Company Law Reform Bill [Lords]


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New Clause 231

Treasury shares: disposal
‘(1) Where shares are held as treasury shares, the company may at any time—
(a) sell the shares (or any of them) for a cash consideration, or
(b) transfer the shares (or any of them) for the purposes of or pursuant to an employees’ share scheme.
(2) In subsection (1)(a) “cash consideration” means—
(a) cash received by the company, or
(b) a cheque received by the company in good faith that the directors have no reason for suspecting will not be paid, or
(c) a release of a liability of the company for a liquidated sum, or
(d) an undertaking to pay cash to the company on or before a date not more than 90 days after the date on which the company agrees to sell the shares.
For this purpose “cash” includes foreign currency.
(3) If the company receives a notice under section (Right of offeror to buy out minority shareholder) (takeover offers: right of offeror to buy out minority shareholders) that a person desires to acquire shares held by the company as treasury shares, the company must not sell or transfer the shares to which the notice relates except to that person.’,—[Margaret Hodge.]
Brought up, and added to the Bill.

New Clause 232

Treasury shares: notice of disposal
‘(1) Where shares held by a company as treasury shares—
(a) are sold, or
(b) are transferred for the purposes of an employees’ share scheme,
the company must deliver a return to the registrar not later than 28 days after the shares are disposed of.
(2) The return must state with respect to shares of each class disposed of—
(a) the number and nominal value of the shares, and
(b) the date on which they were disposed of.
(3) Particulars of shares disposed of on different dates may be included in a single return.
(4) If default is made in complying with this section an offence is committed by every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable—
(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-tenth of the statutory maximum.’.—[Margaret Hodge.]
Brought up, and added to the Bill.

New Clause 233

Treasury shares: cancellation
‘(1) Where shares are held as treasury shares, the company may at any time cancel the shares (or any of them).
(2) If shares held as treasury shares cease to be qualifying shares, the company must forthwith cancel the shares.
(3) For this purpose shares are not to be regarded as ceasing to be qualifying shares by virtue only of—
(4) If company cancels shares held as treasury shares, the amount of the company’s share capital is reduced accordingly by the nominal amount of the shares cancelled.
(5) The directors may take any steps required to enable the company to cancel its shares under this section without complying with the provisions of Chapter (Reduction of share capital) of Part (A company’s share capital) (reduction of share capital).’.—[Margaret Hodge.]
Brought up, and added to the Bill.

New Clause 234

Treasury shares: notice of cancellation
‘(1) Where shares held by a company as treasury shares are cancelled, the company must deliver a return to the registrar not later than 28 days after the shares are cancelled.
This does not apply to shares that are cancelled forthwith on their acquisition by the company (see section (Notice to registrar of cancellation of shares)).
(2) The return must state with respect to shares of each class cancelled—
(a) the number and nominal value of the shares, and
(b) the date on which they were cancelled.
(3) Particulars of shares cancelled on different dates may be included in a single return.
(4) The notice must be accompanied by a statement of capital.
(5) The statement of capital must state with respect to the company’s share capital immediately following the cancellation—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(6) If default is made in complying with this section an offence is committed by every officer of the company who is in default.
(7) A person guilty of an offence under this section is liable—
(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-tenth of the statutory maximum.’.—[Margaret Hodge.]
Brought up, and added to the Bill.

New Clause 235

Treasury shares: treatment of proceeds of sale
‘(1) Where shares held as treasury shares are sold, the proceeds of sale must be dealt with in accordance with this section.
(2) If the proceeds of sale are equal to or less than the purchase price paid by the company for the shares, the proceeds are treated for the purposes of Part (Distributions) (distributions) as a realised profit of the company.
(3) If the proceeds of sale exceed the purchase price paid by the company—
(a) an amount equal to the purchase price paid is treated as a realised profit of the company for the purposes of that Part, and
(b) the excess must be transferred to the company’s share premium account.
(4) For the purposes of this section—
(a) the purchase price paid by the company must be determined by the application of a weighted average price method, and
(b) if the shares were allotted to the company as fully paid bonus shares, the purchase price paid for them is treated as nil.’.—[Margaret Hodge.]
Brought up, and added to the Bill.

