Company Law Reform Bill [HL] (39-45)

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL] (39-45)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 7 — Re-registration as a means of altering a company’s status
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(c)
that the requirements of section 92 are met as regards its net assets;
(d)
if section 93 applies (recent allotment of shares for non-cash
consideration), that the requirements of that section are met; and
(e)
that the company has not previously been re-registered as unlimited.
(3)
The company must make such changes—
5
(a)
in its name, and
(b)
in its articles,

as are necessary in connection with its becoming a public company.
(4)
If the company is unlimited it must also make such changes in its articles as are
necessary in connection with its becoming a company limited by shares.
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91
Requirements as to share capital
(1)
The following requirements must be met at the time the special resolution is
passed that the company should be re-registered as a public company—
(a)
the nominal value of the company’s allotted share capital must be not
less than the authorised minimum;
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(b)
each of the company’s allotted shares must be paid up at least as to one-
quarter of the nominal value of that share and the whole of any
premium on it;
(c)
if any shares in the company or any premium on them have been fully
or partly paid up by an undertaking given by any person that he or
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another should do work or perform services (whether for the company
or any other person), the undertaking must have been performed or
otherwise discharged;
(d)
if shares have been allotted as fully or partly paid up as to their nominal
value or any premium on them otherwise than in cash, and the
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consideration for the allotment consists of or includes an undertaking
to the company (other than one to which paragraph (c) applies), then
either—
(i)
the undertaking must have been performed or otherwise
discharged, or
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(ii)
there must be a contract between the company and some person
pursuant to which the undertaking is to be performed within
five years from the time the special resolution is passed.
(2)
For the purpose of determining whether the requirements in subsection (1)(b),
(c) and (d) are met, the following may be disregarded—
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(a)
shares allotted—
(i)
before 22nd June 1982 in the case of a company then registered
in Great Britain, or
(ii)
before 31st December 1984 in the case of a company then
registered in Northern Ireland;
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(b)
shares allotted in pursuance of an employees’ share scheme by reason
of which the company would, but for this subsection, be precluded
under subsection (1)(b) (but not otherwise) from being re-registered as
a public company.
(3)
No more than one-tenth of the nominal value of the company’s allotted share
45
capital is to be disregarded under subsection (2)(a).

For this purpose the allotted share capital is treated as not including shares
disregarded under subsection (2)(b).

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 7 — Re-registration as a means of altering a company’s status
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(4)
Shares disregarded under subsection (2) are treated as not forming part of the
allotted share capital for the purposes of subsection (1)(a).
(5)
A company must not be re-registered as a public company if it appears to the
registrar that—
(a)
the company has resolved to reduce its share capital,
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(b)
the reduction—
(i)
is supported by a solvency statement in accordance with section
135B of the Companies Act 1985 (c. 6),
(ii)
has been confirmed by an order of the court under section 137
of that Act, or
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(iii)
is made under section 640 of this Act (reduction in connection
with redenomination of share capital), and
(c)
the effect of the reduction is, or will be, that the nominal value of the
company’s allotted share capital is below the authorised minimum.
(6)
In this section “the authorised minimum” has the meaning given by section
15
776.
92
Requirements as to net assets
(1)
A company applying to re-register as a public company must obtain—
(a)
a balance sheet prepared as at a date not more than seven months
before the date on which the application is delivered to the registrar,
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(b)
an unqualified report by the company’s auditor on that balance sheet,
and
(c)
a written statement by the company’s auditor that in his opinion at the
balance sheet date the amount of the company’s net assets was not less
than the aggregate of its called-up share capital and undistributable
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reserves.
(2)
Between the balance sheet date and the date on which the application for re-
registration is delivered to the registrar, there must be no change in the
company’s financial position that results in the amount of its net assets
becoming less than the aggregate of its called-up share capital and
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undistributable reserves.
(3)
In subsection (1)(b) an “unqualified report” means—
(a)
if the balance sheet was prepared for a financial year of the company, a
report stating without material qualification the auditor’s opinion that
the balance sheet has been properly prepared in accordance with the
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requirements of this Act;
(b)
if the balance sheet was not prepared for a financial year of the
company, a report stating without material qualification the auditor’s
opinion that the balance sheet has been properly prepared in
accordance with the provisions of this Act which would have applied
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if it had been prepared for a financial year of the company.
(4)
For the purposes of an auditor’s report on a balance sheet that was not
prepared for a financial year of the company, the provisions of this Act apply
with such modifications as are necessary by reason of that fact.
(5)
For the purposes of subsection (3) a qualification is material unless the auditor
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states in his report that the matter giving rise to the qualification is not material
for the purpose of determining (by reference to the company’s balance sheet)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
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whether at the balance sheet date the amount of the company’s net assets was
not less than the aggregate of its called-up share capital and undistributable
reserves.
(6)
In this Part “net assets” and “undistributable reserves” have the meanings
given by section 264(2) and (3) of the Companies Act 1985 (c. 6).
5
93
Recent allotment of shares for non-cash consideration
(1)
This section applies where—
(a)
shares are allotted by the company in the period between the date as at
which the balance sheet required by section 92 is prepared and the
passing of the resolution that the company should re-register as a
10
public company, and
(b)
the shares are allotted as fully or partly paid up as to their nominal
value or any premium on them otherwise than in cash.
(2)
The registrar shall not entertain an application by the company for re-
registration as a public company unless—
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(a)
the consideration for the allotment has been valued in accordance with
section 108 of the Companies Act 1985 and a report with respect to the
value of the consideration has been made to the company (in
accordance with that section) during the six months immediately
preceding the allotment, or
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(b)
the allotment is in connection with—
(i)
a share exchange (see subsections (3) to (5) below), or
(ii)
a proposed merger with another company (see subsection (6)
below).
(3)
An allotment is in connection with a share exchange if—
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(a)
the shares are allotted in connection with an arrangement under which
the whole or part of the consideration for the shares allotted is provided
by—
(i)
the transfer to the company allotting the shares of shares (or
shares of a particular class) in another company, or
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(ii)
the cancellation of shares (or shares of a particular class) in
another company; and
(b)
the allotment is open to all the holders of the shares of the other
company in question (or, where the arrangement applies only to shares
of a particular class, to all the holders of the company’s shares of that
35
class) to take part in the arrangement in connection with which the
shares are allotted.
(4)
In determining whether a person is a holder of shares for the purposes of
subsection (3), there shall be disregarded—
(a)
shares held by, or by a nominee of, the company allotting the shares;
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(b)
shares held by, or by a nominee of—
(i)
the holding company of the company allotting the shares,
(ii)
a subsidiary of the company allotting the shares, or
(iii)
a subsidiary of the holding company of the company allotting
the shares.
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(5)
It is immaterial, for the purposes of deciding whether an allotment is in
connection with a share exchange, whether or not the arrangement in

