Company Law Reform Bill [HL] (361-367)

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL] (361-367)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 20 — Debentures
361

(2)
On a re-issue of redeemed debentures the person entitled to the debentures has
(and is deemed always to have had) the same priorities as if the debentures had
never been redeemed.
(3)
The re-issue of a debenture or the issue of another debenture in its place under
this section is treated as the issue of a new debenture for the purposes of stamp
5
duty.

It is not so treated for the purposes of any provision limiting the amount or
number of debentures to be issued.
(4)
A person lending money on the security of a debenture re-issued under this
section which appears to be duly stamped may give the debenture in evidence
10
in any proceedings for enforcing his security without payment of the stamp
duty or any penalty in respect of it, unless he had notice (or, but for his
negligence, might have discovered) that the debenture was not duly stamped.

In that case the company is liable to pay the proper stamp duty and penalty.
766
Deposit of debentures to secure advances
15
Where a company has deposited any of its debentures to secure advances from
time to time on current account or otherwise, the debentures are not treated as
redeemed by reason only of the company’s account having ceased to be in
debit while the debentures remained so deposited.
767
Priorities where debentures secured by floating charge
20
(1)
This section applies where debentures of a company registered in England and
Wales or Northern Ireland are secured by a charge that, as created, was a
floating charge.
(2)
If possession is taken by or on behalf of the holders of the debentures of any
property comprised in or subject to the charge, and the company is not at that
25
time in the course of being wound up, the company’s preferential debts shall
be paid out of assets coming to the hands of the persons taking possession in
priority to any claims for principal or interest in respect of the debentures.
(3)
“Preferential debts” means the categories of debts listed in Schedule 6 to the
Insolvency Act 1986 (c. 45) or Schedule 4 to the Insolvency (Northern Ireland)
30
Order 1989 (S.I. 1989/2405 (N.I. 19)).

For the purposes of that Schedule “the relevant date” is the date of possession
being taken as mentioned in subsection (2).
(4)
Payments under this section shall be recouped, as far as may be, out of the
assets of the company available for payment of general creditors.
35

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 21 — Private and public companies
Chapter 1 — Prohibition of public offers by private companies
362

Part 21
Private and public companies
Chapter 1
Prohibition of public offers by private companies
768
Prohibition of public offers by private company
5
(1)
A private company limited by shares or limited by guarantee and having a
share capital must not—
(a)
offer to the public any securities of the company, or
(b)
allot or agree to allot any securities of the company with a view to their
being offered to the public.
10
(2)
Unless the contrary is proved, an allotment or agreement to allot securities is
presumed to be made with a view to their being offered to the public if an offer
of the securities (or any of them) to the public is made—
(a)
within six months after the allotment or agreement to allot, or
(b)
before the receipt by the company of the whole of the consideration to
15
be received by it in respect of the securities.
(3)
A company does not contravene this section if—
(a)
it acts in good faith in pursuance of arrangements under which it is to
re-register as a public company before the securities are allotted, or
(b)
as part of the terms of the offer it undertakes to re-register as a public
20
company within a specified period, and that undertaking is complied
with.
(4)
The specified period for the purposes of subsection (3)(b) must be a period
ending not later than six months after the day on which the offer is made (or,
in the case of an offer made on different days, first made).
25
(5)
In this Chapter “securities” means shares or debentures.
769
Meaning of “offer to the public”
(1)
This section explains what is meant in this Chapter by an offer of securities to
the public.
(2)
An offer to the public includes an offer to any section of the public, however
30
selected.
(3)
An offer is not regarded as an offer to the public if it can properly be regarded,
in all the circumstances, as—
(a)
not being calculated to result, directly or indirectly, in securities of the
company becoming available to persons other than those receiving the
35
offer, or
(b)
otherwise being a private concern of the person receiving it and the
person making it.
(4)
An offer is to be regarded (unless the contrary is proved) as being a private
concern of the person receiving it and the person making it if—
40
(a)
it is made to a person already connected with the company and, where
it is made on terms allowing that person to renounce his rights, the

