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Company Law Reform Bill [HL] (309-315)


Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 18 — A company’s share capital
Chapter 9 — Classes of share and class rights

309

 

649     

Copy of court order to be forwarded to the registrar

(1)   

The company must within 15 days after the making of an order by the court on

an application under section 647 or 648 (objection to variation of class rights)

forward a copy of the order to the registrar.

(2)   

If default is made in complying with this section an offence is committed by—

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(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

10

3 on the standard scale.

Matters to be notified to the registrar

650     

Notice of name or other designation of class of shares

(1)   

Where a company assigns a name or other designation, or a new name or other

designation, to any class of its shares, it must within one month from doing so

15

deliver to the registrar a notice giving particulars of the name or designation so

assigned.

(2)   

If default is made in complying with this section, an offence is committed by—

(a)   

the company, and

(b)   

every officer of the company who is in default.

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(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.

651     

Notice of particulars of variation of rights attached to shares

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(1)   

Where the rights attached to any shares of a company are varied, the company

must within one month from the date on which the variation is made deliver

to the registrar a notice giving particulars of the variation.

(2)   

If default is made in complying with this section, an offence is committed by—

(a)   

the company, and

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(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.

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652     

Notice of new class of members

(1)   

If a company not having a share capital creates a new class of members, the

company must within one month from the date on which the new class is

created deliver to the registrar a notice containing particulars of the rights

attached to that class.

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(2)   

If default is made in complying with this section, an offence is committed by—

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 18 — A company’s share capital
Chapter 10 — Reduction of share capital

310

 

(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

5

3 on the standard scale.

653     

Notice of name or other designation of class of members

(1)   

Where a company not having a share capital assigns a name or other

designation, or a new name or other designation, to any class of its members,

it must within one month from doing so deliver to the registrar a notice giving

10

particulars of the name or designation so assigned.

(2)   

If default is made in complying 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

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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.

654     

Notice of particulars of variation of class rights

(1)   

If the rights of any class of members of a company not having a share capital

20

are varied, the company must within one month from the date on which the

variation is made deliver to the registrar a notice containing particulars of the

variation.

(2)   

If default is made in complying with this section, an offence is committed by—

(a)   

the company, and

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(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.

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Chapter 10

Reduction of share capital

Introductory

655     

Circumstances in which a company may reduce its share capital

(1)   

A limited company having a share capital may reduce its share capital—

35

(a)   

in the case of a private company limited by shares, by special resolution

supported by a solvency statement (see sections 656 to 658);

(b)   

in any case, by special resolution confirmed by the court (see sections

659 to 665).

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 18 — A company’s share capital
Chapter 10 — Reduction of share capital

311

 

(2)   

A company may not reduce its capital under subsection (1)(a) if as a result of

the reduction there would no longer be any member of the company holding

shares other than redeemable shares.

(3)   

Subject to that, a company may reduce its share capital under this section in

any way.

5

(4)   

In particular, a company may—

(a)   

extinguish or reduce the liability on any of its shares in respect of share

capital not paid up, or

(b)   

either with or without extinguishing or reducing liability on any of its

shares—

10

(i)   

cancel any paid-up share capital that is lost or unrepresented by

available assets, or

(ii)   

pay off any paid-up share capital in excess of the company’s

wants.

(5)   

A special resolution under this section may not provide for a reduction of share

15

capital to take effect later than the date on which the resolution has effect in

accordance with this Chapter.

(6)   

This Chapter (apart from subsection (5) above) has effect subject to any

provision of the company’s articles restricting or prohibiting the reduction of

the company’s share capital.

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Private companies: reduction of capital supported by solvency statement

656     

Reduction of capital supported by solvency statement

(1)   

A resolution for reducing share capital of a private company limited by shares

is supported by a solvency statement if—

(a)   

the directors of the company make a statement of the solvency of the

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company in accordance with section 657 (a “solvency statement”) not

more than 15 days before the date on which the resolution is passed,

and

(b)   

the resolution and solvency statement are registered in accordance with

section 658.

