Company Law Reform Bill [HL] (421-424)

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL] (421-424)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 27 — Arrangements and reconstructions
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(a)
between a company and its creditors, or any class of them, or
(b)
between the company and its members, or any class of them.
(2)
The provisions of sections 900 to 905 (court sanction for compromise or
arrangement) apply in every case.
(3)
The provisions of section 906 (powers of court to facilitate reconstruction or
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amalgamation) supplement those provisions.
(4)
The provisions mentioned above have effect subject to regulations under
section 908 (mergers and divisions of public companies) in the circumstances
specified in that section.
(5)
In this Part—
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“arrangement” includes a reorganisation of the company’s share capital
by the consolidation of shares of different classes or by the division of
shares into shares of different classes, or by both of those methods; and
“company”—
(a)
in sections 906, 907 and 908 means a company within the
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meaning of this Act, and
(b)
elsewhere in this Part means any company liable to be wound
up under the Insolvency Act 1986 (c. 45) or the Insolvency
(Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).
Court sanction for compromise or arrangement
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900
Court sanction for compromise or arrangement
Where a compromise or arrangement is proposed between a company and its
creditors, or any class of them, or between the company and its members, or
any class of them—
(a)
the company,
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(b)
any creditor or member of the company, or
(c)
if the company is being wound up or an administration order is in force
in relation it, the liquidator or administrator,
may apply to the court to sanction the compromise or arrangement.
901
Meeting of creditors or members
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On receiving an application under section 900 (application to sanction
compromise or arrangement with creditors or members) the court may order a
meeting of the creditors or class of creditors, or of the members of the company
or class of members (as the case may be), to be summoned in such manner as
the court directs.
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902
Statement to be circulated or made available
(1)
Where a meeting is summoned under section 901—
(a)
every notice summoning the meeting that is sent to a creditor or
member must be accompanied by a statement complying with this
section, and
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(b)
every notice summoning the meeting that is given by advertisement
must either—

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 27 — Arrangements and reconstructions
422

(i)
include such a statement, or
(ii)
state where and how creditors or members entitled to attend the
meeting may obtain copies of such a statement
(2)
The statement must—
(a)
explain the effect of the compromise or arrangement, and
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(b)
in particular, state—
(i)
any material interests of the directors of the company (whether
as directors or as members or as creditors of the company or
otherwise), and
(ii)
the effect on those interests of the compromise or arrangement,
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in so far as it is different from the effect on the like interests of
other persons.
(3)
Where the compromise or arrangement affects the rights of debenture holders
of the company, the statement must give the like explanation as respects the
trustees of any deed for securing the issue of the debentures as it is required to
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give as respects the company’s directors.
(4)
Where a notice given by advertisement states that copies of an explanatory
statement can be obtained by creditors or members entitled to attend the
meeting, every such creditor or member is entitled, on making application in
the manner indicated by the notice, to be provided by the company with a copy
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of the statement free of charge.
(5)
If a company makes default in complying with any requirement of this section,
an offence is committed by—
(a)
the company, and
(b)
every officer of the company who is in default.
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This is subject to subsection (7) below.
(6)
For this purpose the following are treated as officers of the company—
(a)
a liquidator or administrator of the company, and
(b)
a trustee of a deed for securing the issue of debentures of the company.
(7)
A person is not guilty of an offence under this section if he shows that the
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default was due to the refusal of a director or trustee for debenture holders to
supply the necessary particulars of his interests.
(8)
A person guilty of an offence under this section is liable—
(a)
on conviction on indictment, to a fine;
(b)
on summary conviction, to a fine not exceeding the statutory
35
maximum.
903
Duty of directors and trustees to provide information
(1)
It is the duty of—
(a)
any director of the company, and
(b)
any trustee for its debenture holders,
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to give notice to the company of such matters relating to himself as may be
necessary for purposes of section 902 (explanatory statement to be circulated
or made available).
(2)
Any person who makes default in complying with this section commits an
offence.
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 27 — Arrangements and reconstructions
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(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.
904
Court order sanctioning compromise or arrangement
(1)
The court may sanction a compromise or arrangement only if, at a meeting
summoned under section 901, a majority in number representing 75% in value
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of the creditors or class of creditors or members or class of members (as the case
may be), present and voting either in person or by proxy at the meeting, agree
to the compromise or arrangement.
(2)
A compromise or agreement sanctioned by the court is binding on—
(a)
all creditors or the class of creditors or on the members or class of
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members (as the case may be), and
(b)
the company or, in the case of a company in the course of being wound
up, the liquidator and contributories of the company.
(3)
The court’s order has no effect until a copy of it has been delivered to the
registrar of companies for registration.
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905
Copy of court order to be annexed to copies of company’s constitution
(1)
A copy of every order of the court under section 904 (order sanctioning
compromise or arrangement with creditors or members) must be annexed to—
(a)
every copy of the company’s articles issued after the order has been
made or,
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(b)
in the case of a company not having articles of association, of every
copy so issued of the instrument constituting the company or defining
its constitution.
(2)
If a company makes default in complying with this section an offence is
committed by—
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(a)
the company, and
(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.
Reconstructions and amalgamations
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906
Powers of court to facilitate reconstruction or amalgamation
(1)
This section applies where—
(a)
application is made to the court under section 900 to sanction a
compromise or arrangement proposed between a company and any
such persons as are mentioned in that section, and
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(b)
it is shown that—
(i)
the compromise or arrangement is proposed for the purposes
of, or in connection with, a scheme for the reconstruction of any
company or companies, or the amalgamation of any two or
more companies, and
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(ii)
under the scheme the whole or any part of the undertaking or
the property of any company concerned in the scheme (“a

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
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transferor company”) is to be transferred to another company
(“the transferee company”).
(2)
The court may, either by the order sanctioning the compromise or arrangement
or by any subsequent order, make provision for all or any of the following
matters—
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(a)
the transfer to the transferee company of the whole or any part of the
undertaking and of the property or liabilities of any transferor
company;
(b)
the allotting or appropriation by the transferee company of any shares,
debentures, policies or other like interests in that company which
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under the compromise or arrangement are to be allotted or
appropriated by that company to or for any person;
(c)
the continuation by or against the transferee company of any legal
proceedings pending by or against any transferor company;
(d)
the dissolution, without winding up, of any transferor company;
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(e)
the provision to be made for any persons who, within such time and in
such manner as the courts directs, dissent from the compromise or
arrangement;
(f)
such incidental, consequential and supplemental matters as are
necessary to secure that the reconstruction or amalgamation is fully
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and effectively carried out.
(3)
If an order under this section provides for the transfer of property or
liabilities—
(a)
the property is by virtue of the order transferred to, and vests in, the
transferee company, and
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(b)
the liabilities are, by virtue of the order, transferred to and become
liabilities of that company.
(4)
The property (if the order so directs) vests freed from any charge that is by
virtue of the compromise or arrangement to cease to have effect.
(5)
In this section—
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“property” includes property, rights and powers of every description; and
“liabilities” includes duties.
907
Copy of order to be delivered to the registrar
(1)
Where an order is made under section 906 (powers of court to facilitate
reconstruction or amalgamation), every company in relation to which the
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order is made must cause a copy of the order to be delivered to the registrar of
companies for registration within seven days after its making.
(2)
If default is made in complying with this section an offence is committed by—
(a)
the company, and
(b)
every officer of the company who is in default.
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(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
3 on the standard scale.