conferred by section (Right of

minority shareholder to be bought out by offeror) are satisfied—

(a)
in the case of acquisitions by virtue of acceptances of the offer, by the

joint offerors acquiring or unconditionally contracting to acquire the

necessary shares jointly;

(b)
in other cases, by the joint offerors acquiring or contracting (whether

unconditionally or subject to conditions being met) to acquire the

necessary shares either jointly or separately.

(4)
Subject to the following provisions, the rights and obligations of the offeror under

sections (Right of offeror to buy out minority shareholder) to (Effect of

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

offeror)) are respectively joint rights and joint and several obligations of the joint

offerors.

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Company Law Reform Bill–[ [], continued

(5)
A provision of sections (Right of offeror to buy out minority shareholder) to

(Applications to the court) that requires or authorises a notice or other document

to be given or sent by or to the joint offerors is complied with if the notice or

document is given or sent by or to any of them (but see subsection (6)).

(6)
The statutory declaration required by section (Further provision about notices

given under section (Right of offeror to buy out minority shareholder))(4) must

be made by all of the joint offerors and, where one or more of them is a company,

signed by a director of the company.

(7)
In sections (Meaning of “takeover offer”) to (Shares to which an offer relates),

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

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

shareholder to be bought out by offeror)(8) and (Associates) references to the

offeror are to be read as references to the joint offerors or any of them.

(8)
In section (Effect of notice under section (Right of offeror to buy out minority

shareholder))(7) and (8) references to the offeror are to be read as references to

the joint offerors or such of them as they may determine.

(9)
In sections (Effect of notice under section (Right of offeror to buy out minority

shareholder))(5)(a) and (Effect of requirement under section (Right of minority

shareholder to be bought out by offeror))(5)(a) references to the offeror being no

longer able to provide the relevant consideration are to be read as references to

none of the joint offerors being able to do so.

(10)
In section (Applications to the court) references to the offeror are to be read as

references to the joint offerors, except that—

(a)
an application under subsection (3) or (9) may be made by any of them,

and

(b)
the reference in subsection (9)(a) to the offeror having been unable to

trace one or more of the persons holding shares is to be read as a reference

to none of the offerors having been able to do so.’.

Associates

Margaret Hodge

Added  nc366

To move the following Clause:—

‘(1)
In this Chapter “associate”, in relation to an offeror, means—

(a)
a nominee of the offeror,

(b)
a holding company, subsidiary or fellow subsidiary of the offeror or a

nominee of such a holding company, subsidiary or fellow subsidiary,

(c)
a body corporate in which the offeror is substantially interested,

(d)
a person who is, or is a nominee of, a party to a share acquisition

agreement with the offeror, or

(e)
(where the offeror is an individual) his spouse or civil partner and any

minor child or step-child of his.

(2)
For the purposes of subsection (1)(b) a company is a fellow subsidiary of another

body corporate if both are subsidiaries of the same body corporate but neither is

a subsidiary of the other.

(3)
For the purposes of subsection (1)(c) an offeror has a substantial interest in a body

corporate if—

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Company Law Reform Bill–[ [], continued

(a)
the body or its directors are accustomed to act in accordance with his

directions or instructions, or

(b)
he is entitled to exercise or control the exercise of one-third or more of

the voting power at general meetings of the body.


Subsections (2) and (3) of section 630 (which contain provision about when a

person is treated as entitled to exercise or control the exercise of voting power)

apply for the purposes of this subsection as they apply for the purposes of that

section.

(4)
For the purposes of subsection (1)(d) an agreement is a share acquisition

agreement if—

(a)
it is an agreement for the acquisition of, or of an interest in, shares to

which the offer relates,

(b)
it includes provisions imposing obligations or restrictions on any one or

more of the parties to it with respect to their use, retention or disposal of

such shares, or their interests in such shares, acquired in pursuance of the

agreement (whether or not together with any other shares to which the

offer relates or any other interests of theirs in such shares), and

(c)
it is not an excluded agreement (see subsection (5)).

(5)
An agreement is an “excluded agreement”—

(a)
if it is not legally binding, unless it involves mutuality in the

undertakings, expectations or understandings of the parties to it, or

(b)
if it is an agreement to underwrite or sub-underwrite an offer of shares in

the company, provided the agreement is confined to that purpose and any

matters incidental to it.

(6)
The reference in subsection (4)(b) to the use of interests in shares is to the exercise

of any rights or of any control or influence arising from those interests (including

the right to enter into an agreement for the exercise, or for control of the exercise,

of any of those rights by another person).

(7)
In this section—

(a)
“agreement” includes any agreement or arrangement;

(b)
references to provisions of an agreement include—

(i)
undertakings, expectations or understandings operative under an

arrangement, and

(ii)
any provision whether express or implied and whether absolute

or not.’.

Convertible securities

Margaret Hodge

Added  nc367

To move the following Clause:—

‘(1)
For the purposes of this Chapter securities of a company are treated as shares in

the company if they are convertible into or entitle the holder to subscribe for such

shares.


References to the holder of shares or a shareholder are to be read accordingly.

