COMPANIES (AMENDMENT) ACT, 1983

• (b) in the case of a company which is re-registered or registered as a public limited company in pursuance of an application made before the end of that period, the time at which the application is made.

Payment for share capital

26 Subscription of share capital.

26.—(1) Subject to the following provisions of this Part, shares allotted by a company and any premium payable on them may be paid up in money or money's worth (including goodwill and expertise).

• (2) A public limited company shall not accept at any time in payment up of its shares or any premium on them, an undertaking given by any person that he or another should do work or perform services for the company or any other person.

• (3) Where a public limited company accepts such an undertaking as payment up of its shares or any premium payable on them, the holder of the shares when they or the premium are treated as paid up, in whole or in part, by the undertaking—

• (a) shall be liable to pay the company in respect of those shares an amount equal to their nominal value, together with the whole of any premium or, if the case so requires, such proportion of that amount as is treated as paid up by the undertaking; and

• (b) shall be liable to pay interest at the appropriate rate on the amount payable under paragraph (a).

• (4) Where any person becomes a holder of any shares in respect of which—

• (a) there has been a contravention of this section; and

• (b) by virtue of that contravention, another is liable to pay any amount under this section,

that person also shall be liable to pay that amount (jointly and severally with any other person so liable) unless either he is a purchaser for value and, at the time of the purchase, he did not have actual notice of the contravention or he derived title to the shares (directly or indirectly) from a person who became a holder of them after the contravention and was not so liable.

• (5) Subsection (1) shall not prevent a company from allotting bonus shares in the company to its members or from paying up, with sums available for the purpose, any amounts for the time being unpaid on any of its shares (whether on account of the nominal value of the shares or by way of premium).

• (6) References in this section to a holder, in relation to any shares in a company, include references to any person who has an unconditional right to be included in the company's register of members in respect of those shares or to have an instrument of transfer of the shares executed in his favour.

27 Prohibition on allotment of shares at a discount.

27.—(1) Subject to subsection (4) the shares of a company shall not be allotted at a discount.

• (2) Where shares are allotted in contravention of subsection (1), the allottee shall be liable to pay the company an amount equal to the amount of the discount and shall be liable to pay interest thereon at the appropriate rate.

• (3) Section 26(4) shall apply for the purposes of this section as it applies for the purposes of that section.

• (4) The repeal of section 63 of the Principal Act effected by section 3(2) shall not affect an application for an order sanctioning the issue of shares at a discount which has been made to the court under that section and which has not been withdrawn or disposed of before the appointed day, or an order made on or after that day in pursuance of any such application, and—

• (a) any such application may be proceeded with and any such order, if not made before the appointed day, may be made as if that section had not been repealed; and

• (b) shares may be allotted at a discount in accordance with any such order (whether made, before, on or after the appointed day) accordingly.

28 Payment for allotted shares.

28.—(1) Subject to subsection (4), a public limited company shall not allot a share except as paid up at least as to one-quarter of the nominal value of the share and the whole of any premium on it.

• (2) Where a public limited company allots a share in contravention of subsection (1), the share shall be treated as if one-quarter of its nominal value together with the whole of any premium had been received, but the allottee shall be liable to pay the company the minimum amount which should have been received in respect of the share under that subsection less the value of any consideration actually applied in payment up (to any extent) of the share and any premium on it, and interest at the appropriate rate on the amount payable under this subsection.

• (3) Subsection (2) shall not apply in relation to the allotment of a bonus share in contravention of subsection (1) unless the allottee knew or ought to have known the share was so allotted.

• (4) Subsections (1) to (3) shall not apply to shares allotted in pursuance of an employees' share scheme.

• (5) Section 26(4) shall apply for the purposes of this section as it applies for the purposes of that section.

29 Payment of non-cash consideration.

29.—(1) A public limited company shall not allot shares as fully or partly paid up (as to their nominal value or any premium payable on them) otherwise than in cash if the consideration for the allotment is or includes an undertaking which is to be or may be performed more than five years after the date of the allotment.

• (2) Where a public limited company allots shares in contravention of subsection (1), the allottee of the shares shall be liable to pay the company an amount equal to their nominal value, together with the whole of any premium, or, if the case so requires, such proportion of that amount as is treated as paid up by the undertaking and shall be liable to pay interest at the appropriate rate on the amount payable under this subsection.

• (3) Where a contract for the allotment of shares does not contravene subsection (1), any variation of the contract which has the effect that the contract would have contravened that subsection if the terms of the contract as varied had been its original terms shall be void.

• (4) Subsection (3) shall apply to the variation by a public limited company of the terms of a contract entered into before the company was registered or re-registered as a public limited company.

• (5) Where a public limited company allots shares for a consideration which consists of or includes (in accordance with subsection (1)) an undertaking which is to be performed within five years of the allotment but that undertaking is not performed within the period allowed by the contract for the allotment of the shares, the allottee of the shares in question shall be liable to pay the company at the end of that period an amount equal to the nominal value of the shares, together with the whole of any premium, or, if the case so requires, such proportion of that amount as is treated as paid up by the undertaking, together with interest at the appropriate rate on the amount payable under this subsection.

• (6) Section 26 (4) shall apply in relation to a contravention of this section and to a failure to carry out a term of a contract as mentioned in subsection (5) as it applies in relation to a contravention of that section.

• (7) Any reference in this section to a contract for the allotment of shares includes a reference to an ancillary contract relating to payment in respect of those shares.

30 Experts' reports on non-cash consideration before allotment of shares.

30.—(1) Subject to subsection (2), a public limited company shall not allot shares as fully or partly paid up (as to their nominal value or any premium payable on them) otherwise than in cash unless—

• (a) the consideration for the allotment has been valued in accordance with the following provisions of this section;

• (b) a report with respect to its value has been made to the company by a person appointed by the company in accordance with those provisions during the six months immediately preceding the allotment of the shares; and

• (c) a copy of the report has been sent to the proposed allottee of the shares.

