Company Law Reform Bill [HL] (59-65)

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Company Law Reform Bill [HL] (59-65)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 8 — A company’s members
Chapter 3 — Overseas branch registers
59

130
Notice of opening of overseas branch register
(1)
A company that begins to keep an overseas branch register must give notice to
the registrar within 14 days of doing so, stating the country or territory in
which the register is kept.
(2)
If default is made in complying with subsection (1), an offence is committed
5
by—
(a)
the company, and
(b)
every officer of the company who is in default.
(3)
A person guilty of an offence under subsection (2) is liable on summary
conviction to a fine not exceeding level 3 on the standard scale and, for
10
continued contravention, a daily default fine not exceeding one-tenth of level
3 on the standard scale.
131
Keeping of overseas branch register
(1)
An overseas branch register is regarded as part of the company’s register of
members (“the main register”).
15
(2)
The Secretary of State may make provision by regulations modifying any
provision of Chapter 2 (register of members) as it applies in relation to an
overseas branch register.
(3)
Regulations under this section are subject to negative resolution procedure.
(4)
Subject to the provisions of this Act, a company may by its articles make such
20
provision as it thinks fit as to the keeping of overseas branch registers.
132
Register or duplicate to be kept available for inspection in UK
(1)
A company that keeps an overseas branch register must keep available for
inspection—
(a)
the register, or
25
(b)
a duplicate of the register duly entered up from time to time,

at the place in the United Kingdom where the company’s main register is kept
available for inspection.
(2)
Any such duplicate is treated for all purposes of this Act as part of the main
register.
30
(3)
If default is made in complying with subsection (1), an offence is committed
by—
(a)
the company, and
(b)
every officer of the company who is in default.
(4)
A person guilty of an offence under subsection (3) is liable on summary
35
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.
133
Transactions in shares registered in overseas branch register
(1)
Shares registered in an overseas branch register must be distinguished from
40
those registered in the main register.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 8 — A company’s members
Chapter 3 — Overseas branch registers
60

(2)
No transaction with respect to shares registered in an overseas branch register
may be registered in any other register.
(3)
An instrument of transfer of a share registered in an overseas branch register—
(a)
is regarded as a transfer of property situated outside the United
Kingdom, and
5
(b)
unless executed in a part of the United Kingdom, is exempt from stamp
duty.
134
Jurisdiction of local courts
(1)
A competent court in a country or territory where an overseas branch register
is kept may exercise the same jurisdiction as is exercisable by a court in the
10
United Kingdom—
(a)
to rectify the register (see section 125), or
(b)
in relation to a request for inspection or a copy of the register (see
section 117).
(2)
The offences—
15
(a)
of refusing inspection or failing to provide a copy of the register (see
section 118), and
(b)
of making a false, misleading or deceptive statement in a request for
inspection or a copy (see section 119),

may be prosecuted summarily before any tribunal having summary criminal
20
jurisdiction in the country or territory where the register is kept.
(3)
This section extends only to those countries and territories to which paragraph
3 of Schedule 14 to the Companies Act 1985 (c. 6) (which made similar
provision) extended immediately before the coming into force of this Chapter.
135
Discontinuance of overseas branch register
25
(1)
A company may discontinue an overseas branch register.
(2)
If it does so all the entries in that register must be transferred—
(a)
to some other overseas branch register kept in the same country or
territory, or
(b)
to the main register.
30
(3)
The company must give notice to the registrar within 14 days of the
discontinuance.
(4)
If default is made in complying with subsection (3), an offence is committed
by—
(a)
the company, and
35
(b)
every officer of the company who is in default.
(5)
A person guilty of an offence under subsection (4) 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.
40

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 8 — A company’s members
Chapter 4 — Prohibition on subsidiary being member of its holding company
61

Chapter 4
Prohibition on subsidiary being member of its holding company
General prohibition
136
Prohibition on subsidiary being a member of its holding company
(1)
Except as provided by this Chapter—
5
(a)
a body corporate cannot be a member of a company that is its holding
company, and
(b)
any allotment or transfer of shares in a company to its subsidiary is
void.
(2)
The exceptions are provided for in—
10
section 138 (subsidiary acting as personal representative or trustee), and
section 141 (subsidiary acting as authorised dealer in securities).
137
Shares acquired before prohibition became applicable
(1)
Where a body corporate became a holder of shares in a company—
(a)
before the relevant date, or
15
(b)
on or after that date and before the commencement of this Chapter in
circumstances in which the prohibition in section 23(1) of the
Companies Act 1985 (c. 6) or Article 33(1) of the Companies (Northern
Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) (or any corresponding
earlier enactment), as it then had effect, did not apply, or
20
(c)
on or after the commencement of this Chapter in circumstances in
which the prohibition in section 136 did not apply,

it may continue to be a member of the company.
(2)
The relevant date for the purposes of subsection (1)(a) is—
(a)
1st July 1948 in the case of a company registered in Great Britain, and
25
(b)
1st April 1961 in the case of a company registered in Northern Ireland.
(3)
So long as it is permitted to continue as a member of a company by virtue of
this section, an allotment to it of fully paid shares in the company may be
validly made by way of capitalisation of reserves of the company.
(4)
But, so long as the prohibition in section 136 would (apart from this section)
30
apply, it has no right to vote in respect of the shares mentioned in subsection
(1) above, or any shares allotted as mentioned in subsection (2) above, on a
written resolution or at meetings of the company or of any class of its members.
Subsidiary acting as personal representative or trustee
138
Subsidiary acting as personal representative or trustee
35
(1)
The prohibition in section 136 (prohibition on subsidiary being a member of its
holding company) does not apply where the subsidiary is concerned only—
(a)
as personal representative, or
(b)
as trustee,

