Company Law Reform Bill [HL] (444-448)

House of Commons

Session 2005 - 06
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Company Law Reform Bill [HL] (444-448)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 3 — “Squeeze-out” and “Sell-out”
444

943
Cases where offer treated as being on same terms
(1)
The condition in section 941(3) (terms of offer to be the same for all shares or
all shares of particular classes) is treated as satisfied where subsection (2) or (3)
below applies.
(2)
This subsection applies where—
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(a)
shares carry an entitlement to a particular dividend which other shares
of the same class, by reason of being allotted later, do not carry,
(b)
there is a difference in the value of consideration offered for the shares
allotted earlier as against that offered for those allotted later,
(c)
that difference merely reflects the difference in entitlement to the
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dividend, and
(d)
the condition in section 941(3) would be satisfied but for that difference.
(3)
This subsection applies where—
(a)
the law of a country or territory outside the United Kingdom—
(i)
precludes an offer of consideration in the form, or any of the
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forms, specified in the terms of the offer (“the specified form”),
or
(ii)
precludes it except after compliance by the offeror with
conditions with which he is unable to comply or which he
regards as unduly onerous,
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(b)
the persons to whom an offer of consideration in the specified form is
precluded are able to receive consideration in another form that is of
substantially equivalent value, and
(c)
the condition in section 941(3) would be satisfied but for the fact that an
offer of consideration in the specified form to those persons is
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precluded.
944
Shares to which an offer relates
(1)
Where a takeover offer is made and, during the period beginning with the date
of the offer and ending when the offer can no longer be accepted, the offeror—
(a)
acquires or unconditionally contracts to acquire any of the shares to
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which the offer relates, but
(b)
does not do so by virtue of acceptances of the offer,

those shares are treated for the purposes of this Chapter as excluded from those
to which the offer relates.
(2)
For the purposes of this Chapter shares that an associate of the offeror holds or
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has contracted to acquire, whether at the date of the offer or subsequently, are
not treated as shares to which the offer relates, even if the offer extends to such
shares.

In this subsection “contracted” means contracted unconditionally or subject to
conditions being met.
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(3)
This section is subject to section 946(8) and (9).
945
Effect of impossibility etc of communicating or accepting offer
(1)
Where there are holders of shares in a company to whom an offer to acquire
shares in the company is not communicated, that does not prevent the offer
from being a takeover offer for the purposes of this Chapter if—
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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”
445

(a)
those shareholders have no registered address in the United Kingdom,
(b)
the offer was not communicated to those shareholders in order not to
contravene the law of a country or territory outside the United
Kingdom, and
(c)
either—
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(i)
the offer is published in the Gazette, or
(ii)
the offer can be inspected, or a copy of it obtained, at a place in
an EEA State or on a website, and a notice is published in the
Gazette specifying the address of that place or website.
(2)
Where an offer is made to acquire shares in a company and there are persons
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for whom, by reason of the law of a country or territory outside the United
Kingdom, it is impossible to accept the offer, or more difficult to do so, that
does not prevent the offer from being a takeover offer for the purposes of this
Chapter.
(3)
It is not to be inferred—
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(a)
that an offer which is not communicated to every holder of shares in the
company cannot be a takeover offer for the purposes of this Chapter
unless the requirements of paragraphs (a) to (c) of subsection (1) are
met, or
(b)
that an offer which is impossible, or more difficult, for certain persons
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to accept cannot be a takeover offer for those purposes unless the
reason for the impossibility or difficulty is the one mentioned in
subsection (2).
“Squeeze-out”
946
Right of offeror to buy out minority shareholder
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(1)
Subsection (2) applies in a case where a takeover offer does not relate to shares
of different classes.
(2)
If the offeror has, by virtue of acceptances of the offer, acquired or
unconditionally contracted to acquire—
(a)
not less than 90% in value of the shares to which the offer relates, and
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(b)
in a case where the shares to which the offer relates are voting shares,
not less than 90% of the voting rights carried by those shares,