• (2) Subject to subsection (3), subsection (1) shall not apply to the allotment of shares by a company in connection with—

• (a) an arrangement providing for the allotment of shares in that company on terms that the whole or part of the consideration for the shares allotted is to be provided by the transfer to that company or the cancellation of all or some of the shares, or of all or some of the shares of a particular class, in another company (with or without the issue to that company of shares, or of shares of any particular class, in that other company); or

• (b) a proposed merger of that company with another company.

• (3) Subsection (2) (a) does not exclude the application of subsection (1) to the allotment of shares by a company in connection with any such arrangement as is there mentioned unless it is open to all the holders of the shares in the other company in question or, where the arrangement applies only to shares of a particular class, to all the holders of shares in that other company of that class, to take part in the arrangement. In determining whether that is the case, shares heldby or by a nominee of the company proposing to allot the shares in connection with the arrangement, or by or by a nominee of a company which is that company's holding company or subsidiary or a company which is a subsidiary of its holding company, shall be disregarded.

• (4) For the purposes of subsection (2) (b) there is a proposed merger of two companies when one of them proposes to acquire all the assets and liabilities of the other in exchange for the issue of shares or other securities in that one to shareholders of the other, with or without any cash payment to those shareholders.

• (5) The valuation and report required by subsection (1) shall be made by an independent person, that is to say, a person qualified at the time of the report to be appointed or to continue to be auditor of the company, except that where it appears to him to be reasonable for the valuation of the consideration, or a valuation of part of the consideration, to be made, or to accept such a valuation made, by any person who—

• (a) appears to him to have the requisite knowledge and experience to value the consideration or that part of the consideration; and

• (b) is not an officer or servant of the company or any other body corporate which is that company's subsidiary or holding company or a subsidiary of that company's holding company or a partner or employee of such an officer or servant,

that independent person may arrange for or accept such a valuation, together with a report which will enable him to make his own report under that subsection and provide a note in accordance with subsection (8).

• (6) The independent person's report under subsection (1) shall state—

• (a) the nominal value of the shares to be wholly or partly paid for by the consideration in question;

• (b) the amount of any premium payable on those shares;

• (c) the description of the consideration and, as respects so much of the consideration as he himself has valued, a description of that part of the consideration, the method used to value it and the date of the valuation; and

• (d) the extent to which the nominal value of the shares and any premium are to be treated as paid up—

• (i) by the consideration;

• (ii) in cash.

• (7) Where any consideration is valued under this section by a person other than the independent person, the latter's report under subsection (1) shall state that fact and shall also—

• (a) state the former's name and what knowledge and experience he has to carry out the valuation; and

• (b) describe so much of the consideration as was valued by that other person, the method used to value it and state the date of valuation.

• (8) The report of the independent person made under subsection (1) shall contain or be accompanied by a note by him—

• (a) in the case of a valuation made by another person, that it appeared to the independent person reasonable to arrange for it to be so made, or to accept a valuation so made;

• (b) whoever made the valuation, that the method of valuation was reasonable in all the circumstances;

• (c) that it appears to the independent person that there has been no material change in the value of the consideration in question since the valuation; and

• (d) that on the basis of the valuation the value of the consideration, together with any cash by which the nominal value of the shares or any premium payable on them is to be paid up, is not less than so much of the aggregate of the nominal value and the whole of any such premium as is treated as paid up by the consideration and any such cash.

• (9) Subsection (10) applies where a public limited company allots any share in contravention of subsection (1) and either—

• (a) the allottee has not received a report under this section; or

• (b) there has been some other contravention of this section and the allottee knew or ought to have known that it amounted to a contravention.

• (10) Where this subsection applies, the allottee shall be liable to pay the company an amount equal to the nominal value of the shares, together with the whole of any premium or, if the case so requires, such proportion of that amount as is treated as paid up by the consideration, and shall be liable to pay interest at the appropriate rate on the amount payable under this subsection.

• (11) Section 26 (4) shall apply for the purposes of this section as it applies for the purposes of that section.

• (12) Where the consideration is accepted partly in payment up of the nominal value of the shares and any premium and partly for some other consideration given by the company, the provisions of this section shall apply as if references to the consideration accepted by the company included references to the proportion of that consideration which is properly attributable to the payment up of that value and any premium; and

• (a) the independent person shall carry out or arrange for such other valuations as will enable him to determine that proportion; and

• (b) his report under subsection (1) shall state what valuations have been made by virtue of this subsection and also the reason for and method and date of any such valuation and any other matters which may be relevant to that determination.

• (13) It is hereby declared for the avoidance of doubt that subsection (1) does not apply by reference to the application of an amount for the time being standing to the credit of any of the company's reserve accounts or to the credit of its profit and loss account in paying up (to any extent) any shares allotted to members of the company or any premiums on any shares so allotted; and in relation to any such allotment references in this section to the consideration for the allotment do not include any such amount so applied.

• (14) In this section—

• (a) “arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with section 201 or 260 of the Principal Act);

• (b) any reference to a company, except where it is or is to be construed as a reference to a public limited company, includes a reference to any body corporate and any body to which letters patent have been issued under the Chartered Companies Act, 1837; and

• (c) any reference to an officer or servant shall not include a reference to an auditor.

31 Experts' reports: supplementary.

31.—(1) Any person carrying out a valuation or making a report under section 30 with respect to any consideration proposed to be accepted or given by a company shall be entitled to require from the officers of the company such information and explanation as he thinks necessary to enable him to carry out the valuation or to make the report and provide a note, under that section.

• (2) A company to which such a report is made as to the value of any consideration for which, or partly for which, it proposes to allot shares shall deliver a copy of the report to the registrar of companies for registration at the same time that it files the return of the allotments of those shares under section 58 of the Principal Act, and subsections (3) and (4) of that section shall apply to a default in complying with this subsection as they apply to a default in complying with that section.