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 21 — Private and public companies
Chapter 1 — Prohibition of public offers by private companies
363

rights may only be renounced in favour of another person already
connected with the company; or
(b)
it is an offer to subscribe for securities to be held under an employees’
share scheme and, where it is made on terms allowing that person to
renounce his rights, the rights may only be renounced in favour of—
5
(i)
another person entitled to hold securities under the scheme, or
(ii)
a person already connected with the company.
(5)
For the purposes of this section “person already connected with the company”
means—
(a)
an existing member or employee of the company,
10
(b)
a member of the family of a person who is or was a member or
employee of the company,
(c)
the widow or widower, or surviving civil partner, of a person who was
a member or employee of the company,
(d)
an existing debenture holder of the company, or
15
(e)
a trustee (acting in his capacity as such) of a trust of which the principal
beneficiary is a person within any of paragraphs (a) to (d).
(6)
For the purposes of subsection (5)(b) the members of a person’s family are the
person’s spouse or civil partner and children (including step-children) and
their descendants.
20
770
Enforcement of prohibition: order restraining proposed contravention
(1)
If it appears to the court—
(a)
on an application under this section, or
(b)
in proceedings under section 459 or 460 of the Companies Act 1985
(c. 6) (protection of members against unfair prejudice),
25

that a company is proposing to act in contravention of section 768 (prohibition
of public offers by private companies), the court shall make an order under this
section.
(2)
An order under this section is an order restraining the company from
contravening that section.
30
(3)
An application for an order under this section may be made by—
(a)
a member or creditor of the company, or
(b)
the Secretary of State.
771
Enforcement of prohibition: orders available to the court after contravention
(1)
This section applies if it appears to the court—
35
(a)
on an application under this section, or
(b)
in proceedings under section 459 or 460 of the Companies Act 1985
(protection of members against unfair prejudice),

that a company has acted in contravention of section 768 (prohibition of public
offers by private companies).
40
(2)
The court must make an order requiring the company to re-register as a public
company unless it appears to the court—
(a)
that the company does not meet the requirements for re-registration as
a public company, and

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 21 — Private and public companies
Chapter 1 — Prohibition of public offers by private companies
364

(b)
that it is impractical or undesirable to require it to take steps to do so.
(3)
If it does not make an order for re-registration, the court may make either or
both of the following—
(a)
a remedial order (see section 772), or
(b)
an order for the compulsory winding up of the company.
5
(4)
An application under this section may be made by—
(a)
a member of the company who—
(i)
was a member at the time the offer was made (or, if the offer was
made over a period, at any time during that period), or
(ii)
became a member as a result of the offer,
10
(b)
a creditor of the company who was a creditor at the time the offer was
made (or, if the offer was made over a period, at any time during that
period), or
(c)
the Secretary of State.
772
Enforcement of prohibition: remedial order
15
(1)
A “remedial order” is an order for the purpose of putting a person affected by
anything done in contravention of section 768 (prohibition of public offers by
private company) in the position he would have been in if it had not been done.
(2)
The following provisions are without prejudice to the generality of the power
to make such an order.
20
(3)
Where a private company has—
(a)
allotted securities pursuant to an offer to the public, or
(b)
allotted or agreed to allot securities with a view to their being offered
to the public,

a remedial order may require any person knowingly concerned in the
25
contravention of section 768 to offer to purchase any of those securities at such
price and on such other terms as the court thinks fit.
(4)
A remedial order may be made—
(a)
against any person knowingly concerned in the contravention, whether
or not an officer of the company;
30
(b)
notwithstanding anything in the company’s constitution (which
includes, for this purpose, the terms on which any securities of the
company are allotted or held);
(c)
whether or not the holder of the securities subject to the order is the
person to whom the company allotted or agreed to allot them.
35
(5)
Where a remedial order is made against the company itself, the court may
provide for the reduction of the company’s capital accordingly.
773
Validity of allotment etc not affected
Nothing in this Chapter affects the validity of any allotment or sale of securities
or of any agreement to allot or sell securities.
40

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 21 — Private and public companies
Chapter 2 — Minimum share capital requirement for public companies
365

Chapter 2
Minimum share capital requirement for public companies
774
Public company: requirement as to minimum share capital
(1)
A company that is a public company (otherwise than by virtue of re-
registration as a public company) must not do business or exercise any
5
borrowing powers unless the registrar has issued it with a certificate under this
section (a “trading certificate”).
(2)
The registrar shall issue a trading certificate if, on an application made in
accordance with section 775, he is satisfied that the nominal value of the
company’s allotted share capital is not less than the authorised minimum.
10
(3)
For this purpose a share allotted in pursuance of an employees’ share scheme
shall not be taken into account unless paid up as to—
(a)
at least one-quarter of the nominal value of the share, and
(b)
the whole of any premium on the share.
(4)
A trading certificate has effect from the date on which it is issued and is
15
conclusive evidence that the company is entitled to do business and exercise
any borrowing powers.
775
Procedure for obtaining certificate
(1)
An application for a certificate under section 774 must—
(a)
state that the nominal value of the company’s allotted share capital is
20
not less than the authorised minimum,
(b)
specify the amount, or estimated amount, of the company’s
preliminary expenses,
(c)
specify any amount or benefit paid or given, or intended to be paid or
given, to any promoter of the company, and the consideration for the
25
payment or benefit, and
(d)
be accompanied by a statement of compliance.
(2)
The statement of compliance is a statement that the company meets the
requirements for the issue of a certificate under section 774.
(3)
The registrar may accept the statement of compliance as sufficient evidence of
30
the matters stated in it.
776
The authorised minimum
For the purposes of sections 774 and 775 (requirement as to minimum share
capital of public company) the authorised minimum is £50,000.
777
Consequences of doing business etc without a trading certificate
35
(1)
If a company does business or exercises any borrowing powers in
contravention of section 774, an offence is committed by—
(a)
the company, and
(b)
every officer of the company who is in default.
(2)
A person guilty of an offence under subsection (1) is liable—
40

