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Company Law Reform Bill [HL] (354-360)


Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 19 — Acquisition by limited company of its own shares
Chapter 7 — Supplementary provisions

354

 

   

may be reduced by a sum not exceeding (or by sums not in total exceeding) the

amount by which the permissible capital payment exceeds the nominal

amount of the shares.

(4)   

Where the proceeds of a fresh issue are applied by the company in making a

redemption or purchase of its own shares in addition to a payment out of

5

capital under this Chapter, the references in subsections (2) and (3) to the

permissible capital payment are to be read as referring to the aggregate of that

payment and those proceeds.

748     

Effect of company’s failure to redeem or purchase

(1)   

This section applies where a company—

10

(a)   

issues shares on terms that they are or are liable to be redeemed, or

(b)   

agrees to purchase any of its shares.

(2)   

The company is not liable in damages in respect of any failure on its part to

redeem or purchase any of the shares.

   

This is without prejudice to any right of the holder of the shares other than his

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right to sue the company for damages in respect of its failure.

(3)   

The court shall not grant an order for specific performance of the terms of

redemption or purchase if the company shows that it is unable to meet the costs

of redeeming or purchasing the shares in question out of distributable profits.

(4)   

If the company is wound up and at the commencement of the winding up any

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of the shares have not been redeemed or purchased, the terms of redemption

or purchase may be enforced against the company.

   

When shares are redeemed or purchased under this subsection, they are

treated as cancelled.

(5)   

Subsection (4) does not apply if—

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(a)   

the terms provided for the redemption or purchase to take place at a

date later than that of the commencement of the winding up, or

(b)   

during the period—

(i)   

beginning with the date on which the redemption or purchase

was to have taken place, and

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(ii)   

ending with the commencement of the winding up,

   

the company could not at any time have lawfully made a distribution

equal in value to the price at which the shares were to have been

redeemed or purchased.

(6)   

There shall be paid in priority to any amount that the company is liable under

35

subsection (4) to pay in respect of any shares—

(a)   

all other debts and liabilities of the company (other than any due to

members in their character as such), and

(b)   

if other shares carry rights (whether as to capital or as to income) that

are preferred to the rights as to capital attaching to the first-mentioned

40

shares, any amount due in satisfaction of those preferred rights.

   

Subject to that, any such amount shall be paid in priority to any amounts due

to members in satisfaction of their rights (whether as to capital or income) as

members.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 20 — Debentures

355

 

749     

Meaning of “distributable profits”

In this Part (except in Chapter 2 (financial assistance): see section 696)

“distributable profits”, in relation to the making of any payment by a company,

means profits out of which the company could lawfully make a distribution

(within the meaning given by section 833) equal in value to the payment.

5

750     

General power to make further provision by regulations

(1)   

The Secretary of State may by regulations modify the provisions of this Part.

(2)   

The regulations may—

(a)   

amend or repeal any of the provisions of this Part, or

(b)   

make such other provision as appears to the Secretary of State

10

appropriate in place of any of the provisions of this Part.

(3)   

Regulations under this section may make consequential amendments or

repeals in other provisions of this Act, or in other enactments.

(4)   

Regulations under this section are subject to affirmative resolution procedure.

Part 20

15

Debentures

General provisions

751     

Meaning of “debenture”

In the Companies Acts “debenture” includes debenture stock, bonds and any

other securities of a company, whether or not constituting a charge on the

20

assets of the company.

752     

Perpetual debentures

(1)   

A condition contained in debentures, or in a deed for securing debentures, is

not invalid by reason only that the debentures are made—

(a)   

irredeemable, or

25

(b)   

redeemable only—

(i)   

on the happening of a contingency (however remote), or

(ii)   

on the expiration of a period (however long),

   

any rule of equity to the contrary notwithstanding.

(2)   

Subsection (1) applies to debentures whenever issued and to deeds whenever

30

executed.

753     

Enforcement of contract to subscribe for debentures

A contract with a company to take up and pay for debentures of the company

may by enforced by an order for specific performance.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 20 — Debentures

356

 

754     

Registration of allotment of debentures

(1)   

A company must register an allotment of debentures as soon as practicable and

in any event within two months after the date of the allotment.

(2)   

If a company fails to comply with this section, an offence is committed by—

(a)   

the company, and

5

(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

2 on the standard scale.

