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Company Law Reform Bill [HL] (332-335)


Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 19 — Acquisition by limited company of its own shares
Chapter 3 — Redeemable shares

332

 

698     

Terms and manner of redemption

(1)   

The directors of a limited company may determine the terms, conditions and

manner of redemption of shares if they are authorised to do so—

(a)   

by the company’s articles, or

(b)   

by a resolution of the company.

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(2)   

A resolution under subsection (1)(b) may be an ordinary resolution, even

though it amends the company’s articles.

(3)   

Where the directors are authorised under subsection (1) to determine the

terms, conditions and manner of redemption of shares—

(a)   

they must do so before the shares are allotted, and

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(b)   

any obligation of the company to state in a statement of capital the

rights attached to the shares extends to the terms, conditions and

manner of redemption.

(4)   

Where the directors are not so authorised, the terms, conditions and manner of

redemption of any redeemable shares must be stated in the company’s articles.

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699     

Payment for redeemable shares

(1)   

Redeemable shares in a limited company may not be redeemed unless they are

fully paid.

(2)   

The terms of redemption of shares in a limited company may provide that the

amount payable on redemption may, by agreement between the company and

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the holder of the shares, be paid on a date later than the redemption date.

(3)   

Unless redeemed in accordance with provision authorised by subsection (2),

the shares must be paid for on redemption.

700     

Financing of redemption

(1)   

A private limited company may redeem redeemable shares out of capital in

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accordance with Chapter 5 of this Part.

(2)   

Subject to that, redeemable shares in a limited company may only be redeemed

out of—

(a)   

distributable profits of the company, or

(b)   

the proceeds of a fresh issue of shares made for the purposes of the

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redemption.

(3)   

Any premium payable on redemption of shares in a limited company must be

paid out of distributable profits of the company, subject to the following

provision.

(4)   

If the redeemable shares were issued at a premium, any premium payable on

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their redemption may be paid out of the proceeds of a fresh issue of shares

made for the purposes of the redemption, up to an amount equal to—

(a)   

the aggregate of the premiums received by the company on the issue of

the shares redeemed, or

(b)   

the current amount of the company’s share premium account

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(including any sum transferred to that account in respect of premiums

on the new shares),

   

whichever is the less.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 19 — Acquisition by limited company of its own shares
Chapter 4 — Purchase of own shares

333

 

(5)   

The amount of the company’s share premium account is reduced by a sum

corresponding (or by sums in the aggregate corresponding) to the amount of

any payment made under subsection (3).

(6)   

This section is subject to section 748(4) (terms of redemption enforceable in a

winding up).

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701     

Redeemed shares treated as cancelled

Where shares in a limited company are redeemed—

(a)   

the shares are treated as cancelled, and

(b)   

the amount of the company’s issued share capital is diminished

accordingly by the nominal value of the shares redeemed.

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702     

Notice to registrar of redemption

(1)   

If a limited company redeems any redeemable shares it must within one month

after doing so give notice to the registrar, specifying the shares redeemed.

(2)   

The notice must be accompanied by a statement of capital.

(3)   

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

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immediately following the redemption—

(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,

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(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).

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(4)   

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.

(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, for

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continued contravention, a daily default fine not exceeding one-tenth of level

3 on the standard scale.

Chapter 4

Purchase of own shares

General provisions

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703     

Power of limited company to purchase own shares

(1)   

A limited company having a share capital may purchase its own shares

(including any redeemable shares), subject to—

(a)   

the following provisions of this Chapter, and

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 19 — Acquisition by limited company of its own shares
Chapter 4 — Purchase of own shares

334

 

(b)   

any restriction or prohibition in the company’s articles.

(2)   

A limited company may not purchase its own shares if as a result of the

purchase there would no longer be any issued shares of the company other

than redeemable shares or shares held as treasury shares.

704     

Payment for purchase of own shares

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(1)   

A limited company may not purchase its own shares unless they are fully paid.

