Company Law Reform Bill [HL] (449-455)

House of Commons

Session 2005 - 06
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Company Law Reform Bill [HL] (449-455)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 3 — “Squeeze-out” and “Sell-out”
449

949
Further provision about consideration held on trust under section 948(9)
(1)
This section applies where an offeror pays or transfers consideration to the
company under section 948(6).
(2)
The company must pay into a separate bank account that complies with
subsection (3)—
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(a)
any money it receives under paragraph (b) of section 948(6), and
(b)
any dividend or other sum accruing from any other consideration it
receives under that paragraph.
(3)
A bank account complies with this subsection if the balance on the account—
(a)
bears interest at an appropriate rate, and
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(b)
can be withdrawn by such notice (if any) as is appropriate.
(4)
If—
(a)
the person entitled to the consideration held on trust by virtue of
section 948(9) cannot be found, and
(b)
subsection (5) applies,
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the consideration (together with any interest, dividend or other benefit that has
accrued from it) must be paid into court.
(5)
This subsection applies where—
(a)
reasonable enquiries have been made at reasonable intervals to find the
person, and
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(b)
twelve years have elapsed since the consideration was received, or the
company is wound up.
(6)
In relation to a company registered in Scotland, subsections (7) and (8) apply
instead of subsection (4).
(7)
If the person entitled to the consideration held on trust by virtue of section
25
948(9) cannot be found and subsection (5) applies—
(a)
the trust terminates,
(b)
the company or (if the company is wound up) the liquidator must sell
any consideration other than cash and any benefit other than cash that
has accrued from the consideration, and
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(c)
a sum representing—
(i)
the consideration so far as it is cash,
(ii)
the proceeds of any sale under paragraph (b), and
(iii)
any interest, dividend or other benefit that has accrued from the
consideration,
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must be deposited in the name of the Accountant of Court in a separate
bank account complying with subsection (3) and the receipt for the
deposit must be transmitted to the Accountant of Court.
(8)
Section 58 of the Bankruptcy (Scotland) Act 1985 (c. 66) (so far as consistent
with this Act) applies (with any necessary modifications) to sums deposited
40
under subsection (7) as it applies to sums deposited under section 57(1)(a) of
that Act.
(9)
The expenses of any such enquiries as are mentioned in subsection (5) may be
paid out of the money or other property held on trust for the person to whom
the enquiry relates.
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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”
450

“Sell-out”
950
Right of minority shareholder to be bought out by offeror
(1)
Subsections (2) and (3) apply in a case where a takeover offer relates to all the
shares in a company.

For this purpose a takeover offer relates to all the shares in a company if it is an
5
offer to acquire all the shares in the company within the meaning of section 941.
(2)
The holder of any voting shares to which the offer relates who has not accepted
the offer may require the offeror to acquire those shares if, at any time before
the end of the period within which the offer can be accepted—
(a)
the offeror has by virtue of acceptances of the offer acquired or
10
unconditionally contracted to acquire some (but not all) of the shares to
which the offer relates, and
(b)
those shares, with or without any other shares in the company which
he has acquired or contracted to acquire (whether unconditionally or
subject to conditions being met)—
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(i)
amount to not less than 90% in value of all the voting shares in
the company (or would do so but for section 957(1)), and
(ii)
carry not less than 90% of the voting rights in the company (or
would do so but for section 957(1)).
(3)
The holder of any non-voting shares to which the offer relates who has not
20
accepted the offer may require the offeror to acquire those shares if, at any time
before the end of the period within which the offer can be accepted—
(a)
the offeror has by virtue of acceptances of the offer acquired or
unconditionally contracted to acquire some (but not all) of the shares to
which the offer relates, and
25
(b)
those shares, with or without any other shares in the company which
he has acquired or contracted to acquire (whether unconditionally or
subject to conditions being met), amount to not less than 90% in value
of all the shares in the company (or would do so but for section 957(1)).
(4)
If a takeover offer relates to shares of one or more classes and at any time before
30
the end of the period within which the offer can be accepted—
(a)
the offeror has by virtue of acceptances of the offer acquired or
unconditionally contracted to acquire some (but not all) of the shares of
any class to which the offer relates, and
(b)
those shares, with or without any other shares of that class which he has
35
acquired or contracted to acquire (whether unconditionally or subject
to conditions being met)—
(i)
amount to not less than 90% in value of all the shares of that
class, and
(ii)
in a case where the shares of that class are voting shares, carry
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not less than 90% of the voting rights carried by the shares of
that class,

