Company Law Reform Bill [HL] (439-443)

House of Commons

Session 2005 - 06
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Company Law Reform Bill [HL] (439-443)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 2 — Impediments to takeovers
439

(4)
An opting-in resolution passed before the time when voting shares of the
company are admitted to trading on a regulated market complies with the
requirement in subsection (1) if, instead of specifying a particular date, it
provides for the resolution to have effect from that time.
(5)
An opting-in resolution passed before the commencement of this section
5
complies with the requirement in subsection (1) if, instead of specifying a
particular date, it provides for the resolution to have effect from that
commencement.
(6)
The effective date of an opting-out resolution may not be earlier than the first
anniversary of the date on which a copy of the opting-in resolution was
10
forwarded to the registrar.
(7)
Where a company has passed an opting-in resolution, any alteration of its
articles of association that would prevent the second condition in section 933
from being met is of no effect until the effective date of an opting-out resolution
passed by the company.
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Consequences of opting in
935
Effect on contractual restrictions
(1)
The following provisions have effect where a takeover bid is made for an
opted-in company.
(2)
An agreement to which this section applies is invalid in so far as it places any
20
restriction—
(a)
on the transfer to the offeror, or at his direction to another person, of
shares in the company during the offer period;
(b)
on the transfer to any person of shares in the company at a time during
the offer period when the offeror holds shares amounting to not less
25
than 75% in value of all the voting shares in the company;
(c)
on rights to vote at a general meeting of the company that decides
whether to take any action which might result in the frustration of the
bid;
(d)
on rights to vote at a general meeting of the company that—
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(i)
is the first such meeting to be held after the end of the offer
period, and
(ii)
is held at a time when the offeror holds shares amounting to not
less than 75% in value of all the voting shares in the company.
(3)
This section applies to an agreement—
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(a)
entered into between a person holding shares in the company and
another such person on or after 21st April 2004, or
(b)
entered into at any time between such a person and the company,

and it applies to such an agreement even if the law applicable to the agreement
(apart from this section) is not the law of a part of the United Kingdom.
40
(4)
The reference in subsection (2)(c) to rights to vote at a general meeting of the
company that decides whether to take any action which might result in the
frustration of the bid includes a reference to rights to vote on a written
resolution concerned with that question.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 2 — Impediments to takeovers
440

(5)
For the purposes of subsection (2)(c), action which might result in the
frustration of a bid is any action of that kind specified in rules under section
910(1) giving effect to Article 9 of the Takeovers Directive.
(6)
If a person suffers loss as a result of any act or omission that would (but for this
section) be a breach of an agreement to which this section applies, he is entitled
5
to compensation, of such amount as the court considers just and equitable,
from any person who would (but for this section) be liable to him for
committing or inducing the breach.
(7)
In subsection (6) “the court” means the High Court or, in Scotland, the Court of
Session.
10
(8)
A reference in this section to voting shares in the company does not include—
(a)
debentures, or
(b)
shares that, under the company’s articles of association, do not
normally carry rights to vote at its general meetings (for example,
shares carrying rights to vote that, under those articles, arise only
15
where specified pecuniary advantages are not provided).
936
Power of offeror to require general meeting to be called
(1)
Where a takeover bid is made for an opted-in company, the offeror may by
making a request to the directors of the company require them to call a general
meeting of the company if, at the date at which the request is made, he holds
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shares amounting to not less than 75% in value of all the voting shares in the
company.
(2)
The reference in subsection (1) to voting shares in the company does not
include—
(a)
debentures, or
25
(b)
shares that, under the company’s articles of association, do not
normally carry rights to vote at its general meetings (for example,
shares carrying rights to vote that, under those articles, arise only
where specified pecuniary advantages are not provided).
(3)
Sections 310 to 312 (members’ power to require general meetings to be called)
30
apply as they would do if subsection (1) above were substituted for subsections
(1) to (3) of section 310, and with any other necessary modifications.
Supplementary
937
Communication of decisions
(1)
A company that has passed an opting-in resolution or an opting-out resolution
35
must notify—
(a)
the Panel on Takeovers and Mergers, and
(b)
where the company—
(i)
has voting shares admitted to trading on a regulated market in
an EEA State other than the United Kingdom, or
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(ii)
has requested such admission,

the authority designated by that state as the supervisory authority for
the purposes of Article 4.1 of the Takeovers Directive.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 2 — Impediments to takeovers
441