• (3) Any person who knowingly or recklessly makes a statement which—

• (a) is misleading, false or deceptive in a material particular, and

• (b) is a statement to which this subsection applies,

shall be guilty of an offence.

• (4) Subsection (3) applies to any statement made (whether orally or in writing) to any person carrying out a valuation or making a report under section 30, being a statement which conveys or purports to convey any information or explanation which that person requires, or is entitled to require, under subsection (1).

32 Experts' reports on non-cash assets acquired from subscribers, etc.

32.—(1) A public limited company, other than a company re-registered under section 12, shall not, unless the conditions mentioned in subsection (3) have been complied with, enter into an agreement with a relevant person for the transfer by him during the initial period of one or more non-cash assets to the company or another for a consideration to be given by the company equal in value at the time of the agreement to at least one-tenth of the nominal value of the company's share capital issued at that time.

• (2) In this section—

• (a) in relation to a company formed as a public limited company, “relevant person” means any subscriber to the memorandum of the company and “initial period” means the period of two years beginning with the date on which the company is issued with a certificate under section 6 that it is entitled to do business;

• (b) in relation to a company re-registered, or registered in accordance with section 18, as a public limited company, “relevant person” means any person who was a member of the company on the date of the re-registration or registration and “initial period” means the period of two years beginning with that date.

• (3) The conditions referred to in subsection (1) are that—

• (a) the consideration to be received by the company (that is to say, the asset to be transferred to the company or the advantage to the company of its transfer to another person) and any consideration other than cash to be given by the company have been valued under the following provisions of this section (without prejudice to any requirement to value any consideration under section 30);

• (b) a report with respect to the consideration to be so received and given has been made to the company in accordance with those provisions during the six months immediately preceding the date of the agreement;

• (c) the terms of the agreement have been approved by an ordinary resolution of the company; and

• (d) not later than the giving of the notice of the meeting at which the resolution is proposed, copies of the resolution and report have been circulated to the members of the company entitled to receive that notice and, if the relevant person is not then such a member, to that person.

• (4) Subsection (1) shall not apply to the following agreements for the transfer of an asset for a consideration to be given by the company, that is to say—

• (a) where it is part of the ordinary business of the company to acquire or arrange for other persons to acquire assets of a particular description, an agreement entered into by the company in the ordinary course of its business for the transfer of an asset of that description to it or such a person, as the case may be; or

• (b) an agreement entered into by the company under the supervision of the court or an officer authorised by the court for the purpose, for the transfer of an asset to the company or to another.

• (5) Section 30 (5) and (7) shall apply to a valuation and report of any consideration under this section as those subsections apply to a valuation of and report on any consideration under subsection (1) of that section.

• (6) The report of the independent person under this section shall—

• (a) state the consideration to be received by the company, describing the asset in question, specifying the amount to be received in cash, and the consideration to be given by the company, specifying the amount to be given in cash;

• (b) state the method and date of valuation;

• (c) contain or be accompanied by a note as to the matters mentioned in section 30 (8) (a) to (c); and

• (d) contain or be accompanied by a note that on the basis of the valuation the value of the consideration to be received by the company is not less than the value of the consideration to be given by it.

• (7) If a public limited company enters into an agreement with any relevant person in contravention of subsection (1) and either he has not received a report under this section or there has been some other contravention of this section or section 30 (5) or (7) which he knew or ought to have known amounted to a contravention, then, subject to subsection (8)—

• (a) the company shall be entitled to recover from the relevant person any consideration given by the company under the agreement or an amount equivalent to its value at the time of the agreement; and

• (b) the agreement, so far as not carried out, shall be void.

• (8) Where a company enters into an agreement in contravention of subsection (1) and that agreement is or includes an agreement for the allotment of shares in that company, then, whether or not the agreement also contravenes section 30—

• (a) subsection (7) shall not apply to the agreement insofar as it is an agreement for the allotment of shares; and

• (b) section 26 (4) and section 30 (10) shall apply in relation to the shares as if they had been allotted in contravention of section 30.

33 Provisions supplementary to section 32.

33.—(1) Any person carrying out a valuation or making a report under section 32 shall be entitled to require from the officers of the company such information and explanation as he thinks necessary to enable him to carry out the valuation or make the report and provide the note required by that section; and section 31(3) shall apply in relation to any such valuation and report as it applies in relation to a valuation and report under section 30 (1) with the substitution of a reference to this subsection for the reference in section 31(4) to section 31 (1).

• (2) A company which has passed a resolution under section 32 with respect to the transfer of an asset shall, within 15 days of the passing of the resolution, deliver to the registrar of companies a copy of the resolution together with the report required by that section and, if it fails to do so, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding £250 together with, in the case of a continuing offence, a fine not exceeding £25 for every day on which the offence continues, but not exceeding £500 in total.

• (3) Any reference in section 32 or this section to consideration given for the transfer of an asset includes a reference to consideration given partly for its transfer but—

• (a) the value of any consideration partly so given shall be taken to be the proportion of that consideration properly attributable to its transfer;

• (b) the independent person shall carry out or arrange for such valuations of anything else as will enable him to determine that proportion; and

• (c) his report under that section shall state what valuation has been made by virtue of this paragraph and also the reason for and method and date of any such valuation and any other matters which may be relevant to that determination.

34 Relief.

34.—(1) Where any person is liable to a company under section 26, 29, 30 or 32 in relation to payment in respect of any shares in the company or is liable by virtue of any undertaking given to the company in, or in connection with, payment for any such shares, the person so liable may make an application to the court under this subsection to be exempted in whole or in part from that liability.

