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Company Law Reform Bill [HL] (336-342)


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

336

 

708     

Resolution authorising off-market purchase: exercise of voting rights

(1)   

This section applies to a resolution to confer, vary, revoke or renew authority

for the purposes of section 707 (authority for off-market purchase of own

shares).

(2)   

Where the resolution is proposed as a written resolution, a member who holds

5

shares to which the resolution relates is not an eligible member.

(3)   

Where the resolution is proposed at a meeting of the company, it is not

effective if—

(a)   

any member of the company holding shares to which the resolution

relates exercises the voting rights carried by any of those shares in

10

voting on the resolution, and

(b)   

the resolution would not have been passed if he had not done so.

(4)   

For this purpose—

(a)   

a member who holds shares to which the resolution relates is regarded

as exercising the voting rights carried by those shares not only if he

15

votes in respect of them on a poll on the question whether the

resolution shall be passed, but also if he votes on the resolution

otherwise than on a poll;

(b)   

notwithstanding anything in the company’s articles, any member of the

company may demand a poll on that question;

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(c)   

a vote and a demand for a poll by a person as proxy for a member are

the same respectively as a vote and a demand by the member.

709     

Resolution authorising off-market purchase: disclosure of details of contract

(1)   

This section applies in relation to a resolution to confer, vary, revoke or renew

authority for the purposes of section 707 (authority for off-market purchase of

25

own shares).

(2)   

A copy of the proposed contract (if it is in writing) or a memorandum setting

out its terms (if it is not) must be made available to members—

(a)   

in the case of a written resolution, by being sent or submitted to every

eligible member at or before the time at which the proposed resolution

30

is sent or submitted to him;

(b)   

in the case of a resolution at a meeting, by being made available for

inspection by members of the company both—

(i)   

at the company’s registered office for not less than 15 days

ending with the date of the meeting, and

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(ii)   

at the meeting itself.

(3)   

A memorandum of contract terms so made available must include the names

of the members holding shares to which the contract relates.

(4)   

A copy of the contract so made available must have annexed to it a written

memorandum specifying such of those names as do not appear in the contract

40

itself.

(5)   

The resolution is not validly passed if the requirements of this section are not

complied with

 
 

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

337

 

710     

Variation of contract for off-market purchase

(1)   

A company may only agree to a variation of a contract authorised under

section 707 (authority for off-market purchase) if the variation is approved in

advance in accordance with this section.

(2)   

The terms of the variation must be authorised by a special resolution of the

5

company before it is agreed to.

(3)   

That authority may be varied, revoked or from time to time renewed by a

special resolution of the company.

(4)   

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

10

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

(5)   

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

section is subject to—

section 711 (exercise of voting rights), and

section 712 (disclosure of details of variation).

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711     

Resolution authorising variation: exercise of voting rights

(1)   

This section applies to a resolution to confer, vary, revoke or renew authority

for the purposes of section 710 (variation of contract for off-market purchase of

own shares).

(2)   

Where the resolution is proposed as a written resolution, a member who holds

20

shares to which the resolution relates is not an eligible member.

(3)   

Where the resolution is proposed at a meeting of the company, it is not

effective if—

(a)   

any member of the company holding shares to which the resolution

relates exercises the voting rights carried by any of those shares in

25

voting on the resolution, and

(b)   

the resolution would not have been passed if he had not done so.

(4)   

For this purpose—

(a)   

a member who holds shares to which the resolution relates is regarded

as exercising the voting rights carried by those shares not only if he

30

votes in respect of them on a poll on the question whether the

resolution shall be passed, but also if he votes on the resolution

otherwise than on a poll;

(b)   

notwithstanding anything in the company’s articles, any member of the

company may demand a poll on that question; and

35

(c)   

a vote and a demand for a poll by a person as proxy for a member are

the same respectively as a vote and a demand by the member.

712     

Resolution authorising variation: disclosure of details of variation

(1)   

This section applies in relation to a resolution under section 710 (variation of

contract for off-market purchase of own shares).

40

(2)   

A copy of the proposed variation (if it is in writing) or a written memorandum

giving details of the proposed variation (if it is not) must be made available to

members—

 
 

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

338

 

(a)   

in the case of a written resolution, by being sent or submitted to every

eligible member at or before the time at which the proposed resolution

is sent or submitted to him;

(b)   

in the case of a resolution at a meeting, by being made available for

inspection by members of the company both—

5

(i)   

at the company’s registered office for not less than 15 days

ending with the date of the meeting, and

(ii)   

at the meeting itself.