he may give notice to the holder of any shares to which the offer relates which
the offeror has not acquired or unconditionally contracted to acquire that he
desires to acquire those shares.
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(3)
Subsection (4) applies in a case where a takeover offer relates to shares of
different classes.
(4)
If the offeror has, by virtue of acceptances of the offer, acquired or
unconditionally contracted to acquire—
(a)
not less than 90% in value of the shares of any class to which the offer
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relates, and
(b)
in a case where the shares of that class are voting shares, not less than
90% of the voting rights carried by those shares,

he may give notice to the holder of any shares of that class to which the offer
relates which the offeror has not acquired or unconditionally contracted to
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acquire that he desires to acquire those shares.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 3 — “Squeeze-out” and “Sell-out”
446

(5)
In the case of a takeover offer which includes among the shares to which it
relates—
(a)
shares that are allotted after the date of the offer, or
(b)
relevant treasury shares (within the meaning of section 941) that cease
to be held as treasury shares after the date of the offer,
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the offeror’s entitlement to give a notice under subsection (2) or (4) on any
particular date shall be determined as if the shares to which the offer relates did
not include any allotted, or ceasing to be held as treasury shares, on or after that
date.
(6)
Subsection (7) applies where—
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(a)
the requirements for the giving of a notice under subsection (2) or (4)
are satisfied, and
(b)
there are shares in the company which the offeror, or an associate of his,
has contracted to acquire subject to conditions being met, and in
relation to which the contract has not become unconditional.
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(7)
The offeror’s entitlement to give a notice under subsection (2) or (4) shall be
determined as if—
(a)
the shares to which the offer relates included shares falling within
paragraph (b) of subsection (6), and
(b)
in relation to shares falling within that paragraph, the words “by virtue
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of acceptances of the offer” in subsection (2) or (4) were omitted.
(8)
Where a takeover offer is made and, during the period beginning with the date
of the offer and ending when the offer can no longer be accepted, the offeror—
(a)
acquires or unconditionally contracts to acquire any of the shares to
which the offer relates, but
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(b)
does not do so by virtue of acceptances of the offer,

then, if subsection (10) applies, the offeror is treated for the purposes of this
section as having acquired or contracted to acquire those shares by virtue of
acceptances of the offer.
(9)
Where a takeover offer is made and, during the period beginning with the date
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of the offer and ending when the offer can no longer be accepted, an associate
of the offeror acquires or unconditionally contracts to acquire any of the shares
to which the offer relates, then, if subsection (10) applies, those shares are
treated for the purposes of this section as shares to which the offer relates.
(10)
This subsection applies if—
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(a)
at the time the shares are acquired or contracted to be acquired as
mentioned in subsection (8) or (9) (as the case may be), the value of the
consideration for which they are acquired or contracted to be acquired
(“the acquisition consideration”) does not exceed the value of the
consideration specified in the terms of the offer, or
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(b)
those terms are subsequently revised so that when the revision is
announced the value of the acquisition consideration, at the time
mentioned in paragraph (a), no longer exceeds the value of the
consideration specified in those terms.
947
Further provision about notices given under section 946
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(1)
A notice under section 946 must be given in the prescribed manner.
(2)
No notice may be given under section 946(2) or (4) after the end of—

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 3 — “Squeeze-out” and “Sell-out”
447

(a)
the period of three months beginning with the day after the last day on
which the offer can be accepted, or
(b)
the period of six months beginning with the date of the offer, where that
period ends earlier and the offer is one to which subsection (3) below
applies.
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(3)
This subsection applies to an offer if the time allowed for acceptance of the offer
is not governed by rules under section 910(1) that give effect to Article 7 of the
Takeovers Directive.