• (2) Where the liability mentioned in subsection (1) arises under any of those sections in relation to payment in respect of any shares, the court may, on an application under that subsection, exempt the applicant from that liability only—

• (a) if and to the extent that it appears to the court just and equitable to do so having regard to the following, namely—

• (i) whether the applicant has paid, or is liable to pay, any amount in respect of any other liability arising in relation to those shares under any of those sections or of any liability arising by virtue of any undertaking given in or in connection with payment for those shares;

• (ii) whether any person other than the applicant has paid or is likely to pay (whether in pursuance of an order of the court or otherwise) any such amount; and

• (iii) whether the applicant or any other person has performed, in whole or in part, or is likely so to perform any such undertaking or has done or is likely to do any other thing in payment or part payment in respect of those shares;

• (b) if and to the extent that it appears to the court just and equitable to do so in respect of any interest which he is liable to pay to the company under any of those sections.

• (3) Where the liability mentioned in subsection (1) arises by virtue of an undertaking given to the company in, or in connection with, payment for any shares in the company, the court may, on an application under that subsection, exempt the applicant from that liability only if and to the extent that it appears to the court just and equitable to do so having regard to the following, namely—

• (a) whether the applicant has paid or is liable to pay any amount in respect of any liability arising in relation to those shares under section 26, 29, 30 or 32; and

• (b) whether any person other than the applicant has paid or is likely to pay (whether in pursuance of an order of the court or otherwise) any such amount.

• (4) In determining in pursuance of an application under subsection (1) whether it should exempt the applicant in whole or in part from any liability, the court shall have regard to the following overriding principles, namely—

• (a) that a company which has allotted shares should receive money or money's worth at least equal in value to the aggregate of the nominal value of those shares and the whole of any premium or, if the case so requires, so much of that aggregate as is treated as paid up; and

• (b) subject to paragraph (a), that where such a company would, if the court did not grant that exemption, have more than one remedy against a particular person, it should be for the company to decide which remedy it should remain entitled to pursue.

• (5) Where a person brings any proceedings against another (“the contributor”) for a contribution in respect of any liability to a company arising under any of sections 26 to 30 and 32 and it appears to the court that the contributor is liable to make such a contribution, the court may, if and to the extent that it appears to the court, having regard to the respective culpability in respect of the liability to the company of the contributor and the person bringing the proceedings, that it is just and equitable to do so—

• (a) exempt the contributor in whole or in part from his liability to make such a contribution; or

• (b) order the contributor to make a larger contribution than, but for this subsection, he would be liable to make.

• (6) Where a person is liable to a company by virtue of section 32(7)(a), the court may, on an application under this subsection, exempt that person in whole or in part from that liability if and to the extent that it appears to the court just and equitable to do so having regard to any benefit accruing to the company by virtue of anything done by that person towards the carrying out of the agreement mentioned in that subsection.

35 Special provisions as to issue of shares to subscribers.

35.—Any shares taken by a subscriber to the memorandum of a public limited company in pursuance of an undertaking of his in the memorandum and any premium on the shares shall be paid up in cash.

36 Contravention of sections 26 to 35.

36.—(1) Where a company contravenes any of the provisions of sections 26 to 30, 32 and 35, the company and any officer of the company who is in default shall be guilty of an offence.

• (2) Subject to section 34, an undertaking given by any person in or in connection with payment for shares in a company to do work or perform services or to do any other thing shall, if it is enforceable by the company apart from this Act, be so enforceable notwithstanding that there has been a contravention in relation thereto of section 26, 29 or 30 and where such an undertaking is given in contravention of section 32 in respect of the allotment of any shares it shall be so enforceable notwithstanding that contravention.

37 Application of sections 26 to 36 in special cases.

37.—(1) Subject to subsection (2), sections 26, 28 to 31 and 34 to 36 shall apply—

• (a) to a company which has passed and not revoked a special resolution to be re-registered under section 9 or section 11;

• (b) to a company whose directors have passed and not revoked a resolution to be re-registered under section 12; and

• (c) to a joint stock company (within the meaning of section 329 of the Principal Act) which has passed and not revoked a resolution that the company be a public limited company;

as those sections apply to a public limited company.

• (2) Section 26 and sections 28 to 31 shall not apply to the allotment of shares by a company, other than a public limited company registered as such on its original incorporation, where the contract for their allotment was entered into—

• (a) except in a case falling within paragraph (b), before the end of the general transitional period;

• (b) in the case of a company re-registered or registered as a public limited company in pursuance of a resolution of any description mentioned in subsection (1) that is passed before the end of that period, before the date on which that resolution is passed.

Class rights

38 Variation of rights attached to special classes of shares.

38.—(1) This section shall have effect with respect to the variation of the rights attached to any class of shares in a company whose share capital is divided into shares of different classes.

• (2) Where the rights are attached to a class of shares in the company otherwise than by the memorandum, and the articles of the company do not contain provision with respect to the variation of the rights, those rights may be varied if, but only if—

• (a) the holders of three-quarters in nominal value of the issued shares of that class consent in writing to the variation; or

• (b) a special resolution passed at a separate general meeting of the holders of that class sanctions the variation;

and any requirement (howsoever imposed) in relation to the variation of those rights is complied with to the extent that it is not comprised in paragraphs (a) and (b).

• (3) Where—

• (a) the rights are attached to a class of shares in the company by the memorandum or otherwise;

• (b) the memorandum or articles contain provision for the variation of those rights; and

• (c) the variation of those rights is connected with the giving, variation, revocation or renewal of an authority for the purposes of section 20 or with a reduction of the company's share capital under section 72 of the Principal Act,

those rights shall not be varied unless—

• (i) the condition mentioned in subsection (2) (a) or (b) is satisfied; and

• (ii) any requirement of the memorandum or articles in relation to the variation of rights of that class is complied with to the extent that it is not comprised in the condition in subparagraph (i).

• (4) Where the rights are attached to a class of shares in the company by the memorandum or otherwise and—

• (a) where they are so attached by the memorandum, the articles contain provision with respect to their variation which had been included in the articles at the time of the company's original incorporation; or

• (b) where they are so attached otherwise, the articles contain such provision (whenever first so included);

and in either case the variation is not connected as mentioned in subsection (3) (c), those rights may only be varied in accordance with that provision of the articles.

