rs2181910.936-942

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Report Stage Proceedings: 19th October 2006
936

Companies Bill–[ [], continued

(iii)
whether it is a company limited by shares or a company limited

by guarantee and having a share capital;

(b)
the number of shares in a transferee company to be allotted to members

of the transferor company for a given number of their shares (the “share

exchange ratio”) and the amount of any cash payment;

(c)
the terms relating to the allotment of shares in a transferee company;

(d)
the date from which the holding of shares in a transferee company will

entitle the holders to participate in profits, and any special conditions

affecting that entitlement;

(e)
the date from which the transactions of the transferor company are to be

treated for accounting purposes as being those of a transferee company;

(f)
any rights or restrictions attaching to shares or other securities in a

transferee company to be allotted under the scheme to the holders of

shares or other securities in the transferor company to which any special

rights or restrictions attach, or the measures proposed concerning them;

(g)
any amount of benefit paid or given or intended to be paid or given—

(i)
to any of the experts referred to in section (Expert’s report

(division)) (expert’s report), or

(ii)
to any director of a company involved in the division,


and the consideration for the payment of benefit.

(3)
The draft terms must also—

(a)
give particulars of the property and liabilities to be transferred (to the

extent that these are known to the transferor company) and their

allocation among the transferee companies;

(b)
make provision for the allocation among and transfer to the transferee

companies of any other property and liabilities that the transferor

company has acquired or may subsequently acquire; and

(c)
specify the allocation to members of the transferor company of shares in

the transferee companies and the criteria upon which that allocation is

based.’.

Publication of draft terms (division)

Mr Secretary Darling

Added  nc37

To move the following Clause:—

‘(1)
The directors of each company involved in the division must deliver a copy of the

draft terms to the registrar.

(2)
The registrar must publish in the Gazette notice of receipt by him from that

company of a copy of the draft terms.

(3)
That notice must be published at least one month before the date of any meeting

of that company summoned for the purposes of approving the scheme.

(4)
The requirements in this section are subject to section (Power of court to exclude

certain requirements (division)) (power of court to exclude certain

requirements).’.

Report Stage Proceedings: 19th October 2006
937

Companies Bill–[ [], continued

Approval of members of companies involved in the division

Mr Secretary Darling

Added  nc38

To move the following Clause:—

‘(1)
The compromise or arrangement must be approved by a majority in number,

representing 75% in value, of each class of members of each of the companies

involved in the division, present and voting either in person or by proxy at a

meeting.

(2)
This requirement is subject to sections (Circumstances in which meeting of

members of transferor company not required (division)) and (Circumstances in

which meeting of members of transferee company not required (division))

(circumstances in which meeting of members not required).’.

Directors’ explanatory report (division)

Mr Secretary Darling

Added  nc39

To move the following Clause:—

‘(1)
The directors of the transferor and each existing transferee company must draw

up and adopt a report.

(2)
The report must consist of—

(a)
the statement required by section 902 (statement explaining effect of

compromise or arrangement), and

(b)
insofar as that statement does not deal with the following matters, a

further statement—

(i)
setting out the legal and economic grounds for the draft terms,

and in particular for the share exchange ratio and for the criteria

on which the allocation to the members of the transferor

company of shares in the transferee companies was based, and

(ii)
specifying any special valuation difficulties.

(3)
The report must also state—

(a)
whether a report has been made to any transferee company under section

607 (valuation of non-cash consideration for shares), and

(b)
if so, whether that report has been delivered to the registrar of companies.

(4)
The requirement in this section is subject to section (Agreement to dispense with

reports etc (division)) (agreement to dispense with reports etc).’.

Expert’s report (division)

Mr Secretary Darling

Added  nc40

To move the following Clause:—

Report Stage Proceedings: 19th October 2006
938

Companies Bill–[ [], continued

‘(1)
An expert’s report must be drawn up on behalf of each company involved in the

division.

(2)
The report required is a written report on the draft terms to the members of the

company.

(3)
The court may on the joint application of the companies involved in the division

approve the appointment of a joint expert to draw up a single report on behalf of

all those companies.


If no such appointment is made, there must be a separate expert’s report to the

members of each company involved in the division drawn up by a separate expert

appointed on behalf of that company.

(4)
The expert must be a person who—

(a)
is eligible for appointment as a statutory auditor (see section 1176), and

(b)
meets the independence requirement in section (Experts and valuers:

independence requirement).