10

(4)   

For the duties of the company as to the issue of the debentures, or certificates

of debenture stock, see Part 22 (certification and transfer of securities)

755     

Debentures to bearer (Scotland)

Notwithstanding anything in the statute of the Scots Parliament of 1696,

chapter 25, debentures to bearer issued in Scotland are valid and binding

15

according to their terms.

Register of debenture holders

756     

Register of debenture holders

(1)   

Any register of debenture holders of a company that is kept by the company

must be kept available for inspection—

20

(a)   

at the company’s registered office, or

(b)   

at another place in the part of the United Kingdom in which the

company is registered.

(2)   

A company must give notice to the registrar of the place where any such

register is kept available for inspection and of any change in that place.

25

(3)   

No such notice is required if the register has, at all times since it came into

existence, been kept available for inspection at the company’s registered office.

(4)   

If a company makes default for 14 days in complying with subsection (2), an

offence is committed by—

(a)   

the company, and

30

(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 in the case

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

level 3 on the standard scale.

35

(6)   

References in this section to a register of debenture holders include a

duplicate—

(a)   

of a register of debenture holders that is kept outside the United

Kingdom, or

(b)   

of any part of such a register.

40

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 20 — Debentures

357

 

757     

Register of debenture holders: right to inspect and require copy

(1)   

Every register of debenture holders of a company must, except when duly

closed, be open to the inspection—

(a)   

of the registered holder of any such debentures, or any holder of shares

in the company, without charge, and

5

(b)   

of any other person on payment of such fee as may be prescribed.

(2)   

Any person may require a copy of the register, or any part of it, on payment of

such fee as may be prescribed.

(3)   

A person seeking to exercise either of the rights conferred by this section must

make a request to the company to that effect.

10

(4)   

The request must contain the following information—

(a)   

in the case of an individual, his name and address;

(b)   

in the case of an organisation, the name and address of an individual

responsible for making the request on behalf of the organisation;

(c)   

the purpose for which the information is to be used; and

15

(d)   

whether the information will be disclosed to any other person, and if

so—

(i)   

where that person is an individual, his name and address,

(ii)   

where that person is an organisation, the name and address of

an individual responsible for receiving the information on its

20

behalf, and

(iii)   

the purpose for which the information is to be used by that

person.

(5)   

For the purposes of this section a register is “duly closed” if it is closed in

accordance with provision contained—

25

(a)   

in the articles or in the debentures,

(b)   

in the case of debenture stock in the stock certificates, or

(c)   

in the trust deed or other document securing the debentures or

debenture stock.

   

The total period for which a register is closed in any year must not exceed 30

30

days.

(6)   

References in this section to a register of debenture holders include a

duplicate—

(a)   

of a register of debenture holders that is kept outside the United

Kingdom, or

35

(b)   

of any part of such a register.

758     

Register of debenture holders: response to request for inspection or copy

(1)   

Where a company receives a request under section 757 (register of debenture

holders: right to inspect and require copy), it must within five working days

either—

40

(a)   

comply with the request, or

(b)   

apply to the court.

(2)   

If it applies to the court it must notify the person making the request.

(3)   

If on an application under this section the court is satisfied that the inspection

or copy is not sought for a proper purpose—

45

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 20 — Debentures

358

 

(a)   

it shall direct the company not to comply with the request, and

(b)   

it may further order that the company’s costs (in Scotland, expenses) on

the application be paid in whole or in part by the person who made the

request, even if he is not a party to the application.

(4)   

If the court makes such a direction and it appears to the court that the company

5

is or may be subject to other requests made for a similar purpose (whether

made by the same person or different persons), it may direct that the company

is not to comply with any such request.

   

The order must contain such provision as appears to the court appropriate to

identify the requests to which it applies.

10

(5)   

If on an application under this section the court does not direct the company

not to comply with the request, the company must comply with the request

immediately upon the court giving its decision or, as the case may be, the

proceedings being discontinued.

759     

Register of debenture holders: refusal of inspection or default in providing

15

copy

(1)   

If an inspection required under section 757 (register of debenture holders: right

to inspect and require copy) is refused or default is made in providing a copy

required under that section, otherwise than in accordance with an order of the

court, an offence is committed by—

20

(a)   

the company, and

(b)   

every 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

25

3 on the standard scale.

(3)   

In the case of any such refusal or default the court may by order compel an

immediate inspection or, as the case may be, direct that the copy required be

sent to the person requesting it.

760     

Register of debenture holders: offences in connection with request for or

30

disclosure of information

(1)   

It is an offence for a person knowingly or recklessly to make in a request under

section 757 (register of debenture holders: right to inspect and require copy) a

statement that is misleading, false or deceptive in a material particular.

