Company Law Reform Bill [HL] (368-374)

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL] (368-374)

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
368

(a)
in relation to a transfer of shares if the company has issued a share
warrant in respect of the shares (see section 789);
(b)
in relation to the transmission of shares or debentures by operation of
law.
782
Transfer of shares on application of transferor
5
On the application of the transferor of any share or interest in a company, the
company shall enter in its register of members the name of the transferee in the
same manner and subject to the same conditions as if the application for the
entry were made by the transferee.
783
Execution of share transfer by personal representative
10
An instrument of transfer of the share or other interest of a deceased member
of a company—
(a)
may be made by his personal representative although the personal
representative is not himself a member of the company, and
(b)
is as effective as if the personal representative had been such a member
15
at the time of the execution of the instrument.
784
Evidence of grant of probate etc
(1)
The production to a company of any document that is by law sufficient
evidence of the grant of—
(a)
probate of the will of a deceased person,
20
(b)
letters of administration of the estate of a deceased person, or
(c)
confirmation as executor of a deceased person,

shall be accepted by the company as sufficient evidence of the grant.
(2)
This has effect notwithstanding anything in the company’s articles.
785
Certification of instrument of transfer
25
(1)
The certification by a company of an instrument of transfer of any shares in, or
debentures of, the company is to be taken as a representation by the company
to any person acting on the faith of the certification that there have been
produced to the company such documents as on their face show a prima facie
title to the shares or debentures in the transferor named in the instrument.
30
(2)
The certification is not to be taken as a representation that the transferor has
any title to the shares or debentures.
(3)
Where a person acts on the faith of a false certification by a company made
negligently, the company is under the same liability to him as if the
certification had been made fraudulently.
35
(4)
For the purposes of this section—
(a)
an instrument of transfer is certificated if it bears the words “certificate
lodged” (or words to the like effect);
(b)
the certification of an instrument of transfer is made by a company if—
(i)
the person issuing the instrument is a person authorised to issue
40
certificated instruments of transfer on the company’s behalf,
and

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
369

(ii)
the certification is signed by a person authorised to certificate
transfers on the company’s behalf or by an officer or employee
either of the company or of a body corporate so authorised;
(c)
a certification is treated as signed by a person if—
(i)
it purports to be authenticated by his signature or initials
5
(whether handwritten or not), and
(ii)
it is not shown that the signature or initials was or were placed
there neither by himself nor by a person authorised to use the
signature or initials for the purpose of certificating transfers on
the company’s behalf.
10
Issue of certificates etc on transfer
786
Duty of company as to issue of certificates etc on transfer
(1)
A company must, within two months after the date on which a transfer of any
of its shares, debentures or debenture stock is lodged with the company,
complete and have ready for delivery—
15
(a)
the certificates of the shares transferred,
(b)
the debentures transferred, or
(c)
the certificates of the debenture stock transferred.
(2)
For this purpose a “transfer” means—
(a)
a transfer duly stamped and otherwise valid, or
20
(b)
an exempt transfer within the Stock Transfer Act 1982 (c. 41),

but does not include a transfer that the company is for any reason entitled to
refuse to register and does not register.
(3)
Subsection (1) does not apply—
(a)
if the conditions of issue of the shares, debentures or debenture stock
25
provide otherwise,
(b)
in the case of a transfer to a financial institution (see section 788), or
(c)
in the case of a transfer of shares if, following the transfer, the company
has issued a share warrant in respect of the shares (see section 789).
(4)
Subsection (1) has effect subject to section 787 (cases where the Stock Transfer
30
Act 1982 applies).
(5)
If default is made in complying with subsection (1) an offence is committed by
every officer of the company who is in default.
(6)
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
35
continued contravention, a daily default fine not exceeding one-tenth of level
3 on the standard scale.
787
Issue of certificates etc: cases within the Stock Transfer Act 1982
(1)
Section 786(1) (duty of company as to issue of certificates etc on transfer) does
not apply in the case of a transfer to a person where, by virtue of regulations
40
under section 3 of the Stock Transfer Act 1982, he is not entitled to a certificate
or other document of or evidencing title in respect of the securities transferred.
(2)
But if in such a case the transferee—