• (5) Where the rights are attached to a class of shares in the company by the memorandum and the memorandum and articles do not contain provision with respect to the variation of the rights, those rights may be varied if all the members of the company agree to the variation.

• (6) The provisions of sections 133 and 134 of the Principal Act and the provisions of the articles relating to general meetings shall, so far as applicable, apply in relation to any meeting of shareholders required by this section or otherwise to take place in connection with the variation of the rights attached to a class of shares, and shall so apply with the necessary modifications and subject to the following provisions, namely—

• (a) the necessary quorum at any such meeting other than an adjourned meeting shall be two persons holding or representing by proxy at least one-third in nominal value of the issued shares of the class in question and at an adjourned meeting one person holding shares of the class in question or his proxy;

• (b) any holder of shares of the class in question present in person or by proxy may demand a poll.

• (7) Any alteration of a provision contained in the articles of a company for the variation of the rights attached to a class of shares or the insertion of any such provision into the company's articles shall itself be treated as a variation of those rights.

• (8) Section 78 of the Principal Act shall apply in relation to subsection (2) as it applies in relation to a provision of the memorandum or articles of a company to the like effect.

• (9) In this section and, except where the context otherwise requires,in any provision for the variation of the rights attached to a class of shares contained in the company's memorandum or articles references to the variation of those rights shall include references to their abrogation.

• (10) Nothing in subsections (2) to (5) shall be construed as derogating from the powers of the court under section 15 or any of the following sections of the Principal Act, that is to say, sections 10, 201, 203 and 205.

• (11) This section shall not apply in relation to any variation made by a company, other than a public limited company registered as such on its original incorporation, before the date on which the earlier of the following events occurs, that is to say, the re-registration or registration of the company as a public limited company and the end of the general transitional period.

39 Registration of particulars of special rights.

39.—(1) Where a company allots shares with rights which are not stated in its memorandum or articles or in any resolution or agreement to which section 143 of the Principal Act applies, the company shall, unless the shares are in all respects uniform with shares previously allotted, deliver to the registrar of companies within one month from allotting the shares a statement in the prescribed form containing particulars of those rights.

• (2) Shares allotted with such rights shall not be treated for the purposes of subsection (1) as different from shares previously allotted by reason only of the fact that the former do not carry the same rights to dividends as the latter during the twelve months immediately following the former's allotment.

• (3) Where the rights attached to any shares of a company are varied otherwise than by an amendment of the company's memorandum or articles or by resolution or agreement to which the said section 143 applies, the company shall within one month from the date on which the variation is made deliver to the registrar of companies a statement in the prescribed form containing particulars of the variation.

• (4) Where a company (otherwise than by any such amendment, resolution or agreement as is mentioned in subsection (3)) assigns a name or other designation, or a new name or other designation, to any class of its shares it shall within one month from doing so deliver to the registrar of companies a notice in the prescribed form giving particulars thereof.

• (5) If a company fails to comply with this section, the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding £250 together with, in the case of a continuing offence, a fine not exceeding £25 for every day on which the offence continues but not exceeding £500 in total.

Maintenance of capital

40 Obligation to convene extraordinary general meeting in event of serious loss of capital.

40.—(1) Subject to subsection (4), where the net assets of a company are half or less of the amount of the company's called-up share capital, the directors of the company shall, not later than 28 days from the earliest day on which that fact is known to a director of the company, duly convene an extraordinary general meeting of the company for a date not later than 56 days from that day for thepurpose of considering whether any, and if so what, measures should be taken to deal with the situation.

• (2) If there is a failure to convene an extraordinary general meeting of a company as required by subsection (1), each of the directors of the company who—

• (a) knowingly and wilfully authorises or permits that failure; or

• (b) after the expiry of the period during which that meeting should have been convened, knowingly and wilfully authorises or permits that failure to continue,

shall be guilty of an offence.

• (3) Nothing in this section shall be taken as authorising the consideration, at a meeting convened in pursuance of subsection (1), of any matter which could not have been considered at that meeting apart from this section.

• (4) This section shall not apply where the day mentioned in subsection (1) is before the appointed day.

41 Restriction on company acquiring its own shares.

41.—(1) Subject to the following provisions of this section, no company limited by shares or limited by guarantee and having a share capital shall acquire its own shares (whether by purchase, subscription or otherwise).

• (2) A company limited by shares may acquire any of its own fully paid shares otherwise than for valuable consideration.

• (3) If a company purports to act in contravention of this section the company and every officer of the company who is in default shall be guilty of an offence and the purported acquisition shall be void.

• (4) Subsection (1) shall not apply in relation to—

• (a) the redemption of preference shares in pursuance of the articles;

• (b) the acquisition of any shares in a reduction of capital duly made;

• (c) the purchase of any shares in pursuance of an order of the court under section 15 or under section 10 or section 205 of the Principal Act; or

• (d) the forfeiture of any shares, or the acceptance of any shares surrendered in lieu, in pursuance of the articles for failure to pay any sum payable in respect of those shares.

42 Acquisition of shares in a company by company's nominee.

42.—(1) Subject to subsections (5) and (6), where shares are issued to a nominee of a company referred to in section 41 (1) or are acquired by a nominee of such a company from a third party as partly paid up, then, for all purposes the shares shall be treated as held by the nominee on his own account and the company shall be regarded as having no beneficial interest in them.

• (2) Subject to subsection (6), if a person is called on to pay any amount for the purpose of paying up, or paying any premium on, any shares in any such company which were issued to him, or which he otherwise acquired, as the nominee of the company and he fails to pay that amount within 21 days from being called on to do so, then—

• (a) if the shares were issued to him as a subscriber to the memorandum by virtue of an undertaking of his in the memorandum, the other subscribers to the memorandum; or

• (b) if the shares were otherwise issued to or acquired by him, the directors of the company at the time of the issue or acquisition,

shall be jointly and severally liable with him to pay that amount.