(2)   

Where a limited company purchases its own shares, the shares must be paid

for on purchase.

705     

Financing of purchase of own shares

(1)   

A private limited company may purchase its own shares out of capital in

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accordance with Chapter 5 of this Part.

(2)   

Subject to that—

(a)   

a limited company may only purchase its own shares out of—

(i)   

distributable profits of the company, or

(ii)   

the proceeds of a fresh issue of shares made for the purpose of

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financing the purchase, and

(b)   

any premium payable on the purchase by a limited company of its own

shares must be paid out of distributable profits of the company, subject

to subsection (3).

(3)   

If the shares to be purchased were issued at a premium, any premium payable

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on their purchase by the company may be paid out of the proceeds of a fresh

issue of shares made for the purpose of financing the purchase, up to an

amount equal to—

(a)   

the aggregate of the premiums received by the company on the issue of

the shares purchased, or

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(b)   

the current amount of the company’s share premium account

(including any sum transferred to that account in respect of premiums

on the new shares),

   

whichever is the less.

(4)   

The amount of the company’s share premium account is reduced by a sum

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corresponding (or by sums in the aggregate corresponding) to the amount of

any payment made under subsection (3).

(5)   

This section has effect subject to section 748(4) (terms of purchase enforceable

in a winding up).

Authority for purchase of own shares

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706     

Authority for purchase of own shares

(1)   

A limited company may only purchase its own shares—

(a)   

by an off-market purchase, in pursuance of a contract approved in

advance in accordance with section 707;

(b)   

by a market purchase, authorised in accordance with section 714.

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(2)   

A purchase is “off-market” if the shares either—

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 19 — Acquisition by limited company of its own shares
Chapter 4 — Purchase of own shares

335

 

(a)   

are purchased otherwise than on a recognised investment exchange, or

(b)   

are purchased on a recognised investment exchange but are not subject

to a marketing arrangement on the exchange.

(3)   

For this purpose a company’s shares are subject to a marketing arrangement

on a recognised investment exchange if—

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(a)   

they are listed under Part 6 of the Financial Services and Markets Act

2000 (c. 8), or

(b)   

the company has been afforded facilities for dealings in the shares to

take place on the exchange—

(i)   

without prior permission for individual transactions from the

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authority governing that investment exchange, and

(ii)   

without limit as to the time during which those facilities are to

be available.

(4)   

A purchase is a “market purchase” if it is made on a recognised investment

exchange and is not an off-market purchase by virtue of subsection (2)(b).

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(5)   

In this section “recognised investment exchange” means a recognised

investment exchange (within the meaning of Part 18 of the Financial Services

and Markets Act 2000) other than an overseas exchange (within the meaning of

that Part).

Authority for off-market purchase

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707     

Authority for off-market purchase

(1)   

A company may only make an off-market purchase of its own shares in

pursuance of a contract approved in advance in accordance with this section.

(2)   

Either—

(a)   

the terms of the proposed contract must be authorised by special

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resolution of the company before the contract is entered into, or

(b)   

the purchase must be in pursuance of a contingent purchase contract

authorised by special resolution of the company before it was entered

into.

(3)   

A “contingent purchase contract” means a contract, entered into by the

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company and relating to shares in the company, that does not amount to a

contract to purchase the shares but under which the company may (subject to

any conditions) become entitled or obliged to purchase the shares.

(4)   

The authority conferred by a resolution under this section may be varied,

revoked or from time to time renewed by a special resolution of the company.

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(5)   

In the case of a public company a resolution conferring, varying or renewing

authority must specify a date on which the authority is to expire, which must

not be later than 18 months after the date on which the resolution is passed.

(6)   

A resolution conferring, varying, revoking or renewing authority under this

section is subject to—

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section 708 (exercise of voting rights), and

section 709 (disclosure of details of contract).

 
 

 
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