the holder of any shares of that class to which the offer relates who has not
accepted the offer may require the offeror to acquire those shares.
(5)
For the purposes of subsections (2) to (4), in calculating 90% of the value of any
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shares, shares held by the company as treasury shares are to be treated as
having been acquired by the offeror.
(6)
Subsection (7) applies where—

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 3 — “Squeeze-out” and “Sell-out”
451

(a)
a shareholder exercises rights conferred on him by subsection (2), (3) or
(4),
(b)
at the time when he does so, there are shares in the company which the
offeror has contracted to acquire subject to conditions being met, and in
relation to which the contract has not become unconditional, and
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(c)
the requirement imposed by subsection (2)(b), (3)(b) or (4)(b) (as the
case may be) would not be satisfied if those shares were not taken into
account.
(7)
The shareholder is treated for the purposes of section 952 as not having
exercised his rights under this section unless the requirement imposed by
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paragraph (b) of subsection (2), (3) or (4) (as the case may be) would be satisfied
if—
(a)
the reference in that paragraph to other shares in the company which
the offeror has contracted to acquire unconditionally or subject to
conditions being met were a reference to such shares which he has
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unconditionally contracted to acquire, and
(b)
the reference in that subsection to the period within which the offer can
be accepted were a reference to the period referred to in section 951(2).
(8)
A reference in subsection (2)(b), (3)(b), (4)(b), (6) or (7) to shares which the
offeror has acquired or contracted to acquire includes a reference to shares
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which an associate of his has acquired or contracted to acquire.
951
Further provision about rights conferred by section 950
(1)
Rights conferred on a shareholder by subsection (2), (3) or (4) of section 950 are
exercisable by a written communication addressed to the offeror.
(2)
Rights conferred on a shareholder by subsection (2), (3) or (4) of that section are
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not exercisable after the end of the period of three months from—
(a)
the end of the period within which the offer can be accepted, or
(b)
if later, the date of the notice that must be given under subsection (3)
below.
(3)
Within one month of the time specified in subsection (2), (3) or (4) (as the case
30
may be) of that section, the offeror must give any shareholder who has not
accepted the offer notice in the prescribed manner of—
(a)
the rights that are exercisable by the shareholder under that subsection,
and
(b)
the period within which the rights are exercisable.
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If the notice is given before the end of the period within which the offer can be
accepted, it must state that the offer is still open for acceptance.
(4)
Subsection (3) does not apply if the offeror has given the shareholder a notice
in respect of the shares in question under section 946.
(5)
An offeror who fails to comply with subsection (3) commits an offence.
40

If the offeror is a company, every officer of that company who is in default or
to whose neglect the failure is attributable also commits an offence.
(6)
If an offeror other than a company is charged with an offence for failing to
comply with subsection (3), it is a defence for him to prove that he took all
reasonable steps for securing compliance with that subsection.
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(7)
A person guilty of an offence under this section is liable—