(5)
The expert’s report must—

(a)
indicate the method or methods used to arrive at the share exchange ratio;

(b)
give an opinion as to whether the method or methods used are reasonable

in all the circumstances of the case, indicate the values arrived at using

each such method and (if there is more than one method) give an opinion

on the relative importance attributed to such methods in arriving at the

value decided on;

(c)
describe any special valuation difficulites that have arisen;

(d)
state whether in the expert’s opinion the share exchange ratio is

reasonable; and

(e)
in the case of a valuation made by a person other than himself (see section

(Expert’s report: valuation by another person)), state that it appeared to

him reasonable to arrange for it to be so made or to accept a valuation so

made.

(6)
The expert (or each of them) has—

(a)
the right of access to all such documents of the companies involved in the

division, and

(b)
the right to require from the companies’ officers all such information,


as he thinks necessary for the purposes of making his report.

(7)
The requirement in this section is subject to section (Agreement to dispense with

reports etc (division)) (agreement to dispense with reports etc).’.

Supplementary accounting statement (division)

Mr Secretary Darling

Added  nc41

To move the following Clause:—

‘(1)
If the last annual accounts of a company involved in the division relates to a

financial year ending more than seven months before the first meeting of the

company summoned for the purposes of approving the scheme, the directors of

that company must prepare a supplementary accounting statement.

(2)
That statement must consist of—

Report Stage Proceedings: 19th October 2006
939

Companies Bill–[ [], continued

(a)
a balance sheet dealing with the state of affairs of the company as at a

date not more than three months before the draft terms were adopted by

the directors, and

(b)
where the company would be required under section 405 to prepare group

accounts if that date were the last day of a financial year, a consolidated

balance sheet dealing with the state of affairs of the company and the

undertakings that would be included in such a consolidation.

(3)
The requirements of this Act (and where relevant Article 4 of the IAS Regulation)

as to the balance sheet forming part of a company’s annual accounts, and the

matters to be included in notes to it, apply to the balance sheet required for an

accounting statement under this section, with such modifications as are necessary

by reason of its being prepared otherwise than as at the last day of a financial year.

(4)
The provisions of section 420 as to the approval and signing of accounts apply to

the balance sheet required for an accounting statement under this section.

(5)
The requirement in this section is subject to section (Agreement to dispense with

reports etc (division)) (agreement to dispense with reports etc).’.

Inspection of documents (division)

Mr Secretary Darling

Added  nc42

To move the following Clause:—

‘(1)
The members of each company involved in the division must be able, during the

period specified below—

(a)
to inspect at the registered office of that company copies of the

documents listed below relating to that company and every other

company involved in the division, and

(b)
to obtain copies of those documents or any part of them on request free

of charge.

(2)
The period referred to above is the period—

(a)
beginning one month before, and

(b)
ending on the date of,


the first meeting of the members, or any class of members, of the company for the

purposes of approving the scheme.

(3)
The documents referred to above are—

(a)
the draft terms;

(b)
the directors’ explanatory report;

(c)
the expert’s report;

(d)
the company’s annual accounts and reports for the last three financial

years ending on or before the first meeting of the members, or any class

of members, of the company summoned for the purposes of approving

the scheme; and

(e)
any supplementary accounting statement required by section

(Supplementary accounting statement (division)).

(4)
The requirements in subsection (3)(b), (c) and (e) are subject to section

(Agreement to dispense with reports etc (division)) (agreement to dispense with

Report Stage Proceedings: 19th October 2006
940

Companies Bill–[ [], continued

reports etc) and section (Power of court to exclude certain requirements

(division)) (power of court to exclude certain requirements).’.

Report on material changes of assets of transferor company (division)

Mr Secretary Darling

Added  nc43

To move the following Clause:—

‘(1)
The directors of the transferor company must report—

(a)
to every meeting of the members, or any class of members, of that

company summoned for the purpose of agreeing to the scheme, and

(b)
to the directors of each existing transferee company,


any material changes in the property and liabilities of the transferor company

between the date when the draft terms were adopted and the date of the meeting

in question.

(2)
The directors of each existing transferee company must in turn—

(a)
report those matters to every meeting of the members, or any class of

members, of that company summoned for the purpose of agreeing to the

scheme, or

(b)
send a report of those matters to every member entitled to receive notice

of such a meeting.