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 8 — A company’s members
Chapter 4 — Prohibition on subsidiary being member of its holding company
62


unless, in the latter case, the holding company or a subsidiary of it is
beneficially interested under the trust.
(2)
For the purpose of ascertaining whether the holding company or a subsidiary
is so interested, there shall be disregarded—
(a)
any interest held only by way of security for the purposes of a
5
transaction entered into by the holding company or subsidiary in the
ordinary course of a business that includes the lending or money;
(b)
any interest within—
section 139 (interests to be disregarded: residual interest under
pension scheme or employees’ share scheme), or
10
section 140 (interests to be disregarded: employer’s rights of
recovery under pension scheme or employees’ share scheme);
(c)
any rights that the company or subsidiary has in its capacity as trustee,
including in particular—
(i)
any right to recover its expenses or be remunerated out of the
15
trust property, and
(ii)
any right to be indemnified out of the trust property for any
liability incurred by reason of any act or omission in the
performance of its duties as trustee.
139
Interests to be disregarded: residual interest under pension scheme or
20
employees’ share scheme
(1)
Where shares in a company are held on trust for the purposes of a pension
scheme or employees’ share scheme, there shall be disregarded for the
purposes of section 138 any residual interest that has not vested in possession.
(2)
A “residual interest” means a right of the company or subsidiary (“the residual
25
beneficiary”) to receive any of the trust property in the event of—
(a)
all the liabilities arising under the scheme having been satisfied or
provided for, or
(b)
the residual beneficiary ceasing to participate in the scheme, or
(c)
the trust property at any time exceeding what is necessary for satisfying
30
the liabilities arising or expected to arise under the scheme.
(3)
In subsection (2)—
(a)
the reference to a right includes a right dependent on the exercise of a
discretion vested by the scheme in the trustee or another person, and
(b)
the reference to liabilities arising under a scheme includes liabilities
35
that have resulted, or may result, from the exercise of any such
discretion.
(4)
For the purposes of this section a residual interest vests in possession—
(a)
in a case within subsection (2)(a), on the occurrence of the event
mentioned there (whether or not the amount of the property receivable
40
pursuant to the right is ascertained);
(b)
in a case within subsection (2)(b) or (c), when the residual beneficiary
becomes entitled to require the trustee to transfer to him any of the
property receivable pursuant to the right.
(5)
In this section “pension scheme” means a scheme for the provision of benefits
45
consisting of or including relevant benefits for or in respect of employees or
former employees.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 8 — A company’s members
Chapter 4 — Prohibition on subsidiary being member of its holding company
63

(6)
In subsection (5)—
(a)
“relevant benefits” here means any pension, lump sum, gratuity or
other like benefit given or to be given on retirement or on death or in
anticipation of retirement or, in connection with past service, after
retirement or death; and
5
(b)
“employee” shall be read as if a director of a company were employed
by it.
140
Interests to be disregarded: employer’s rights of recovery under pension
scheme or employees’ share scheme
(1)
Where shares in a company are held on trust for the purposes of a pension
10
scheme or employees’ share scheme, there shall be disregarded for the
purposes of section 138 any charge or lien on, or set-off against, any benefit or
other right or interest under the scheme for the purpose of enabling the
employer or former employer of a member of the scheme to obtain the
discharge of a monetary obligation due to him from the member.
15
(2)
In the case of a trust for the purposes of a pension scheme there shall also be
disregarded any right to receive from the trustee of the scheme, or as trustee of
the scheme to retain, an amount that can be recovered or retained, under
section 61 of the Pension Schemes Act 1993 (c. 48) or section 57 of the Pension
Schemes (Northern Ireland) Act 1993 (c. 49) (deduction of contributions
20
equivalent premium from refund of scheme contributions) or otherwise, as
reimbursement or partial reimbursement for any contributions equivalent
premium paid in connection with the scheme under Part 3 of that Act.
(3)
In this section “pension scheme” means a scheme for the provision of benefits
consisting of or including relevant benefits for or in respect of employees or
25
former employees.