New Clause 236

Treasury shares: offences
‘(1) If a company contravenes any of the provisions of this Chapter (except section (Treasury shares: notice of cancellation) (notice of cancellation)), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(2) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]
Brought up, and added to the Bill.

New Clause 237

The capital redemption reserve
‘(1) Where under this Part shares of a limited company are redeemed or purchased wholly out of the company’s profits, the amount by which the company’s issued share capital is diminished—
(a) on cancellation of the shares redeemed or purchased (see section (Redeemed shares treated as cancelled) or (Treatment of shares purchased)(3)), or
(b) on cancellation of shares held as treasury shares (see section (Treasury shares: cancellation),
must be transferred to a reserve, called the “capital redemption reserve”.
(2) Where—
(a) the shares are redeemed or purchased wholly or partly out of the proceeds of a fresh issue, and
(b) the aggregate amount of the proceeds is less than the aggregate nominal value of the shares redeemed or purchased,
the amount of the difference must be transferred to the capital redemption reserve.
(3) Subsection (2) does not apply in the case of a private company if, in addition to the proceeds of the fresh issue, the company applies a payment out of capital under Chapter (Redemption or purchase by private company out of capital) in making the purchase of shares.
Brought up, and added to the Bill.

New Clause 238

Accounting consequences of payment out of capital
‘(1) This section applies where a payment out of capital is made in accordance with Chapter (Redemption or purchase by private company out of capital) (redemption or purchase of own shares by private company out of capital).
(2) If the permissible capital payment is less than the nominal amount of the shares redeemed or purchased, the amount of the difference must be transferred to the company’s capital redemption reserve.
(3) If the permissible capital payment is greater than the nominal amount of the shares redeemed or purchased—
(a) the amount of any capital redemption reserve, share premium account or fully paid share capital of the company, and
(b) any amount representing unrealised profits of the company for the time being standing to the credit of any revaluation reserve maintained by the company,
may be reduced by a sum not exceeding (or by sums not in total exceeding) the amount by which the permissible capital payment exceeds the nominal amount of the shares.
(4) Where the proceeds of a fresh issue are applied by the company in making a redemption or purchase of its own shares in addition to a payment out of capital under this Chapter, the references in subsections (2) and (3) to the permissible capital payment are to be read as referring to the aggregate of that payment and those proceeds.’.—[Margaret Hodge.]
Brought up, and added to the Bill.

New Clause 239

Effect of company’s failure to redeem or purchase
‘(1) This section applies where a company—
(a) issues shares on terms that they are or are liable to be redeemed, or
(b) agrees to purchase any of its shares.
(2) The company is not liable in damages in respect of any failure on its part to redeem or purchase any of the shares.
This is without prejudice to any right of the holder of the shares other than his right to sue the company for damages in respect of its failure.
(3) The court shall not grant an order for specific performance of the terms of redemption or purchase if the company shows that it is unable to meet the costs of redeeming or purchasing the shares in question out of distributable profits.
(4) If the company is wound up and at the commencement of the winding up any of the shares have not been redeemed or purchased, the terms of redemption or purchase may be enforced against the company.
the company could not at any time have lawfully made a distribution equal in value to the price at which the shares were to have been redeemed or purchased.
(6) There shall be paid in priority to any amount that the company is liable under subsection (4) to pay in respect of any shares—
(a) all other debts and liabilities of the company (other than any due to members in their character as such), and
(b) if other shares carry rights (whether as to capital or as to income) that are preferred to the rights as to capital attaching to the first-mentioned shares, any amount due in satisfaction of those preferred rights.
Subject to that, any such amount shall be paid in priority to any amounts due to members in satisfaction of their rights (whether as to capital or income) as members.’.—[Margaret Hodge.]
Brought up, and added to the Bill.
 
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Prepared 21 July 2006