(2)
Notification must be given within 15 days after the resolution is passed and, if
any admission or request such as is mentioned in subsection (1)(b) occurs at a
later time, within 15 days after that time.
(3)
If a company fails to comply with this section, an offence is committed by—
(a)
the company, and
5
(b)
every officer of it 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
continued contravention, a daily default fine not exceeding one-tenth of level
3 on the standard scale.
10
938
Interpretation of Chapter
(1)
In this Chapter—
“company” means—
(a)
a company within the meaning of this Act, or
(b)
an unregistered company within the meaning of section 718 of
15
the Companies Act 1985 (c. 6);
“offeror” and “takeover bid” have the same meaning as in the Takeovers
Directive;
“offer period”, in relation to a takeover bid, means the time allowed for
acceptance of the bid by—
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(a)
rules under section 910(1) giving effect to Article 7(1) of the
Takeovers Directive, or
(b)
where the rules giving effect to that Article which apply to the
bid are those of an EEA State other than the United Kingdom,
those rules;
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“opted-in company” means a company in relation to which—
(a)
an opting-in resolution has effect, and
(b)
the conditions in section 933(2) and (4) continue to be met;
“opting-in resolution” has the meaning given by section 933(1);
“opting-out resolution” has the meaning given by section 933(5);
30
“the Takeovers Directive” means Directive 2004/25/EC of the European
Parliament and of the Council;
“voting rights” means rights to vote at general meetings of the company
in question, including rights that arise only in certain circumstances;
“voting shares” means shares carrying voting rights.
35
(2)
For the purposes of this Chapter—
(a)
securities of a company are treated as shares in the company if they are
convertible into or entitle the holder to subscribe for such shares;
(b)
debentures issued by a company are treated as shares in the company
if they carry voting rights.
40
939
Transitory provision
(1)
Where a takeover bid is made for an opted-in company, section 368 of the
Companies Act 1985 (extraordinary general meeting on members’ requisition)
and section 378 of that Act (extraordinary and special resolutions) have effect
as follows until their repeal by this Act.
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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 3 — “Squeeze-out” and “Sell-out”
442

(2)
Section 368 has effect as if a members’ requisition included a requisition of a
person who—
(a)
is the offeror in relation to the takeover bid, and
(b)
holds at the date of the deposit of the requisition shares amounting to
not less than 75% in value of all the voting shares in the company.
5
(3)
In relation to a general meeting of the company that—
(a)
is the first such meeting to be held after the end of the offer period, and
(b)
is held at a time when the offeror holds shares amounting to not less
than 75% in value of all the voting shares in the company,

section 378(2) (meaning of “special resolution”) has effect as if “14 days’ notice”
10
were substituted for “21 days’ notice”.
(4)
A reference in this section to voting shares in the company does not include—
(a)
debentures, or
(b)
shares that, under the company’s articles of association, do not
normally carry rights to vote at its general meetings (for example,
15
shares carrying rights to vote that, under those articles, arise only
where specified pecuniary advantages are not provided).
940
Power to extend to Isle of Man and Channel Islands
Her Majesty may by Order in Council direct that any of the provisions of this
Chapter extend, with such modifications as may be specified in the Order, to
20
the Isle of Man or any of the Channel Islands.
Chapter 3
“Squeeze-out” and “Sell-out”
Takeover offers
941
Meaning of “takeover offer”
25
(1)
For the purposes of this Chapter an offer to acquire shares in a company is a
“takeover offer” if the following two conditions are satisfied in relation to the
offer.
(2)
The first condition is that it is an offer to acquire—
(a)
all the shares in a company, or
30
(b)
where there is more than one class of shares in a company, all the shares
of one or more classes,

other than shares that at the date of the offer are already held by the offeror.

Section 942 contains provision supplementing this subsection.
(3)
The second condition is that the terms of the offer are the same—
35
(a)
in relation to all the shares to which the offer relates, or
(b)
where the shares to which the offer relates include shares of different
classes, in relation to all the shares of each class.

Section 943 contains provision treating this condition as satisfied in certain
circumstances.
40

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 3 — “Squeeze-out” and “Sell-out”
443

(4)
In subsections (1) to (3) “shares” means shares, other than relevant treasury
shares, that have been allotted on the date of the offer (but see subsection (5)).
(5)
A takeover offer may include among the shares to which it relates—
(a)
all or any shares that are allotted after the date of the offer but before a
specified date;
5
(b)
all or any relevant treasury shares that cease to be held as treasury
shares before a specified date;
(c)
all or any other relevant treasury shares.
(6)
In this section—
“relevant treasury shares” means shares that—
10
(a)
are held by the company as treasury shares on the date of the
offer, or
(b)
become shares held by the company as treasury shares after that
date but before a specified date;
“specified date” means a date specified in or determined in accordance
15
with the terms of the offer.
(7)
Where the terms of an offer make provision for their revision and for
acceptances on the previous terms to be treated as acceptances on the revised
terms, then, if the terms of the offer are revised in accordance with that
provision—
20
(a)
the revision is not to be regarded for the purposes of this Chapter as the
making of a fresh offer, and
(b)
references in this Chapter to the date of the offer are accordingly to be
read as references to the date of the original offer.
942
Shares already held by the offeror etc
25
(1)
The reference in section 941(2) to shares already held by the offeror includes a
reference to shares that he has contracted to acquire, whether unconditionally
or subject to conditions being met.

This is subject to subsection (2).
(2)
The reference in section 941(2) to shares already held by the offeror does not
30
include a reference to shares that are the subject of a contract—
(a)
intended to secure that the holder of the shares will accept the offer
when it is made, and
(b)
entered into—
(i)
by deed and for no consideration,
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(ii)
for consideration of negligible value, or
(iii)
for consideration consisting of a promise by the offeror to make
the offer.
(3)
In relation to Scotland, this section applies as if the words “by deed and” in
subsection (2)(b)(i) were omitted.
40
(4)
The condition in section 941(2) is treated as satisfied where—
(a)
the offer does not extend to shares that associates of the offeror hold or
have contracted to acquire (whether unconditionally or subject to
conditions being met), and
(b)
the condition would be satisfied if the offer did extend to those shares.
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(For further provision about such shares, see section 944(2)).