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 3 — “Squeeze-out” and “Sell-out”
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(a)
on conviction on indictment, to a fine;
(b)
on summary conviction, to a fine not exceeding the statutory maximum
and, for continued contravention, a daily default fine not exceeding
one-fiftieth of the statutory maximum.
952
Effect of requirement under section 950
5
(1)
Subject to section 953, this section applies where a shareholder exercises his
rights under section 950 in respect of any shares held by him.
(2)
The offeror is entitled and bound to acquire those shares on the terms of the
offer or on such other terms as may be agreed.
(3)
Where the terms of an offer are such as to give the shareholder a choice of
10
consideration—
(a)
the shareholder may indicate his choice when requiring the offeror to
acquire the shares, and
(b)
the notice given to the shareholder under section 951(3)—
(i)
must give particulars of the choice and of the rights conferred
15
by this subsection, and
(ii)
may state 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.
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(4)
Subsection (3) applies whether or not any time-limit or other conditions
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
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(b)
was to have been provided by a third party who is no longer bound or
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 when the shareholder requires the offeror to acquire
the shares is equivalent to the consideration offered or (as the case may be)
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chosen.
Supplementary
953
Applications to the court
(1)
Where a notice is given under section 946 to a shareholder the court may, on an
application made by him, order—
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(a)
that the offeror is not entitled and bound to acquire the shares to which
the notice relates, or
(b)
that the terms on which the offeror is entitled and bound to acquire the
shares shall be such as the court thinks fit.
(2)
An application under subsection (1) must be made within six weeks from the
40
date on which the notice referred to in that subsection was given.

If an application to the court under subsection (1) is pending at the end of that
period, section 948(6) does not have effect until the application has been
disposed of.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 28 — Takeovers etc
Chapter 3 — “Squeeze-out” and “Sell-out”
453

(3)
Where a shareholder exercises his rights under section 950 in respect of any
shares held by him, the court may, on an application made by him or the
offeror, order that the terms on which the offeror is entitled and bound to
acquire the shares shall be such as the court thinks fit.
(4)
On an application under subsection (1) or (3)—
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(a)
the court may not require consideration of a higher value than that
specified in the terms of the offer (“the offer value”) to be given for the
shares to which the application relates unless the holder of the shares
shows that the offer value would be unfair;
(b)
the court may not require consideration of a lower value than the offer
10
value to be given for the shares.
(5)
No order for costs or expenses may be made against a shareholder making an
application under subsection (1) or (3) unless the court considers that—
(a)
the application was unnecessary, improper or vexatious,
(b)
there has been unreasonable delay in making the application, or
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(c)
there has been unreasonable conduct on the shareholder’s part in
conducting the proceedings on the application.
(6)
A shareholder who has made an application under subsection (1) or (3) must
give notice of the application to the offeror.
(7)
An offeror who is given notice of an application under subsection (1) or (3)
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must give a copy of the notice to—
(a)
any person (other than the applicant) to whom a notice has been given
under section 946;
(b)
any person who has exercised his rights under section 950.
(8)
An offeror who makes an application under subsection (3) must give notice of
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the application to—
(a)
any person to whom a notice has been given under section 946;
(b)
any person who has exercised his rights under section 950.
(9)
Where a takeover offer has not been accepted to the extent necessary for
entitling the offeror to give notices under subsection (2) or (4) of section 946 the
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court may, on an application made by him, make an order authorising him to
give notices under that subsection if it is satisfied that—
(a)
the offeror has after reasonable enquiry been unable to trace one or
more of the persons holding shares to which the offer relates,
(b)
the requirements of that subsection would have been met if the person,
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or all the persons, mentioned in paragraph (a) above had accepted the
offer, and
(c)
the consideration offered is fair and reasonable.