(2)   

It is an offence for a person in possession of information obtained by exercise

35

of either of the rights conferred by that section—

(a)   

to do anything that results in the information being disclosed to

another person, or

(b)   

to fail to do anything with the result that the information is disclosed to

another person,

40

   

knowing or having reason to suspect that person may use the information for

a purpose that is not a proper purpose.

(3)   

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);

45

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 20 — Debentures

359

 

(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);

(ii)   

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

5

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

maximum (or both).

761     

Time limit for claims arising from entry in register

(1)   

Liability incurred by a company—

(a)   

from the making or deletion of an entry in the register of debenture

10

holders, or

(b)   

from a failure to make or delete any such entry,

   

is not enforceable more than ten years after the date on which the entry was

made or deleted or, as the case may be, the failure first occurred.

(2)   

This is without prejudice to any lesser period of limitation (and, in Scotland, to

15

any rule that the obligation giving rise to the liability prescribes before the

expiry of that period).

Supplementary provisions

762     

Right of debenture holder to copy of deed

(1)   

Any holder of debentures of a company is entitled, on request and on payment

20

of such fee as may be prescribed, to be provided with a copy of any trust deed

for securing the debentures.

(2)   

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

every officer of the company who is in default.

(3)   

A person guilty of an offence under this section is liable on summary

25

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.

(4)   

In the case of any such default the court may direct that the copy required be

sent to the person requiring it.

30

763     

Liability of trustees of debentures

(1)   

Any provision contained in—

(a)   

a trust deed for securing an issue of debentures, or

(b)   

any contract with the holders of debentures secured by a trust deed,

   

is void in so far as it would have the effect of exempting a trustee of the deed

35

from, or indemnifying him against, liability for breach of trust where he fails to

show the degree of care and diligence required of him as trustee, having regard

to the provisions of the trust deed conferring on him any powers, authorities

or discretions.

(2)   

Subsection (1) does not invalidate—

40

(a)   

a release otherwise validly given in respect of anything done or omitted

to be done by a trustee before the giving of the release;

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 20 — Debentures

360

 

(b)   

any provision enabling such a release to be given—

(i)   

on being agreed to by a majority of not less than 75% in value of

the debenture holders present and voting in person or, where

proxies are permitted, by proxy at a meeting summoned for the

purpose, and

5

(ii)   

either with respect to specific acts or omissions or on the trustee

dying or ceasing to act.

(3)   

This section is subject to section 764 (saving for certain older provisions).

764     

Liability of trustees of debentures: saving for certain older provisions

(1)   

Section 763 (liability of trustees of debentures) does not operate—

10

(a)   

to invalidate any provision in force on the relevant date so long as any

person—

(i)   

then entitled to the benefit of the provision, or

(ii)   

afterwards given the benefit of the provision under subsection

(4) below,

15

   

remains a trustee of the deed in question, or

(b)   

to deprive any person of any exemption or right to be indemnified in

respect of anything done or omitted to be done by him while any such

provision was in force.

(2)   

The relevant date for this purpose is—

20

(a)   

1st July 1948 in a case where section 192 of the Companies Act 1985

(c. 6) applied immediately before the commencement of this section;

(b)   

1st July 1961 in a case where Article 201 of the Companies (Northern

Ireland) Order 1986 then applied.

(3)   

While any trustee of a trust deed remains entitled to the benefit of a provision

25

saved by subsection (1) above the benefit of that provision may be given

either—

(a)   

to all trustees of the deed, present and future, or

(b)   

to any named trustees or proposed trustees of it,

   

by a resolution passed by a majority of not less than 75% in value of the

30

debenture holders present in person or, where proxies are permitted, by proxy

at a meeting summoned for the purpose.

(4)   

A meeting for that purpose must be summoned in accordance with the

provisions of the deed or, if the deed makes no provision for summoning

meetings, in a manner approved by the court.

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765     

Power to re-issue redeemed debentures

(1)   

Where a company has redeemed debentures previously issued, then unless—

(a)   

provision to the contrary (express or implied) is contained in the

company’s articles or in any contract made by the company, or

(b)   

the company has, by passing a resolution to that effect or by some other

40

act, manifested its intention that the debentures shall be cancelled,

   

the company may re-issue the debentures, either by re-issuing the same

debentures or by issuing new debentures in their place.

   

This subsection is deemed always to have had effect.

 
 

 
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