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
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connection with which the shares are allotted involves the issue to the
company allotting the shares of shares (or shares of a particular class) in the
other company.
(6)
There is a proposed merger with another company if one of the companies
concerned proposes to acquire all the assets and liabilities of the other in
5
exchange for the issue of its shares or other securities to shareholders of the
other (whether or not accompanied by a cash payment).

“Another company” includes any body corporate.
(7)
For the purposes of this section—
(a)
the consideration for an allotment does not include any amount
10
standing to the credit of any of the company’s reserve accounts, or of its
profit and loss account, that has been applied in paying up (to any
extent) any of the shares allotted or any premium on those shares; and
(b)
“arrangement” means any agreement, scheme or arrangement,
including an arrangement sanctioned in accordance with—
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(i)
section 425 of the Companies Act 1985 (c. 6) (company
compromise with creditors and members), or
(ii)
section 110 of the Insolvency Act 1986 (c. 45) or Article 96 of the
Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I.
19)) (liquidator in winding up accepting shares as consideration
20
for sale of company’s property).
94
Application and accompanying documents
(1)
An application for re-registration as a public company must contain—
(a)
a statement of the company’s proposed name on re-registration; and
(b)
a statement of the company’s proposed secretary (see section 95).
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(2)
The application must be accompanied by—
(a)
a copy of the special resolution that the company should re-register as
a public company (unless a copy has already been forwarded to the
registrar under Chapter 3 of Part 3);
(b)
a copy of the company’s articles as proposed to be amended;
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(c)
a copy of the balance sheet and other documents referred to in section
92(1); and
(d)
if section 93 applies (recent allotment of shares for non-cash
consideration), a copy of the valuation report (if any) under subsection
(2)(a) of that section.
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(3)
The statement of compliance required to be delivered together with the
application is a statement that the requirements of this Part as to re-registration
as a public company have been complied with.
(4)
The registrar may accept the statement of compliance as sufficient evidence
that the company is entitled to be re-registered as a public company.
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95
Statement of proposed secretary
(1)
The statement of the company’s proposed secretary must contain the required
particulars of the person who is or the persons who are to be (or continue to be)
the secretary or joint secretaries of the company.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
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(2)
The required particulars are the particulars that will be required to be stated in
the company’s register of secretaries (see sections 277 to 279).
(3)
The statement must also contain a consent by the person named as secretary,
or each of the persons named as joint secretaries, to act in the relevant capacity.