• (3) If in proceedings for the recovery of any such amount from any such subscriber or director under this section it appears to the court that he is or may be liable to pay that amount, but that he has acted honestly and reasonably and that, having regard to all the circumstances of the case, he ought fairly to be excused from liability, the court may relieve him, either wholly or partly, from his liability on such terms as the court thinks fit.

• (4) Where any such subscriber or director has reason to apprehend that a claim will or might be made for the recovery of any such amount from him, he may apply to the court for relief and on the application the court shall have the same power to relieve him as it would have had in proceedings for the recovery of that amount.

• (5) Subsection (1) shall not apply to shares acquired otherwise than by subscription by a nominee of a public limited company in a case falling within section 43 (1) (d).

• (6) Subsections (1) and (2) shall not apply—

• (a) to shares acquired by a nominee of a company where the company has no beneficial interest in those shares (disregarding any right which the company itself may have as trustee, whether as personal representative or otherwise, to recover its expenses or be remunerated out of the trust property); or

• (b) to shares issued in consequence of an application made before the appointed day or transferred in pursuance of an agreement to acquire them made before that day.

43 Treatment of shares held by or on behalf of a public limited company.

43.—(1) Subject to subsections (12) and (15), this section applies to a public limited company—

• (a) where shares in the company are forfeited, or are surrendered to the company in lieu, in pursuance of the articles for failure to pay any sum payable in respect of those shares;

• (b) where shares in the company are acquired by the company otherwise than by any of the methods mentioned in section 41 (4) and the company has a beneficial interest in those shares;

• (c) where the nominee of the company acquires shares in the company from a third person without financial assistance being given directly or indirectly by the company and the company has a beneficial interest in those shares; or

• (d) where any person acquires shares in the company with financial assistance given to him directly or indirectly by the company for the purpose of or in connection with the acquisition and the company has a beneficial interest in those shares.

• (2) In determining for the purposes of subsection (1) (b) and (c) whether a company has a beneficial interest in any shares, there shall be disregarded, in any case where the company is a trustee (whether as personal representative or otherwise), any right of the company (as trustee) to recover its expenses or be remunerated out of the trust property.

• (3) Unless the shares or any interest of the company in them are previously disposed of, the company must not later than the end of the relevant period from their forfeiture or surrender or, in a case to which subsection (1) (b), (c) or (d) applies, their acquisition—

• (a) cancel them and reduce the amount of the share capital by the nominal value of the shares; and

• (b) where the effect of cancelling the shares will be that the nominal value of the company's allotted share capital is brought below the authorised minimum, apply for re-registration as another form of company, stating the effect of the cancellation,

and the directors may take such steps as are requisite to enable the company to carry out its obligations under this subsection without complying with sections 72 and 73 of the Principal Act, including passing a resolution in accordance with subsection (5).

• (4) The company and, in a case falling within subsection (1) (c) or (d), the company's nominee or, as the case may be, the other shareholder must not exercise any voting rights in respect of the shares and any purported exercise of those rights shall be void.

• (5) The resolution authorised by subsection (3) may alter the company's memorandum so that it no longer states that the company is to be a public limited company and may make such other alterations in the memorandum and articles as are requisite in the circumstances.

• (6) The application for re-registration required by subsection (3) (b) must be in the prescribed form and signed by a director or secretary of the company and must be delivered to the registrar together with a printed copy of the memorandum and articles of the company as altered by the resolution.

• (7) If a public limited company required to apply to be re-registered as another form of company under this section fails to do so before the end of the relevant period, section 21 shall apply to it as if it were a private company such as is mentioned in that section, but, except as aforesaid, the company shall continue to be treated for the purposes of the Companies Acts as a public limited company until it is re-registered as another form of company.

• (8) If a company when required to do so by subsection (3) fails to cancel any shares in accordance with paragraph (a) of that subsection or to make an application for re-registration in accordance with paragraph (b) of that subsection, the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding £250 together with, in the case of a continuing offence, a fine not exceeding £25 forevery day on which the offence continues, but not exceeding £500 in total.

• (9) If the registrar is satisfied that a company may be re-registered in accordance with this section he shall—

• (a) retain the application and other documents delivered to him under subsection (6); and

• (b) issue the company with an appropriate certificate of incorporation.

• (10) Upon the issue of a certificate of incorporation under subsection (9)—

• (a) the company shall by virtue of the issue of that certificate become the form of company stated in the certificate; and

• (b) the alterations in the memorandum and articles set out in the resolution shall take effect accordingly.

• (11) A certificate of incorporation issued to a company under subsection (9) shall be conclusive evidence—

• (a) that the requirements of this section in respect of re-registration and of matters precedent and incidental thereto have been complied with; and

• (b) that the company is the form of company stated in the certificate.

• (12) Where, after shares in a company—

• (a) are forfeited in pursuance of the articles of the company or are surrendered to the company in lieu of forfeiture or are otherwise acquired by the company;

• (b) are acquired by a nominee of the company in the circumstances mentioned in subsection (1)(c); or

• (c) are acquired by any person in the circumstances mentioned in subsection (1) (d),

the company is re-registered as a public limited company, the foregoing provisions of this section shall apply to the company as if it had been a public limited company at the time of the forfeiture, surrender or acquisition and as if for any reference to the relevant period from the forfeiture, surrender or acquisition there were substituted a reference to the relevant period from the re-registration of the company as a public limited company.

• (13) Where a public limited company or a nominee of a public limited company acquires shares in the company or an interest in such shares and those shares are or that interest is shown in a balance sheet of the company as an asset, an amount equal to the value of the shares or, as the case may be, the value to the company of its interest in the shares shall be transferred out of profits available for dividend to a reserve fund and shall not be available for distribution.

• (14) In this section “relevant period”, in relation to any shares, means—

• (a) in the case of shares forfeited or surrendered to the company in lieu of forfeiture or acquired as mentioned in subsection (1) (b) or (c), three years;

• (b) in the case of shares acquired as mentioned in subsection (1)(d), one year.