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
370

(a)
subsequently becomes entitled to such a certificate or other document
by virtue of any provision of those regulations, and
(b)
gives notice in writing of that fact to the company,

section 786 (duty to company as to issue of certificates etc) has effect as if the
reference in subsection (1) of that section to the date of the lodging of the
5
transfer were a reference to the date of the notice.
Issue of certificates etc on allotment or transfer to financial institution
788
Issue of certificates etc: allotment or transfer to financial institution
(1)
A company—
(a)
of which shares or debentures are allotted to a financial institution,
10
(b)
of which debenture stock is allotted to a financial institution, or
(c)
with which a transfer for transferring shares, debentures or debenture
stock to a financial institution is lodged,

is not required in consequence of that allotment or transfer to comply with
section 779(1) or 786(1) (duty of company as to issue of certificates etc).
15
(2)
A “financial institution” means—
(a)
a recognised clearing house acting in relation to a recognised
investment exchange, or
(b)
a nominee of—
(i)
a recognised clearing house acting in that way, or
20
(ii)
a recognised investment exchange,

designated for the purposes of this section in the rules of the recognised
investment exchange in question.
(3)
Expressions used in subsection (2) have the same meaning as in Part 18 of the
Financial Services and Markets Act 2000 (c. 8).
25
Share warrants
789
Issue and effect of share warrant to bearer
(1)
A company limited by shares may, if so authorised by its articles, issue with
respect to any fully paid shares a warrant (a “share warrant”) stating that the
bearer of the warrant is entitled to the shares specified in it.
30
(2)
A share warrant issued under the company’s common seal or (in the case of a
company registered in Scotland) subscribed in accordance with the
Requirements of Writing (Scotland) Act 1995 (c. 7) entitles the bearer to the
shares specified in it and the shares may be transferred by delivery of the
warrant.
35
(3)
A company that issues a share warrant may, if so authorised by its articles,
provide (by coupons or otherwise) for the payment of the future dividends on
the shares included in the warrant.

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
371

790
Duty of company as to issue of certificates on surrender of share warrant
(1)
A company must, within two months of the surrender of a share warrant for
cancellation, complete and have ready for delivery the certificates of the shares
specified in the warrant.
(2)
Subsection (1) does not apply if the company’s articles provide otherwise.
5
(3)
If default is made in complying with subsection (1) an offence is committed by
every officer of the company who is in default.
(4)
A person guilty of an offence under subsection (3) 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
10
3 on the standard scale.
791
Offences in connection with share warrants (Scotland)
(1)
If in Scotland a person—
(a)
with intent to defraud, forges or alters, or offers, utters, disposes of, or
puts off, knowing the same to be forged or altered, any share warrant
15
or coupon, or any document purporting to be a share warrant or
coupon issued in pursuance of this Act, or
(b)
by means of any such forged or altered share warrant, coupon or
document—
(i)
demands or endeavours to obtain or receive any share or
20
interest in a company under this Act, or
(ii)
demands or endeavours to receive any dividend or money
payment in respect of any such share or interest,

knowing the warrant, coupon or document to be forged or altered,

he commits an offence.
25
(2)
If in Scotland a person without lawful authority or excuse (of which proof lies
on him)—
(a)
engraves or makes on any plate, wood, stone, or other material, any
share warrant or coupon purporting to be—
(i)
a share warrant or coupon issued or made by any particular
30
company in pursuance of this Act, or
(ii)
a blank share warrant or coupon so issued or made, or
(iii)
a part of such a share warrant or coupon, or
(b)
uses any such plate, wood, stone, or other material, for the making or
printing of any such share warrant or coupon, or of any such blank
35
share warrant or coupon or of any part of such a share warrant or
coupon, or
(c)
knowingly has in his custody or possession any such plate, wood,
stone, or other material,

he commits an offence.
40
(3)
A person guilty of an offence under subsection (1) is liable on summary
conviction to imprisonment for a term not exceeding six months or to a fine not
exceeding level 5 on the standard scale (or both).
(4)
A person guilty of an offence under subsection (2) is liable—
(a)
on conviction on indictment, to imprisonment for a term not exceeding
45
seven years or a fine (or both);

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 22 — Certification and transfer of securities
Chapter 2 — Evidencing and transfer of title to securities without written instrument
372

(b)
on summary conviction, to imprisonment for a term not exceeding six
months or a fine not exceeding the statutory maximum (or both).
Supplementary provisions
792
Issue of certificates etc: court order to make good default
(1)
If a company on which a notice has been served requiring it to make good any
5
default in complying with—
(a)
section 779(1) (duty of company as to issue of certificates etc on
allotment),
(b)
section 786(1) (duty of company as to issue of certificates etc on
transfer), or
10
(c)
section 790(1) (duty of company as to issue of certificates etc on
surrender of share warrant),