This is subject to subsection (10).
(10)
The court may not make an order under subsection (9) unless it considers that
40
it is just and equitable to do so having regard, in particular, to the number of
shareholders who have been traced but who have not accepted the offer.
954
Joint offers
(1)
In the case of a takeover offer made by two or more persons jointly, this
Chapter has effect as follows.
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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”
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(2)
The conditions for the exercise of the rights conferred by section 946 are
satisfied—
(a)
in the case of acquisitions by virtue of acceptances of the offer, by the
joint offerors acquiring or unconditionally contracting to acquire the
necessary shares jointly;
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(b)
in other cases, by the joint offerors acquiring or unconditionally
contracting to acquire the necessary shares either jointly or separately.
(3)
The conditions for the exercise of the rights conferred by section 950 are
satisfied—
(a)
in the case of acquisitions by virtue of acceptances of the offer, by the
10
joint offerors acquiring or unconditionally contracting to acquire the
necessary shares jointly;
(b)
in other cases, by the joint offerors acquiring or contracting (whether
unconditionally or subject to conditions being met) to acquire the
necessary shares either jointly or separately.
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(4)
Subject to the following provisions, the rights and obligations of the offeror
under sections 946 to 952 are respectively joint rights and joint and several
obligations of the joint offerors.
(5)
A provision of sections 946 to 953 that requires or authorises a notice or other
document to be given or sent by or to the joint offerors is complied with if the
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notice or document is given or sent by or to any of them (but see subsection (6)).
(6)
The statutory declaration required by section 947(4) must be made by all of the
joint offerors and, where one or more of them is a company, signed by a
director of that company.
(7)
In sections 941 to 944, 946(9), 948(6), 950(8) and 955 references to the offeror are
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to be read as references to the joint offerors or any of them.
(8)
In section 948(7) and (8) references to the offeror are to be read as references to
the joint offerors or such of them as they may determine.
(9)
In sections 948(5)(a) and 952(5)(a) references to the offeror being no longer able
to provide the relevant consideration are to be read as references to none of the
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joint offerors being able to do so.
(10)
In section 953 references to the offeror are to be read as references to the joint
offerors, except that—
(a)
an application under subsection (3) or (9) may be made by any of them,
and
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(b)
the reference in subsection (9)(a) to the offeror having been unable to
trace one or more of the persons holding shares is to be read as a
reference to none of the offerors having been able to do so.
Interpretation
955
Associates
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(1)
In this Chapter “associate”, in relation to an offeror, means—
(a)
a nominee of the offeror,
(b)
a holding company, subsidiary or fellow subsidiary of the offeror or a
nominee of such a holding company, subsidiary or fellow subsidiary,
(c)
a body corporate in which the offeror is substantially interested,
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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”
455

(d)
a person who is, or is a nominee of, a party to a share acquisition
agreement with the offeror, or
(e)
(where the offeror is an individual) his spouse or civil partner and any
minor child or step-child of his.
(2)
For the purposes of subsection (1)(b) a company is a fellow subsidiary of
5
another body corporate if both are subsidiaries of the same body corporate but
neither is a subsidiary of the other.
(3)
For the purposes of subsection (1)(c) an offeror has a substantial interest in a
body corporate if—
(a)
the body or its directors are accustomed to act in accordance with his
10
directions or instructions, or
(b)
he is entitled to exercise or control the exercise of one-third or more of
the voting power at general meetings of the body.

Subsections (2) and (3) of section 826 (which contain provision about when a
person is treated as entitled to exercise or control the exercise of voting power)
15
apply for the purposes of this subsection as they apply for the purposes of that
section.
(4)
For the purposes of subsection (1)(d) an agreement is a share acquisition
agreement if—
(a)
it is an agreement for the acquisition of, or of an interest in, shares to
20
which the offer relates,
(b)
it includes provisions imposing obligations or restrictions on any one
or more of the parties to it with respect to their use, retention or
disposal of such shares, or their interests in such shares, acquired in
pursuance of the agreement (whether or not together with any other
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shares to which the offer relates or any other interests of theirs in such
shares), and
(c)
it is not an excluded agreement (see subsection (5)).
(5)
An agreement is an “excluded agreement”—
(a)
if it is not legally binding, unless it involves mutuality in the
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undertakings, expectations or understandings of the parties to it, or
(b)
if it is an agreement to underwrite or sub-underwrite an offer of shares
in the company, provided the agreement is confined to that purpose
and any matters incidental to it.
(6)
The reference in subsection (4)(b) to the use of interests in shares is to the
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exercise of any rights or of any control or influence arising from those interests
(including the right to enter into an agreement for the exercise, or for control of
the exercise, of any of those rights by another person).
(7)
In this section—
(a)
“agreement” includes any agreement or arrangement;
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(b)
references to provisions of an agreement include—
(i)
undertakings, expectations or understandings operative under
an arrangement, and
(ii)
any provision whether express or implied and whether
absolute or not.
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