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

House of Commons

Session 2005 - 06
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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
15
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
20
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
30
(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
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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
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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.
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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—
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 20 — Debentures
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(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);
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 20 — Debentures
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(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
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(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.