• (15) Notwithstanding anything in section 12 (2), a reference in this section to a public limited company does not include a reference to an old public limited company.

44 Charges taken by public limited companies on own shares.

44.—(1) A lien or other charge of a public limited company on its own shares (whether taken expressly or otherwise), except a charge permitted by subsection (2), is void.

• (2) The following are permitted charges, that is to say—

• (a) in the case of every description of company, a charge on its own shares (not being fully paid) for any amount payable in respect of the shares;

• (b) in the case of a public limited company whose ordinary business includes the lending of money or consists of the provision of credit or the bailment or hiring of goods under a hire-purchase agreement, or both, a charge of the company on its own shares (whether fully paid or not) which arises in connection with a transaction entered into by the company in the ordinary course of its business;

• (c) in the case of a company (other than a company in relation to which paragraph (d) applies) which is re-registered or is registered under section 18 as a public limited company, a charge on its own shares which was in existence immediately before its application for re-registration or, as the case may be, registration;

• (d) in the case of any company which after the end of the re-registration period remains or remained an old public limited company and did not before the end of that period apply to be re-registered under section 12 as a public limited company, any charge on its own shares which was in existence immediately before the end of that period.

PART IV Restrictions on distribution of profits and assets.

45 Profits available for distribution.

45.—(1) A company shall not make a distribution (as defined by section 51) except out of profits available for the purpose.

• (2) For the purposes of this Part, but subject to section 47(1), a company's profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.

• (3) A company shall not apply an unrealised profit in paying up debentures or any amounts unpaid on any of its issued shares.

• (4) For the purposes of subsections (2) and (3) any provision (within the meaning of the Sixth Schedule to the Principal Act) other than one in respect of any diminution in value of a fixed asset appearing ona revaluation of all the fixed assets or of all the fixed assets other than goodwill of the company, shall be treated as a realised loss.

• (5) Subject to section 49(8), any consideration by the directors of a company of the value at any particular time of any fixed asset of the company shall be treated as a revaluation of that asset for the purposes of determining whether any such revaluation of the company's fixed assets as is required for the purposes of the exception from subsection (4) has taken place at that time; but where any such assets which have not actually been revalued are treated as revalued for those purposes by virtue of this subsection that exception shall only apply if the directors are satisfied that their aggregate value at the time in question is not less than the aggregate amount at which they are for the time being stated in the company's accounts.

• (6) If, on the revaluation of a fixed asset, an unrealised profit is shown to have been made and, on or after the revaluation, a sum is written off or retained for depreciation of that asset over a period, then, an amount equal to the amount by which that sum exceeds the sum which would have been so written off or retained for depreciation of that asset over that period, if that profit had not been made, shall be treated for the purposes of subsections (2) and (3) as a realised profit made over that period.

• (7) Where there is no record of the original cost of an asset of a company (whether acquired before, on or after the appointed day) or any such record cannot be obtained without unreasonable expense or delay, then, for the purposes of determining whether the company has made a profit or loss in respect of that asset, the cost of the asset shall be taken to be the value ascribed to it in the earliest available record of its value made on or after its acquisition by the company.

• (8) Where the directors of a company are, after making all reasonable enquiries, unable to determine whether a particular profit made before the appointed day is realised or unrealised they may treat the profit as realised, and where after making such enquiries they are unable to determine whether a particular loss so made is realised or unrealised, they may treat the loss as unrealised.

• (9) In this section “fixed asset” includes any other asset which is not a current asset.

46 Restriction on distribution of assets.

46.—(1) Subject to section 47, a public limited company may only make a distribution at any time—

• (a) if at that time the amount of its net assets is not less than the aggregate of the company's called-up share capital and its undistributable reserves; and

• (b) if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.

• (2) For the purposes of this section the undistributable reserves of a public limited company are—

• (a) the share premium account;

• (b) the capital redemption reserve fund;

• (c) the amount by which the company's accumulated, unrealised profits, so far as not previously utilised by any capitalisation, exceed its accumulated, unrealised losses, so far asnot previously written off in a reduction or reorganisation of capital duly made; and

• (d) any other reserve which the company is prohibited from distributing by any enactment, other than one contained in this Part, or by its memorandum or articles.

• (3) Subsections (4) to (8) of section 45 shall apply for the purposes of this section as they apply for the purposes of that section.

• (4) A public limited company shall not include any uncalled share capital as an asset in any account relevant for the purposes of this section.

47 Other distributions of investment companies.

47.—(1) Subject to the following provisions of this section, an investment company may also make a distribution at any time out of its accumulated, realised revenue profits, so far as not previously utilised by distribution or capitalisation, less its accumulated revenue losses (whether realised or unrealised), so far as not previously written off in a reduction or reorganisation of capital duly made—

• (a) if at that time the amount of its assets is at least equal to one and a half times the aggregate of its liabilities; and

• (b) if, and to the extent that, the distribution does not reduce that amount to less than one and a half times that aggregate.

• (2) In subsection (1) “liabilities” includes any provision (within the meaning of the Sixth Schedule to the Principal Act) except to the extent that that provision is taken into account for the purposes of that subsection in calculating the value of any asset of the company in question, and subsection (4) of section 46 shall apply for those purposes as it applies for the purposes of that section.

• (3) In this Part “investment company” means a public limited company which has given notice in writing (which has not been revoked) to the registrar of its intention to carry on business as an investment company (the “requisite notice”) and has since the date of that notice complied with the requirements set out in subsection (4).

• (4) The requirements referred to in subsection (3) are—

• (a) that the business of the company consists of investing its funds mainly in securities, with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds;

• (b) that none of the company's holdings in companies other than companies which are for the time being investment companies represents more than 15 per cent. by value of the investing company's investment;

• (c) that distribution of the company's capital profits is prohibited by its memorandum or articles of association;

• (d) that the company has not retained, otherwise than in compliance with this Part in respect of any financial year more than 15 per cent. of the income it derives from securities.