If all the partners in a firm are to be joint secretaries, consent may be given by
5
one partner on behalf of all of them.
96
Issue of certificate of incorporation on re-registration
(1)
If on an application for re-registration as a public company the registrar is
satisfied that the company is entitled to be so re-registered, the company shall
be re-registered accordingly.
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(2)
The registrar must issue a certificate of incorporation altered to meet the
circumstances of the case.
(3)
The certificate must state that it is issued on re-registration and the date on
which it is issued.
(4)
On the issue of the certificate—
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(a)
the company by virtue of the issue of the certificate becomes a public
company,
(b)
the changes in the company’s name and articles take effect, and
(c)
the person or persons named in the statement under section 95
(statement of proposed secretary) as secretary or joint secretary of the
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company are deemed to have been appointed to that office.
(5)
The certificate is conclusive evidence that the requirements of this Act as to re-
registration have been complied with.
Public company becoming private
97
Re-registration of public company as private limited company
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(1)
A public company may be re-registered as a private limited company if—
(a)
a special resolution that it should be so re-registered is passed,
(b)
the conditions specified below are met, and
(c)
an application for re-registration is delivered to the registrar in
accordance with section 100, together with—
30
(i)
the other documents required by that section, and
(ii)
a statement of compliance.
(2)
The conditions are that—
(a)
where no application under section 98 for cancellation of the resolution
has been made—
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(i)
having regard to the number of members who consented to or
voted in favour of the resolution, no such application may be
made, or
(ii)
the period within which such an application could be made has
expired, or
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(b)
where such an application has been made—
(i)
the application has been withdrawn, or

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 7 — Re-registration as a means of altering a company’s status
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(ii)
an order has been made confirming the resolution and a copy of
that order has been delivered to the registrar.
(3)
The company must make such changes—
(a)
in its name, and
(b)
in its articles,
5

as are necessary in connection with its becoming a private company limited by
shares or, as the case may be, by guarantee.
98
Application to court to cancel resolution
(1)
Where a special resolution by a public company to be re-registered as a private
limited company has been passed, an application to the court for the
10
cancellation of the resolution may be made—
(a)
by the holders of not less in the aggregate than 5% in nominal value of
the company’s issued share capital or any class of the company’s issued
share capital (disregarding any shares held by the company as treasury
shares);
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(b)
if the company is not limited by shares, by not less than 5% of its
members; or
(c)
by not less than 50 of the company’s members;

but not by a person who has consented to or voted in favour of the resolution.
(2)
The application must be made within 28 days after the passing of the resolution
20
and may be made on behalf of the persons entitled to make it by such one or
more of their number as they may appoint for the purpose.
(3)
On the hearing of the application the court shall make an order either
cancelling or confirming the resolution.
(4)
The court may—
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(a)
make that order on such terms and conditions as it thinks fit,
(b)
if it thinks fit adjourn the proceedings in order that an arrangement
may be made to the satisfaction of the court for the purchase of the
interests of dissentient members, and
(c)
give such directions, and make such orders, as it thinks expedient for
30
facilitating or carrying into effect any such arrangement.
(5)
The court’s order may, if the court thinks fit—
(a)
provide for the purchase by the company of the shares of any of its
members and for the reduction accordingly of the company’s capital;
and
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(b)
make such alteration in the company’s articles as may be required in
consequence of that provision.
(6)
The court’s order may, if the court thinks fit, require the company not to make
any, or any specified, amendments to its articles without the leave of the court.
99
Notice to registrar of court application or order
40
(1)
On making an application under section 98 (application to court to cancel
resolution) the applicants, or the person making the application on their behalf,
must immediately give notice to the registrar.

This is without prejudice to any provision of rules of court as to service of
notice of the application.
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 7 — Re-registration as a means of altering a company’s status
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(2)
On being served with notice of any such application, the company must
immediately give notice to the registrar.
(3)
Within 15 days of the making of the court’s order on the application, or such
longer period as the court may at any time direct, the company must deliver to
the registrar a copy of the order.
5
(4)
If a company fails to comply with subsection (2) or (3) 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
10
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.
100
Application and accompanying documents
(1)
An application for re-registration as a private limited company must contain a
15
statement of the company’s proposed name on re-registration.
(2)
The application must be accompanied by—
(a)
a copy of the resolution that the company should re-register as a private
limited company (unless a copy has already been forwarded to the
registrar under Chapter 3 of Part 3); and
20
(b)
a copy of the company’s articles as proposed to be amended.
(3)
The statement of compliance required to be delivered together with the
application is a statement that the requirements of this Part as to re-registration
as a private limited company have been complied with.
(4)
The registrar may accept the statement of compliance as sufficient evidence
25
that the company is entitled to be re-registered as a private limited company.
101
Issue of certificate of incorporation on re-registration
(1)
If on an application for re-registration as a private limited company the
registrar is satisfied that the company is entitled to be so re-registered, the
company shall be re-registered accordingly.
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(2)
The registrar must issue a certificate of incorporation altered to meet the
circumstances of the case.
(3)
The certificate must state that it is issued on re-registration and the date on
which it is issued.
(4)
On the issue of the certificate—
35
(a)
the company by virtue of the issue of the certificate becomes a private
limited company, and
(b)
the changes in the company’s name and articles take effect.
(5)
The certificate is conclusive evidence that the requirements of this Act as to re-
registration have been complied with.
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