fails to make good the default within ten days after service of the notice, the
person entitled to have the certificates or the debentures delivered to him may
apply to the court.
15
(2)
The court may on such an application make an order directing the company
and any officer of it to make good the default within such time as may be
specified in the order.
(3)
The order may provide that all costs (in Scotland, expenses) of and incidental
to the application are to be borne by the company or by an officer of it
20
responsible for the default.
Chapter 2
Evidencing and transfer of title to securities without written instrument
Introductory
793
Scope of this Chapter
25
In this Chapter—
(a)
“securities” means shares, debentures, debenture stock, loan stock,
bonds, units of a collective investment scheme within the meaning of
the Financial Services and Markets Act 2000 (c. 8) and other securities
of any description;
30
(b)
references to title to securities include any legal or equitable interest in
securities;
(c)
references to a transfer of title include a transfer by way of security;
(d)
references to transfer without a written instrument include, in relation
to bearer securities, transfer without delivery.
35
794
Power to make regulations
(1)
The power to make regulations under this Chapter is exercisable by the
Treasury and the Secretary of State, either jointly or concurrently.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 22 — Certification and transfer of securities
Chapter 2 — Evidencing and transfer of title to securities without written instrument
373

(2)
References in this Chapter to the authority having power to make regulations
shall accordingly be read as references to both or either of them, as the case
may require.
(3)
Regulations under this Chapter are subject to affirmative resolution procedure.
Powers exercisable
5
795
Provision enabling procedures for evidencing and transferring title
(1)
Provision may be made by regulations for enabling title to securities to be
evidenced and transferred without a written instrument.
(2)
The regulations may make provision—
(a)
for procedures for recording and transferring title to securities, and
10
(b)
for the regulation of those procedures and the persons responsible for
or involved in their operation.
(3)
The regulations must contain such safeguards as appear to the authority
making the regulations appropriate for the protection of investors and for
ensuring that competition is not restricted, distorted or prevented.
15
(4)
The regulations may, for the purpose of enabling or facilitating the operation
of the procedures provided for by the regulations, make provision with respect
to the rights and obligations of persons in relation to securities dealt with
under the procedures.
(5)
The regulations may include provision for the purpose of giving effect to—
20
(a)
the transmission of title to securities by operation of law;
(b)
any restriction on the transfer of title to securities arising by virtue of
the provisions of any enactment or instrument, court order or
agreement;
(c)
any power conferred by any such provision on a person to deal with
25
securities on behalf of the person entitled.
(6)
The regulations may make provision with respect to the persons responsible
for the operation of the procedures provided for by the regulations—
(a)
as to the consequences of their insolvency or incapacity, or
(b)
as to the transfer from them to other persons of their functions in
30
relation to those procedures.
796
Provision requiring arrangements to be adopted
(1)
Regulations under this Chapter may make provision—
(a)
enabling the members of a company or of any designated class of
companies to adopt, by ordinary resolution, arrangements under
35
which title to securities is required to be evidenced and transferred
without a written instrument; or
(b)
requiring companies, or any designated class of companies, to adopt
such arrangements.
(2)
The regulations may make such provision—
40
(a)
in respect of all securities issued by a company, or
(b)
in respect of all securities of a specified description.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 22 — Certification and transfer of securities
Chapter 2 — Evidencing and transfer of title to securities without written instrument
374

(3)
The arrangements provided for by regulations making such provision as is
mentioned in subsection (1) must not be such that a person who, but for the
arrangements would be entitled—
(a)
to have his name entered in the company’s register of members, or
(b)
to give instructions in respect of any securities,
5

ceases to be so entitled.
(4)
The regulations may—
(a)
prohibit the issue of any certificate by the company in respect of the
issue or transfer of securities,
(b)
require the provision by the company to holders of securities of
10
statements (at specified intervals or on specified occasions) of the
securities held in their name, and
(c)
make provision as to the matters of which any such certificate or
statement is, or is not, evidence.
(5)
In this section—
15
(a)
references to a designated class of companies are to a class designated
in the regulations or by order under section 797; and
(b)
“specified” means specified in the regulations.
797
Provision requiring arrangements to be adopted: order-making powers
(1)
The authority having power to make regulations under this Chapter may by
20
order—
(a)
designate classes of companies for the purposes of section 796
(provision requiring arrangements to be adopted);
(b)
provide that, in relation to securities of a specified description—
(i)
in a designated class of companies, or
25
(ii)
in a specified company or class of companies,

specified provisions of regulations made under this Chapter by virtue
of that section either do not apply or apply subject to specified
modifications.
(2)
In subsection (1) “specified” means specified in the order.
30
(3)
An order under this section is subject to negative resolution procedure.
Supplementary
798
Provision that may be included in regulations
Regulations under this Chapter may—
(a)
modify or exclude any provision of any enactment or instrument, or
35
any rule of law;
(b)
apply, with such modifications as may be appropriate, the provisions
of any enactment or instrument (including provisions creating criminal
offences);
(c)
require the payment of fees, or enable persons to require the payment
40
of fees, of such amounts as may be specified in the regulations or
determined in accordance with them;