• (5) An investment company may not make a distribution by virtue of subsection (1) unless its shares are listed on a recognised stockexchange and, during the period beginning with the first day of the financial year immediately preceding the financial year in which the proposed distribution is to be made or, where the distribution is proposed to be made during the company's first financial year, the first day of that financial year and ending with the date of the distribution (whether or not any part of those financial years falls before the appointed day), it has not—

• (a) distributed any of its capital profits; or

• (b) applied any unrealised profits or any capital profits (realised or unrealised) in paying up debentures or any amounts unpaid on any of its issued shares.

• (6) An investment company may not make a distribution by virtue of subsection (1) unless the company gave the requisite notice—

• (a) before the beginning of the appropriate period referred to in subsection (5); or

• (b) where that period began before the appointed day, as soon as may be reasonably practicable after the appointed day; or

• (c) where the company was incorporated on or after the appointed day, as soon as may be reasonably practicable after the date of its incorporation.

• (7) A notice by a company to the registrar under subsection (3) may be revoked at any time by the company on giving notice to the registrar that it no longer wishes to be an investment company within the meaning of this section and, on giving such notice, the company shall cease to be such an investment company.

• (8) In determining capital and revenue profits and losses for the purposes of this section an asset which is not a fixed asset or a current asset shall be treated as a fixed asset.

• (9) An investment company shall include the expression “investment company” on its letters and order forms.

• (10) Where a company fails to comply with subsection (9), the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding £250.

• (11) Proceedings in relation to an offence under this section may be brought and prosecuted by the registrar of companies.

• (12) For the purposes of paragraph (b) of subsection (4)—

• (a) “holding” means the shares or securities (whether of one class or more than one class) held in any one company;

• (b) holdings in companies which are members of a group (whether or not including the investing company) and are not excluded from the said paragraph (b) shall be treated as holdings in a single company;

• (c) where the investing company is a member of a group, money owed to it by another member of the group shall be treated as a security of the latter held by the investing company and accordingly as, or as part of, the holding of the investing company in the company owing the money,and for the purposes of this subsection “group” means a company and all companies which are its subsidiaries within the meaning of section 155 of the Principal Act.

48 Realised profits of assurance companies.

48.—(1) In the case of an assurance company carrying on life assurance business, or industrial assurance business or both, any amount properly transferred to the profit and loss account of the company from a surplus in the fund or funds maintained by it in respect of that business and any deficit in that fund or those funds shall be respectively treated for the purposes of this Part as a realised profit and a realised loss, and, subject to the foregoing, any profit or loss arising on the fund or funds maintained by it in respect of that business shall be left out of account for those purposes.

• (2) In subsection (1)—

• (a) the reference to a surplus in any fund or funds of an assurance company is a reference to an excess of the assets representing that fund or those funds over the liabilities of the company attributable to its life assurance or industrial assurance business, as shown by an actuarial investigation; and

• (b) the reference to a deficit in any such fund or funds is a reference to the excess of those liabilities over those assets, as so shown.

• (3) In this section—

“actuarial investigation” means an investigation to which section 5 of the Assurance Companies Act, 1909 applies;

“life assurance business” and “industrial assurance business” have the same meanings as in section 3 of the Insurance Act, 1936.

49 The relevant accounts.

49.—(1) Subject to the following provisions of this section, the question whether a distribution may be made by a company without contravening section 45, 46 or 47 (the relevant section) and the amount of any distribution which may be so made shall be determined by reference to the relevant items as stated in the relevant accounts, and the relevant section shall be treated as contravened in the case of a distribution unless the requirements of this section about those accounts are complied with in the case of that distribution.

• (2) The relevant accounts for any company in the case of any particular distribution are—

• (a) except in a case falling within paragraph (b) or (c), the last annual accounts that is to say, the accounts prepared in accordance with the requirements of the Principal Act which were laid in respect of the last preceding financial year in respect of which accounts so prepared were laid;

• (b) if that distribution would be found to contravene the relevant section if reference were made only to the last annual accounts, such accounts (interim accounts) as are necessary to enable a reasonable judgment to be made as to the amounts of any of the relevant items;

• (c) if that distribution is proposed to be declared during the company's first financial year or before any accounts are laid in respect of that financial year, such accounts (initial accounts) as are necessary as aforesaid.

• (3) The following requirements apply where the last annual accounts of a company constitute the only relevant accounts in the case of any distribution, that is to say—

• (a) those accounts must have been properly prepared or have been so prepared subject only to matters which are not material for the purpose of determining, by reference to the relevant items as stated in those accounts, whether that distribution would be in contravention of the relevant section;

• (b) the auditors of the company must have made a report under section 163 of the Principal Act in respect of those accounts;

• (c) if, by virtue of anything referred to in that report, the report is not an unqualified report, the auditors must also have stated in writing (either at the time the report was made or subsequently) whether, in their opinion, that thing is material for the purpose of determining, by reference to the relevant items as stated in those accounts, whether that distribution would be in contravention of the relevant section; and

• (d) a copy of any such statement must have been laid before the company in general meeting.

• (4) A statement under subsection (3) (c) suffices for the purposes of a particular distribution not only if it relates to a distribution which has been proposed but also if it relates to distributions of any description which include that particular distribution, notwithstanding that at the time of the statement it has not been proposed.

• (5) The following requirements apply to interim accounts prepared for a proposed distribution by a public limited company, that is to say—

• (a) the accounts must have been properly prepared or have been so prepared subject only to matters which are not material for the purpose of determining, by reference to the relevant items as stated in those accounts, whether that distribution would be in contravention of the relevant section;

• (b) a copy of those accounts must have been delivered to the registrar of companies;

• (c) if the accounts are in a language other than the English or Irish language, a translation into English or Irish of the accounts which has been certified in the prescribed manner to be a correct translation must also have been delivered to the registrar.