(3)
The requirement in this section is subject to section (Agreement to dispense with

reports etc (division)) (agreement to dispense with reports etc).’.

Approval of articles of new transferee company (division)

Mr Secretary Darling

Added  nc44

To move the following Clause:—

‘The articles of every new transferee company, or a draft of them, must be

approved by ordinary resolution of the transferor company.’.

Protection of holders of securities to which special rights attached (division)

Mr Secretary Darling

Added  nc45

To move the following Clause:—

‘(1)
The scheme must provide that where any securities of the transferor company

(other than shares) to which special rights are attached are held by a person

Report Stage Proceedings: 19th October 2006
941

Companies Bill–[ [], continued

otherwise than as a member or creditor of the company, that person is to receive

rights in a transferee company of equivalent value.

(2)
Subsection (1) does not apply if—

(a)
the holder has agreed otherwise, or

(b)
the holder is, or under the scheme is to be, entitled to have the securities

purchased by a transferee company on terms that the court considers

reasonable.’.

No allotment of shares to transferor company or its nominee (division)

Mr Secretary Darling

Added  nc46

To move the following Clause:—

‘The scheme must not provide for shares in a transferee company to be allotted to

the transferor company (or its nominee) in respect of shares in the transferor

company held by it (or its nominee).’.

Circumstances in which meeting of members of transferor company not required

(division)

Mr Secretary Darling

Added  nc47

To move the following Clause:—

‘(1)
This section applies in the case of a division where all of the shares or other

securities of the transferor company carrying the right to vote at general meetings

of the company are held by or on behalf of one or more existing transferee

companies.

(2)
It is not necessary for the scheme to be approved by a meeting of the members,

or any class of members, of the transferor company if the court is satisfied that

the following conditions have been complied with.

(3)
The first condition is that publication of notice of receipt of the draft terms by the

registrar took place in respect of all the companies involved in the division at least

one month before the date of the court’s order.

(4)
The second condition is that the members of every company involved in the

division were able during the period beginning one month before, and ending on,

that date—

(a)
to inspect at the registered office of their company copies of the

documents listed in section (Inspection of documents (division))(3)

relating to every company involved in the division, and

(b)
to obtain copies of those documents or any part of them on request free

of charge.

(5)
The third condition is that—

(a)
one or more members of the transferor company, who together held not

less than 5% of the paid-up capital of the company (excluding any shares

Report Stage Proceedings: 19th October 2006
942

Companies Bill–[ [], continued

in the company held as treasury shares) would have been able, during that

period, to require a meeting of each class of members to be called for the

purpose of deciding whether or not to agree to the scheme, and

(b)
no such requirement was made.

(6)
The fourth condition is that the directors of the transferor company have sent—

(a)
to every member who would have been entitled to receive notice of a

meeting to agree to the scheme (had any such meeting been called), and

(b)
to the directors of every existing transferee company,


a report of any material change in the property and liabilities of the transferor

company between the date when the terms were adopted by the directors and the

date one month before the date of the court’s order.’.

Circumstances in which meeting of members of transferee company not required

(division)

Mr Secretary Darling

Added  nc48

To move the following Clause:—

‘(1)
In the case of a division, it is not necessary for the scheme to be approved by the

members of a transferee company if the court is satisfied that the following

conditions have been complied with in relation to that company.

(2)
The first condition is that publication of notice of receipt of the draft terms by the

registrar took place in respect of that company at least one month before the date

of the first meeting of members of the transferor company summoned for the

purposes of agreeing to the scheme.

(3)
The second condition is that the members of that company were able during the

period beginning one month before, and ending on, that date—

(a)
to inspect at the registered office of that company copies of the

documents specified in section (Inspection of documents (division))(3)

relating to that company and every other company involved in the

division, and

(b)
to obtain copies of those documents or any part of them on request free

of charge.

(4)
The third condition is that—

(a)
one or more members of that company, who together held not less than

5% of the paid-up capital of the company which carried the right to vote

at general meetings of the company (excluding any shares in the

company held as treasury shares) would have been able, during that

period, to require a meeting of each class of members to be called for the

purpose of deciding whether or not to agree to the scheme, and

(b)
no such requirement was made.

(5)
The first and second conditions above are subject to section (Power of court to

exclude certain requirements (division)) (power of court to exclude certain

requirements).’.