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Lord Sainsbury of Turville moved Amendments Nos. 430 to 432:
"POWER OF PRIVATE COMPANIES TO REDEEM OR PURCHASE OWN SHARES OUT OF CAPITAL
In section 171 of the Companies Act 1985 (c. 6) (power of private companies to redeem or purchase own shares out of capital), for subsection (1) substitute—
"(1) A private limited company may in accordance with this section, but subject to any restriction or prohibition in the company's articles, make a payment in respect of the redemption or purchase of its own shares otherwise than out of distributable profits or the proceeds of a fresh issue of shares."."
After Clause 576, insert the following new clause—
"CONDITIONS FOR REDEMPTION OR PURCHASE OF OWN SHARES OUT OF CAPITAL
(1) Section 173 of the Companies Act 1985 (c. 6) (conditions for payment out of capital for redemption or purchase by a private company of its own shares) is amended as follows.
(2) In subsection (3) (under which the directors are required to make a statutory declaration as to the company's financial position) for "a statutory declaration" substitute "a statement".
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(3) For subsection (4) (directors' opinion as to solvency: liabilities to be taken into account) substitute—
"(4) In forming their opinion for the purposes of subsection (3)(a), the directors must take into account all of the company's liabilities (including any contingent or prospective liabilities).".
(4) In subsection (5) (further requirements)—
(a) in the opening words, for "statutory declaration" substitute "statement";
(b) in paragraphs (b) and (c) for "declaration" substitute "statement".
(5) For subsection (6) (offence of making declaration without reasonable grounds) substitute—
"(6) If the directors make a statement under this section without having reasonable grounds for the opinion expressed in it, an offence is committed by every director who is in default.
(7) A person guilty of an offence under subsection (6) 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—
(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);
(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).".
(6) The following amendments are consequential on that in subsection (2) above—
(a) in section 172(6) of the Companies Act 1985 (c. 6) for "statutory declaration of the directors" substitute "directors' statement";
(b) in section 174 of that Act—
(i) in subsection (1), for "statutory declaration" substitute "statement", and
(ii) in subsection (4), for "statutory declaration" substitute "directors' statement";
(c) in section 175 of that Act—
(i) in subsections (1)(c) and (5), for "statutory declaration of the directors" substitute "directors' statement";
(ii) in subsection (6) for "statutory declaration", substitute "directors' statement", and
(iii) in subsection (8), for "declaration" (twice) substitute "statement";
(d) in section 179 of that Act—
(i) in subsection (1)(d), for "statutory declaration of the directors'" substitute "directors' statement", and
(ii) in subsection (1)(e), for "declaration" substitute "statement"."
After Clause 576, insert the following new clause—
"NOTICE TO REGISTRAR OF PAYMENT OUT OF CAPITAL FOR REDEMPTION OR PURCHASE OF OWN SHARES
After section 177 of the Companies Act 1985 (c. 6) insert—
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"177A NOTICE TO REGISTRAR OF PAYMENT OUT OF CAPITAL FOR REDEMPTION OR PURCHASE OF OWN SHARES
(1) A private limited company that makes a payment out of capital for the redemption or purchase of its own shares must, within 15 days after making the payment, give notice to the registrar.
(2) The notice must be accompanied by a statement of capital.
(3) The statement of capital must state with respect to the company's share capital immediately following the payment out of capital—
(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).
(4) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section 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."."
On Question, amendments agreed to.
Clause 583 [Redenomination of share capital]:
Lord Sainsbury of Turville moved Amendment No. 433:
The noble Lord said: My Lords, this amendment is intended to address the concerns expressed by the noble Lords, Lord Razzall and Lord Hodgson, in Grand Committee, regarding subsection (6) of Clause 583. The concern with the current drafting of subsection (6) is that it does not give companies a sufficiently long period of time to comply with any conditions that may be attached to a resolution to redenominate a company's share capital.
Amendment No. 433 extends the period during which a company may comply with the terms of such a conditional resolution from 15 days to 28 days. This does not go as far as the respective amendments proposed by the noble Lords in Grand Committee—the noble Lords' amendments sought an extension from 15 days to three months and 12 months respectively—but having looked at the issue again we think this is as far as we can go. In particular, we still regard it as important that there is reasonable proximity between the date of the redenomination taking effect and the relevant rate of exchange adopted for the purpose of such redenomination of share capital. In short we think that the respective periods suggested by the noble Lords were simply too long.
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I am however very grateful to the noble Lords for raising this issue and I trust this amendment goes some way towards allaying their concerns. I beg to move.
Lord Razzall: My Lords, I am grateful to the Minister—I speak for the Liberal Democrats—for taking on board at least some of the points that we made. As he rightly says, we tried to go a little further; but I am sure that this is a happy compromise.
On Question, amendment agreed to.
Clause 584 [Calculation of new nominal values]:
Lord Sainsbury of Turville moved Amendment No. 434:
"Divide the resulting figure by the number of shares in the class."
The noble Lord said: My Lords, in Grand Committee the noble Lord, Lord Hodgson, expressed concern that step three of Clause 584 seemed to allow an inadvertent reduction of capital. Having looked at this again we agree that there are potential difficulties with this step of the process for calculating the new nominal value of the shares that have been redenominated under Clause 583.
We think that this step can be omitted from the prescribed method for calculating the new nominal values of the shares without detracting from the redenomination process as a whole—and this is what Amendment No. 343 does. I am grateful to the noble Lord for drawing this to our attention and trust that the amendment addresses his concerns.
On Question, amendment agreed to.
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