In this subsection “the Takeovers Directive” has the same meaning as in section
910.
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(4)
At the time when the offeror first gives a notice under section 946 in relation to
an offer, he must send to the company—
(a)
a copy of the notice, and
(b)
a statutory declaration by him in the prescribed form, stating that the
conditions for the giving of the notice are satisfied.
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(5)
Where the offeror is a company (whether or not a company within the meaning
of this Act) the statutory declaration must be signed by a director.
(6)
A person commits an offence if—
(a)
he fails to send a copy of a notice or a statutory declaration as required
by subsection (4), or
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(b)
he makes such a declaration for the purposes of that subsection
knowing it to be false or without having reasonable grounds for
believing it to be true.
(7)
It is a defence for a person charged with an offence for failing to send a copy of
a notice as required by subsection (4) to prove that he took reasonable steps for
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securing compliance with that subsection.
(8)
A person guilty of an offence under this section is liable—
(a)
on conviction on indictment, to imprisonment for a term not exceeding
two years or a fine (or both);
(b)
on summary conviction—
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(i)
in England and Wales, to imprisonment for a term not
exceeding twelve months or to a fine not exceeding the
statutory maximum (or both) and, for continued contravention,
a daily default fine not exceeding one-fiftieth of the statutory
maximum;
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(ii)
in Scotland or Northern Ireland, to imprisonment for a term not
exceeding six months, or to a fine not exceeding the statutory
maximum (or both) and, for continued contravention, a daily
default fine not exceeding one-fiftieth of the statutory
maximum.
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948
Effect of notice under section 946
(1)
Subject to section 953, this section applies where the offeror gives a shareholder
a notice under section 946.
(2)
The offeror is entitled and bound to acquire the shares to which the notice
relates on the terms of the offer.
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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”
448

(3)
Where the terms of an offer are such as to give the shareholder a choice of
consideration, the notice must give particulars of the choice and state—
(a)
that the shareholder may, within six weeks from the date of the notice,
indicate his choice by a written communication sent to the offeror at an
address specified in the notice, and
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(b)
which consideration specified in the offer will apply if he does not
indicate a choice.

The reference in subsection (2) to the terms of the offer is to be read
accordingly.
(4)
Subsection (3) applies whether or not any time-limit or other conditions
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applicable to the choice under the terms of the offer can still be complied with.
(5)
If the consideration offered to or (as the case may be) chosen by the
shareholder—
(a)
is not cash and the offeror is no longer able to provide it, or
(b)
was to have been provided by a third party who is no longer bound or
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able to provide it,

the consideration is to be taken to consist of an amount of cash, payable by the
offeror, which at the date of the notice is equivalent to the consideration offered
or (as the case may be) chosen.
(6)
At the end of six weeks from the date of the notice the offeror must
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immediately—
(a)
send a copy of the notice to the company, and
(b)
pay or transfer to the company the consideration for the shares to which
the notice relates.

Where the consideration consists of shares or securities to be allotted by the
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offeror, the reference in paragraph (b) to the transfer of the consideration is to
be read as a reference to the allotment of the shares or securities to the
company.
(7)
If the shares to which the notice relates are registered, the copy of the notice
sent to the company under subsection (6)(a) must be accompanied by an
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instrument of transfer executed on behalf of the holder of the shares by a
person appointed by the offeror.

On receipt of that instrument the company must register the offeror as the
holder of those shares.
(8)
If the shares to which the notice relates are transferable by the delivery of
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warrants or other instruments, the copy of the notice sent to the company
under subsection (6)(a) must be accompanied by a statement to that effect.

On receipt of that statement the company must issue the offeror with warrants
or other instruments in respect of the shares, and those already in issue in
receipt of the shares become void.
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(9)
The company must hold any money or other consideration received by it
under subsection (6)(b) on trust for the person who, before the offeror acquired
them, was entitled to the shares in respect of which the money or other
consideration was received.

Section 949 contains further provision about how the company should deal
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with such money or other consideration.