(3)   

There must also be made available as mentioned in subsection (2) a copy of the

original contract or, as the case may be, a memorandum of its terms, together

10

with any variations previously made.

(4)   

A memorandum of the proposed variation so made available must include the

names of the members holding shares to which the variation relates.

(5)   

A copy of the proposed variation so made available must have annexed to it a

written memorandum specifying such of those names as do not appear in the

15

variation itself.

(6)   

The resolution is not validly passed if the requirements of this section are not

complied with.

713     

Release of company’s rights under contract for off-market purchase

(1)   

An agreement by a company to release its rights under a contract approved

20

under section 707 (authorisation of off-market purchase) is void unless the

terms of the release agreement are approved in advance in accordance with

this section.

(2)   

The terms of the proposed agreement must be authorised by a special

resolution of the company before the agreement is entered into.

25

(3)   

That authority may be varied, revoked or from time to time renewed by a

special resolution of the company.

(4)   

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.

30

(5)   

The provisions of—

section 711 (exercise of voting rights), and

section 712 (disclosure of details of variation),

   

apply to a resolution authorising a proposed release agreement as they apply

to a resolution authorising a proposed variation.

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Authority for market purchase

714     

Authority for market purchase

(1)   

A company may only make a market purchase of its own shares if the purchase

has first been authorised by a resolution of the company.

(2)   

That authority—

40

(a)   

may be general or limited to the purchase of shares of a particular class

or description, 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

339

 

(b)   

may be unconditional or subject to conditions.

(3)   

The authority must—

(a)   

specify the maximum number of shares authorised to be acquired, and

(b)   

determine both the maximum and minimum prices that may be paid

for the shares.

5

(4)   

The authority may be varied, revoked or from time to time renewed by a

resolution of the company.

(5)   

A resolution conferring, varying or renewing authority must specify a date on

which it is to expire, which must not be later than 18 months after the date on

which the resolution is passed.

10

(6)   

A company may make a purchase of its own shares after the expiry of the time

limit specified if—

(a)   

the contract of purchase was concluded before the authority expired,

and

(b)   

the terms of the authority permitted the company to make a contract of

15

purchase that would or might be executed wholly or partly after its

expiration.

(7)   

A resolution to confer or vary authority under this section may determine

either or both the maximum and minimum price for purchase by—

(a)   

specifying a particular sum, or

20

(b)   

providing a basis or formula for calculating the amount of the price (but

without reference to any person’s discretion or opinion).

Supplementary provisions

715     

Copy of contract or memorandum to be available for inspection

(1)   

This section applies where a company has entered into—

25

(a)   

a contract approved under section 707 (authorisation of contract for off-

market purchase), or

(b)   

a contract for a purchase authorised under section 714 (authorisation of

market purchase).

(2)   

The company must keep available for inspection at its registered office—

30

(a)   

a copy of the contract, or

(b)   

if the contract is not in writing, a written memorandum setting out its

terms.

(3)   

The copy or memorandum must be kept available for inspection from the

conclusion of the contract until the end of the period of ten years beginning

35

with—

(a)   

the date on which the purchase of all the shares in pursuance of the

contract is completed or,

(b)   

the date on which the contract otherwise determines.

(4)   

Every copy or memorandum required to be kept under this section must be

40

kept open to inspection without charge—

(a)   

by any member of the company, and

(b)   

in the case of a public company, by any other person.

 
 

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

340

 

(5)   

The provisions of this section apply to a variation of a contract as they apply to

the original contract.

716     

Enforcement of right to inspect copy or memorandum

(1)   

If default is made in complying with section 715(2) or (3), or an inspection

required under section 715(4) is refused, an offence is committed by every

5

officer of the company who is in default.

(2)   

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.

10

(3)   

In the case of refusal of an inspection required under section 715(4) the court

may by order compel an immediate inspection.

717     

No assignment of company’s right to purchase own shares

The rights of a company under a contract authorised under—

(a)   

section 707 (authority for off-market purchase), or

15

(b)   

section 714 (authority for market purchase)

are not capable of being assigned.