“Relevant benefits” here means any pension, lump sum, gratuity or other like
benefit given or to be given on retirement or on death or in anticipation of
retirement or, in connection with past service, after retirement or death.
(4)
In this section “employer” and “employee” shall be read as if a director of a
30
company were employed by it.
Subsidiary acting as dealer in securities
141
Subsidiary acting as authorised dealer in securities
(1)
The prohibition in section 136 (prohibition on subsidiary being a member of its
holding company) does not apply where the shares are held by the subsidiary
35
in the ordinary course of its business as an intermediary.
(2)
For this purpose a person is an intermediary if he—
(a)
carries on a bona fide business of dealing in securities,
(b)
is a member of an EEA exchange (and satisfies any requirements for
recognition as a dealer in securities laid down by that exchange) or is
40
otherwise approved or supervised as a dealer in securities under the
laws of an EEA State, and
(c)
does not carry on an excluded business.
(3)
The following are excluded businesses—

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 8 — A company’s members
Chapter 4 — Prohibition on subsidiary being member of its holding company
64

(a)
a business that consists wholly or mainly in the making or managing of
investments;
(b)
a business that consists wholly or mainly in, or is carried on wholly or
mainly for the purposes of, providing services to persons who are
connected with the person carrying on the business;
5
(c)
a business that consists in insurance business;
(d)
a business that consists in managing or acting as trustee in relation to a
pension scheme, or that is carried on by the manager or trustee of such
a scheme in connection with or for the purposes of the scheme;
(e)
a business that consists in operating or acting as trustee in relation to a
10
collective investment scheme, or that is carried on by the operator or
trustee of such a scheme in connection with and for the purposes of the
scheme.
(4)
For the purposes of this section—
(a)
the question whether a person is connected with another shall be
15
determined in accordance with section 839 of the Income and
Corporation Taxes Act 1988 (c. 1);
(b)
“collective investment scheme” has the meaning given in section 236 of
the Financial Services and Markets Act 2000 (c. 8);
(c)
“EEA exchange” means a market that appears on the list drawn up by
20
an EEA State pursuant to Article 16 of Council Directive 93/22/EEC on
investment services in the securities field;
(d)
“insurance business” means business that consists in the effecting or
carrying out of contracts of insurance;
(e)
“securities” includes—
25
(i)
options,
(ii)
futures, and
(iii)
contracts for differences,

and rights or interests in those investments;
(f)
“trustee” and “the operator” in relation to a collective investment
30
scheme shall be construed in accordance with section 237(2) of the
Financial Services and Markets Act 2000.
(5)
Expressions used in this section that are also used in the provisions regulating
activities under the Financial Services and Markets Act 2000 have the same
meaning here as they do in those provisions.
35

See section 22 of that Act, orders made under that section and Schedule 2 to
that Act.
142
Protection of third parties in other cases where subsidiary acting as dealer in
securities
(1)
This section applies where—
40
(a)
a subsidiary that is a dealer in securities has purportedly acquired
shares in its holding company in contravention of the prohibition in
section 136, and
(b)
a person acting in good faith has agreed, for value and without notice
of the contravention, to acquire shares in the holding company—
45
(i)
from the subsidiary or
(ii)
from someone who has purportedly acquired the shares after
their disposal by the subsidiary.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 9 — Exercise of members’ rights
65

(2)
A transfer to that person of the shares mentioned in subsection (1)(a) has the
same effect as it would have had if their original acquisition by the subsidiary
had not been in contravention of the prohibition.
Supplementary
143
Application of provisions to companies not limited by shares
5

In relation to a company other than a company limited by shares, the references
in this Chapter to shares shall be read as references to the interest of its
members as such, whatever the form of that interest.
144
Application of provisions to nominees

The provisions of this Chapter apply to a nominee acting on behalf of a
10
subsidiary as to the subsidiary itself.
Part 9
Exercise of members’ rights
Effect of provisions in company’s articles
145
Effect of provisions of articles as to enjoyment or exercise of members’ rights
15
(1)
This section applies where provision is made by a company’s articles enabling
a member to nominate another person or persons as entitled to enjoy or
exercise all or any specified rights of the member in relation to the company.
(2)
So far as is necessary to give effect to that provision, anything required or
authorised by any provision of the Companies Acts to be done by or in relation
20
to the member shall instead be done, or (as the case may be) may instead be
done, by or in relation to the nominated person (or each of them) as if he were
a member of the company.
(3)
This applies, in particular, to the rights conferred by—
(a)
sections 298 and 300 (right to be sent proposed written resolution);
25
(b)
section 299 (right to require circulation of written resolution);
(c)
section 310 (right to require directors to call general meeting);
(d)
section 317 (right to notice of general meetings);
(e)
section 321 (right to require circulation of a statement);
(f)
section 331 (right to appoint proxy to act at meeting);
30
(g)
section 345 (right to require circulation of resolution for AGM of public
company); and
(h)
section 429 (right to be sent a copy of annual accounts and reports).
(4)
This section and any such provision as is mentioned in subsection (1)—
(a)
do not confer rights enforceable against the company by anyone other
35
than the member, and
(b)
do not affect the requirements for an effective transfer or other
disposition of the whole or part of a member’s interest in the company.