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 22 — Certification and transfer of securities
Chapter 1 — Certification and transfer of securities: general
366

(a)
on conviction on indictment, to a fine;
(b)
on summary conviction, to a fine not exceeding the statutory
maximum.
(3)
A contravention of section 774 does not affect the validity of a transaction
entered into by the company, but if a company—
5
(a)
enters into a transaction in contravention of that section, and
(b)
fails to comply with its obligations in connection with the transaction
within 21 days from being called on to do so,

the directors of the company are jointly and severally liable to indemnify any
other party to the transaction in respect of any loss or damage suffered by him
10
by reason of the company’s failure to comply with its obligations.
(4)
The directors who are so liable are those who were directors at the time the
company entered into the transaction.
Part 22
Certification and transfer of securities
15
Chapter 1
Certification and transfer of securities: general
Share certificates
778
Share certificate to be evidence of title
(1)
In the case of a company registered in England and Wales or Northern Ireland,
20
a certificate under the common seal of the company specifying any shares held
by a member is prima facie evidence of his title to the shares.
(2)
In the case of a company registered in Scotland—
(a)
a certificate under the common seal of the company specifying any
shares held by a member, or
25
(b)
a certificate specifying any shares held by a member and subscribed by
the company in accordance with the Requirements of Writing
(Scotland) Act 1995 (c. 7),

is sufficient evidence, unless the contrary is shown, of his title to the shares.
Issue of certificates etc on allotment
30
779
Duty of company as to issue of certificates etc on allotment
(1)
A company must, within two months after the allotment of any of its shares,
debentures or debenture stock, complete and have ready for delivery—
(a)
the certificates of the shares allotted,
(b)
the debentures allotted, or
35
(c)
the certificates of the debenture stock allotted.
(2)
Subsection (1) does not apply—
(a)
if the conditions of issue of the shares, debentures or debenture stock
provide otherwise,

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 22 — Certification and transfer of securities
Chapter 1 — Certification and transfer of securities: general
367

(b)
in the case of allotment to a financial institution (see section 788), or
(c)
in the case of an allotment of shares if, following the allotment, the
company has issued a share warrant in respect of the shares (see section
789).
(3)
If default is made in complying with subsection (1) an offence is committed by
5
every officer of the company who is in default.
(4)
A person guilty of an offence under subsection (2) 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
Transfer of securities
780
Registration of transfer
(1)
A company may not register a transfer of shares in or debentures of the
company unless—
(a)
a proper instrument of transfer has been delivered to it, or
15
(b)
the transfer—
(i)
is an exempt transfer within the Stock Transfer Act 1982 (c. 41),
or
(ii)
is in accordance with regulations under Chapter 2 of this Part.

This applies notwithstanding anything in the company’s articles.
20
(2)
Subsection (1) does not affect any power of the company to register as
shareholder or debenture holder a person to whom the right to any shares in
or debentures of the company has been transmitted by operation of law.
781
Procedure on transfer being lodged
(1)
When a transfer of shares in or debentures of a company has been lodged with
25
the company, the company must either—
(a)
register the transfer, or
(b)
give the transferee notice of refusal to register the transfer, together
with its reasons for the refusal,

as soon as practicable and in any event within two months after the date on
30
which the transfer is lodged with it.
(2)
If the company refuses to register the transfer, it must provide the transferee
with such further information about the reasons for the refusal as the transferee
may reasonably request.

This does not include copies of minutes of meetings of directors.
35
(3)
If a company fails to comply with this section, an offence is committed by—
(a)
the company, and
(b)
every officer of the company who is in default.
(4)
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
40
continued contravention, a daily default fine not exceeding one-tenth of level
3 on the standard scale.
(5)
This section does not apply—