718     

Payments apart from purchase price to be made out of distributable profits

(1)   

A payment made by a company in consideration of—

(a)   

acquiring any right with respect to the purchase of its own shares in

20

pursuance of a contingent purchase contract approved under section

707 (authorisation of off-market purchase),

(b)   

the variation of any contract approved under that section, or

(c)   

the release of any of the company’s obligations with respect to the

purchase of any of its own shares under a contract—

25

(i)   

approved under section 707, or

(ii)   

authorised under section 714 (authorisation of market

purchase),

   

must be made out of the company’s distributable profits.

(2)   

If this requirement is not met in relation to a contract, then—

30

(a)   

in a case within subsection (1)(a), no purchase by the company of its

own shares in pursuance of that contract may be made under this

Chapter;

(b)   

in a case within subsection (1)(b), no such purchase following the

variation may be made under this Chapter;

35

(c)   

in a case within subsection (1)(c), the purported release is void.

719     

Treatment of shares purchased

Where a limited company makes a purchase of its own shares in accordance

with this Chapter, then—

(a)   

if section 737 (treasury shares) applies, the shares may be held and dealt

40

with in accordance with Chapter 6 of this Part;

(b)   

if that section does not apply—

 
 

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

341

 

(i)   

the shares are treated as cancelled, and

(ii)   

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

accordingly by the nominal value of the shares cancelled.

720     

Return to registrar of purchase of own shares

(1)   

Where a company purchases shares under this Chapter, it must deliver a

5

return to the registrar within the period of 28 days beginning with the date on

which the shares are delivered to it.

(2)   

The return must distinguish—

(a)   

shares in relation to which section 737 (treasury shares) applies and

shares in relation to which that section does not apply, and

10

(b)   

shares in relation to which that section applies—

(i)   

that are cancelled forthwith (under section 742 (cancellation of

treasury shares)), and

(ii)   

that are not so cancelled.

(3)   

The return must state, with respect to shares of each class purchased—

15

(a)   

the number and nominal value of the shares, and

(b)   

the date on which they were delivered to the company.

(4)   

In the case of a public company the return must also state—

(a)   

the aggregate amount paid by the company for the shares, and

(b)   

the maximum and minimum prices paid in respect of shares of each

20

class purchased.

(5)   

Particulars of shares delivered to the company on different dates and under

different contracts may be included in a single return.

   

In such a case the amount required to be stated under subsection (4)(a) is the

aggregate amount paid by the company for all the shares to which the return

25

relates.

(6)   

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

every officer of the company who is in default.

(7)   

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

(a)   

on conviction on indictment, to a fine;

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(b)   

on summary conviction to a fine not exceeding the statutory maximum

and, for continued contravention, a daily default fine not exceeding

one-tenth of the statutory maximum.

721     

Notice to registrar of cancellation of shares

(1)   

If on the purchase by a company of any of its own shares in accordance with

35

this Part—

(a)   

section 737 (treasury shares) does not apply (so that the shares are

treated as cancelled), or

(b)   

that section applies but the shares are cancelled forthwith (under

section 742 (cancellation of treasury shares)),

40

   

the company must give notice of cancellation to the registrar, within the period

of 28 days beginning with the date on which the shares are delivered to it,

specifying the shares cancelled.

(2)   

The notice must be accompanied by a statement of capital.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 19 — Acquisition by limited company of its own shares
Chapter 5 — Redemption or purchase by private company out of capital

342

 

(3)   

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

immediately following the cancellation—

(a)   

the total number of shares of the company,

(b)   

the aggregate nominal value of those shares,

(c)   

for each class of shares—

5

(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

10

premium).

(4)   

If default is made in complying 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

15

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.

Chapter 5

Redemption or purchase by private company out of capital

20

Introductory

722     

Power of private limited company to redeem or purchase own shares out of

capital

(1)   

A private limited company may in accordance with this Chapter, but subject to

any restriction or prohibition in the company’s articles, make a payment in

25

respect of the redemption or purchase of its own shares otherwise than out of

distributable profits or the proceeds of a fresh issue of shares.

(2)   

References below in this Chapter to payment out of capital are to any payment

so made, whether or not it would be regarded apart from this section as a

payment out of capital.

30

The permissible capital payment

723     

The permissible capital payment

(1)   

The payment that may, in accordance with this Chapter, be made by a

company out of capital in respect of the redemption or purchase of its own

shares is such amount as, after applying for that purpose—

35

(a)   

any available profits of the company, and

(b)   

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

redemption or purchase,

   

is required to meet the price of redemption or purchase.

(2)   

That is referred to below in this Chapter as “the permissible capital payment”

40

for the shares.

 
 

 
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