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(2)   

Where the resolution is proposed as a written resolution, a copy of the solvency

statement must be sent or submitted to every eligible member at or before the

time at which the proposed resolution is sent or submitted to him.

(3)   

Where the resolution is proposed at a general meeting, a copy of the solvency

statement must be made available for inspection by members of the company

35

throughout that meeting.

(4)   

The validity of a resolution is not affected by a failure to comply with

subsection (2) or (3).

657     

Solvency statement

(1)   

A solvency statement is a statement that each of the directors—

40

(a)   

has formed the opinion, as regards the company’s situation at the date

of the statement, that there is no ground on which the company could

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 18 — A company’s share capital
Chapter 10 — Reduction of share capital

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then be found to be unable to pay (or otherwise discharge) its debts;

and

(b)   

has also formed the opinion—

(i)   

if it is intended to commence the winding up of the company

within twelve months of that date, that the company will be

5

able to pay (or otherwise discharge) its debts in full within

twelve months of the commencement of the winding up; or

(ii)   

in any other case, that the company will be able to pay (or

otherwise discharge) its debts as they fall due during the year

immediately following that date.

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(2)   

In forming those opinions, the directors must take into account all of the

company’s liabilities (including any contingent or prospective liabilities).

(3)   

The solvency statement must be in the prescribed form and must state—

(a)   

the date on which it is made, and

(b)   

the name of each director of the company.

15

(4)   

If the directors make a solvency statement without having reasonable grounds

for the opinions expressed in it, and the statement is delivered to the registrar,

an offence is committed by every director who is in default.

(5)   

A person guilty of an offence under subsection (4) is liable—

(a)   

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

20

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);

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(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).

658     

Registration of resolution and supporting documents

(1)   

Within 15 days after the resolution for reducing share capital is passed the

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company must deliver to the registrar—

(a)   

a copy of the solvency statement, and

(b)   

a statement of capital.

   

This is in addition to the copy of the resolution itself that is required to be

delivered to the registrar under Chapter 3 of Part 3.

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(2)   

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

as reduced by the resolution—

(a)   

the total number of shares of the company,

(b)   

the aggregate nominal value of those shares,

(c)   

for each class of shares—

40

(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

45

premium).

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 18 — A company’s share capital
Chapter 10 — Reduction of share capital

313

 

(3)   

The registrar must register the documents delivered to him under subsection

(1) on receipt.

(4)   

The resolution does not take effect until those documents are registered.

(5)   

The company must also deliver to the registrar, within 15 days after the

resolution is passed, a statement by the directors confirming that the solvency

5

statement was—

(a)   

made not more than 15 days before the date on which the resolution

was passed, and

(b)   

provided to members in accordance with section 656(2) or (3).

(6)   

The validity of a resolution is not affected by—

10

(a)   

a failure to deliver the documents required to be delivered to the

registrar under subsection (1) within the time specified in that

subsection, or

(b)   

a failure to comply with subsection (5).

(7)   

If the company delivers to the registrar a solvency statement that was not

15

provided to members in accordance with section 656(2) or (3), an offence is

committed by every officer of the company who is in default.

(8)   

If default is made in complying with this section, an offence is committed by—

(a)   

the company, and

(b)   

every officer of the company who is in default.

20

(9)   

A person guilty of an offence under subsection (7) or (8) is liable—

(a)   

on conviction on indictment, to a fine;

(b)   

on summary conviction, to a fine not exceeding the statutory

maximum.

Reduction of capital confirmed by the court

25

659     

Application to court for order of confirmation

(1)   

Where a company has passed a resolution for reducing share capital, it may

apply to the court for an order confirming the reduction.

(2)   

If the proposed reduction of capital involves either—

(a)   

diminution of liability in respect of unpaid share capital, or

30

(b)   

the payment to a shareholder of any paid-up share capital,

   

section 660 (creditors entitled to object to reduction) applies unless the court

directs otherwise.

(3)   

The court may, if having regard to any special circumstances of the case it

thinks proper to do so, direct that section 660 is not to apply as regards any

35

class or classes of creditors.

(4)   

The court may direct that section 660 is to apply in any other case.