(2)
Subsection (1) is not to be read as requiring any securities to be treated—

(a)
as shares of the same class as those into which they are convertible or for

which the holder is entitled to subscribe, or

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Company Law Reform Bill–[ [], continued

(b)
as shares of the same class as other securities by reason only that the

shares into which they are convertible or for which the holder is entitled

to subscribe are of the same class.’.

Debentures carrying voting rights

Margaret Hodge

Added  nc368

To move the following Clause:—

‘(1)
For the purposes of this Chapter debentures issued by a company to which

subsection (2) applies are treated as shares in the company if they carry voting

rights.

(2)
This subsection applies to a company that has voting shares, or debentures

carrying voting rights, which are admitted to trading on a regulated market.

(3)
In this Chapter, in relation to debentures treated as shares by virtue of subsection

(1)—

(a)
references to the holder of shares or a shareholder are to be read

accordingly;

(b)
references to shares being allotted are to be read as references to

debentures being issued.’.

Interpretation

Margaret Hodge

Added  nc369

To move the following Clause:—

‘(1)
In this Chapter—

“the company” means the company whose shares are the subject of a

takeover offer;

“date of the offer” means—

(m)
where the offer is published, the date of publication;

(n)
where the offer is not published, or where any notices of the offer

are given before the date of publication, the date when notices of

the offer (or the first such notices) are given;

“non-voting shares” means shares that are not voting shares;

“offeror” means (subject to section (Joint offers)) the person making a

takeover offer;

“voting rights” means rights to vote at general meetings of the company,

including rights that arise only in certain circumstances;

“voting shares” means shares carrying voting rights.

(2)
For the purposes of this Chapter a person contracts unconditionally to acquire

shares if his entitlement under the contract to acquire them is not (or is no longer)

subject to conditions or if all conditions to which it was subject have been met.

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Company Law Reform Bill–[ [], continued


A reference to a contract becoming unconditional is to be read accordingly.’.

Offence of fraudulent trading

Margaret Hodge

Added  nc370

To move the following Clause:—

‘(1)
If any business of a company is carried on with intent to defraud creditors of the

company or creditors of any other person, or for any fraudulent purpose, every

person who is knowingly a party to the carrying on of the business in that manner

commits an offence.

(2)
This applies whether or not the company has been, or is in the course of being,

wound up.

(3)
A person guilty of an offence under this section is liable—

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

ten 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 a fine not exceeding the statutory maximum (or

both);

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

exceeding six months or a fine not exceeding the statutory

maximum (or both).’.

Petition by company member

Margaret Hodge

Added  nc371

To move the following Clause:—

‘(1)
A member of a company may apply to the court by petition for an order under this

Part on the ground—

(a)
that the company’s affairs are being or have been conducted in a manner

that is unfairly prejudicial to the interests of members generally or of

some part of its members (including at least himself), or

(b)
that an actual or proposed act or omission of the company (including an

act or omission on its behalf) is or would be so prejudicial.

(2)
The provisions of this Part apply to a person who is not a member of a company

but to whom shares in the company have been transferred or transmitted by

operation of law as they apply to a member of a company.

(3)
In this section, and so far as applicable for the purposes of this section in the other

provisions of this Part, “company” means—

(a)
a company within the meaning of this Act, or

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Company Law Reform Bill–[ [], continued

(b)
a company that is not such a company but is a statutory water company

within the meaning of the Statutory Water Companies Act 1991 (c. 58).’.

Petition by Secretary of State

Margaret Hodge

Added  nc372

To move the following Clause:—

‘(1)
This section applies to a company in respect of which—

(a)
the Secretary of State has received a report under section 437 of the

Companies Act 1985 (c. 6) (inspector’s report);

(b)
the Secretary of State has exercised his powers under section 447 or 448

of that Act (powers to require documents and information or to enter and

search premises);

(c)
the Secretary of State or the Financial Services Authority has exercised

his or its powers under Part 11 of the Financial Services and Markets Act

2000 (c. 8) (information gathering and investigations); or

(d)
the Secretary of State has received a report from an investigator

appointed by him or the Financial Services Authority under that Part.

(2)
If it appears to the Secretary of State that in the case of such a company—

(a)
the company’s affairs are being or have been conducted in a manner that

is unfairly prejudicial to the interests of members generally or of some

part of its members, or

(b)
an actual or proposed act or omission of the company (including an act

or omission on its behalf) is or would be so prejudicial,


he may apply to the court by petition for an order under this Part.

(3)
The Secretary of State may do this in addition to, or instead of, presenting a

petition for the winding up of the company.

(4)
In this section, and so far as applicable for the purposes of this section in the other

provisions of this Part, “company” means any body corporate that is liable to be

wound up under the Insolvency Act 1986 (c. 45) or the Insolvency (Northern

Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).’.

Powers of the court under this Part

Margaret Hodge

Added  nc373

To move the following Clause:—

‘(1)
If the court is satisfied that a petition under this Part is well founded, it may make

such order as it thinks fit for giving relief in respect of the matters complained of.

(2)
Without prejudice to the generality of subsection (1), the court’s order may—

(a)
regulate the conduct of the company’s affairs in the future;

(b)
require the company—