660     

Creditors entitled to object to reduction

(1)   

Where this section applies (see section 659(2) and (4)), every creditor of the

company who at the date fixed by the court is entitled to any debt or claim that,

40

if that date were the commencement of the winding up of the company would

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 18 — A company’s share capital
Chapter 10 — Reduction of share capital

314

 

be admissible in proof against the company, is entitled to object to the

reduction of capital.

(2)   

The court shall settle a list of creditors entitled to object.

(3)   

For that purpose the court—

(a)   

shall ascertain, as far as possible without requiring an application from

5

any creditor, the names of those creditors and the nature and amount

of their debts or claims, and

(b)   

may publish notices fixing a day or days within which creditors not

entered on the list are to claim to be so entered or are to be excluded

from the right of objecting to the reduction of capital.

10

(4)   

If a creditor entered on the list whose debt or claim is not discharged or has not

determined does not consent to the reduction, the court may, if it thinks fit,

dispense with the consent of that creditor on the company securing payment

of his debt or claim.

(5)   

For this purpose the debt or claim must be secured by appropriating (as the

15

court may direct) the following amount—

(a)   

if the company admits the full amount of the debt or claim or, though

not admitting it, is willing to provide for it, the full amount of the debt

or claim;

(b)   

if the company does not admit, and is not willing to provide for, the full

20

amount of the debt or claim, or if the amount is contingent or not

ascertained, an amount fixed by the court after the like enquiry and

adjudication as if the company were being wound up by the court.

661     

Offences in connection with list of creditors

(1)   

If an officer of the company—

25

(a)   

intentionally or recklessly—

(i)   

conceals the name of a creditor entitled to object to the reduction

of capital, or

(ii)   

misrepresents the nature or amount of the debt or claim of a

creditor, or

30

(b)   

is knowingly concerned in any such concealment or misrepresentation,

   

he commits an offence.

(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

35

maximum.

662     

Court order confirming reduction

(1)   

The court may make an order confirming the reduction of capital on such terms

and conditions as it thinks fit.

(2)   

The court must not confirm the reduction unless it is satisfied, with respect to

40

every creditor of the company who is entitled to object to the reduction of

capital that either—

(a)   

his consent to the reduction has been obtained, or

(b)   

his debt or claim has been discharged, or has determined or has been

secured.

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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 18 — A company’s share capital
Chapter 10 — Reduction of share capital

315

 

(3)   

Where the court confirms the reduction, it may order the company to publish

(as the court directs) the reasons for reduction of capital, or such other

information in regard to it as the court thinks expedient with a view to giving

proper information to the public, and (if the court thinks fit) the causes that led

to the reduction.

5

(4)   

The court may, if for any special reason it thinks proper to do so, make an order

directing that the company must, during such period (commencing on or at

any time after the date of the order) as is specified in the order, add to its name

as its last words the words “and reduced”.

   

If such an order is made, those words are, until the end of the period specified

10

in the order, deemed to be part of the company’s name.

663     

Registration of order and statement of capital

(1)   

The registrar, on production of an order of the court confirming the reduction

of a company’s share capital and the delivery of a copy of the order and of a

statement of capital (approved by the court), shall register the order and

15

statement.

   

This is subject to section 664 (public company reducing capital below

authorised minimum).

(2)   

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

as altered by the order—

20

(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

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(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).

(3)   

The resolution for reducing share capital, as confirmed by the court’s order,

30

takes effect—

(a)   

in the case of a reduction of share capital that forms part of a

compromise or arrangement sanctioned by the court under Part 27

(arrangements and reconstructions)—

(i)   

on delivery of the order and statement of capital to the registrar,

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or

(ii)   

if the court so orders, on the registration of the order and

statement of capital;

(b)   

in any other case, on the registration of the order and statement of

capital.

40

(4)   

Notice of the registration of the order and statement of capital must be

published in such manner as the court may direct.

(5)   

The registrar must certify the registration of the order and statement of capital.

(6)   

The certificate—

(a)   

must be signed by the registrar or authenticated by the registrar’s

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official seal, and

 
 

 
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Revised 28 July 2006