Companies Act 1985

Part I — Formation and Registration of Companies; Juridical Status and Membership

Chapter I — Company Formation

Memorandum of association

Information as to compromise to be circulated.

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Reporting standards

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Limited partnerships: limit on number of members.

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Maturity analysis

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Procedure for objecting to alteration

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Provisions supplementing ss. 4, 5

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Articles of association

Articles prescribing regulations for companies

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Tables A, C, D and E

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Alteration of articles by special resolution

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Registration and its consequences

Documents to be sent to registrar

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Minimum authorised capital (public companies)

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Duty of registrar

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Effect of registration

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Managed funds

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Memorandum and articles of company limited by guarantee

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Managed funds

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Conditions in memorandum which could have been in articles

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Deferred acquisition costs

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Copies of memorandum and articles to be given to members

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Inclusion of financial instruments at fair value

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Registered documentation of Welsh companies

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A company’s membership

Assets included at a fixed amount

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Membership of holding company

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Investments

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Chapter II — Company Names

Name as stated in memorandum

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Prohibition on registration of certain names

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Long term business

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Long term business provision

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Regulations about names

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• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision for taxation

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Particulars of tax

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General

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Prohibition on trading under misleading name

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Relief from section 56 in respect of group reconstructions.

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Chapter III — A Company’s Capacity; Formalities of Carrying on Business

Company's capacity: power of directors to bind it

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Form of company contracts

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Duty to register

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Scope of Part

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General

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Relief from section 56 in respect of group reconstructions.

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Authentication of documents

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Events affecting a company's status

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Part II — Re-registration as a means of altering a company’s status

Private company becoming public

Re-registration of private company as public

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Consideration for shares recently allotted to be valued

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Additional requirements relating to share capital

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Meaning of " unqualified report " in s. 43(3)

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Certificate of re-registration under s. 43

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Modification for unlimited company re-registering

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Limited company becoming unlimited

Re-registration of limited company as unlimited

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Certificate of re-registration under s. 49

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Unlimited company becoming limited

Re-registration of unlimited company as limited

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Certificate of re-registration under s. 51

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Public company becoming private

Re-registration of public company as private

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Litigated objection to resolution under s. 53

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Certificate of re-registration under s. 53

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Part III — Capital Issues

Chapter I — Issues by Companies Registered, or to be Registered, in Great Britain

The prospectus

Matters to be stated, and reports to be set out, in prospectus

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• (1) Every prospectus issued by or on behalf of a company, or by or on behalf of any person who is or has been engaged or interested in the formation of the company, must comply—

• (a) with Part I of Schedule 3 to this Act, as respects the matters to be stated in the prospectus, and

• (b) with Part II of that Schedule, as respects the reports to be set out.

• (2) It is unlawful to issue any form of application for shares in or debentures of a company unless the form is issued with a prospectus which complies with the requirements of this section.

• (3) Subsection (2) does not apply if it is shown that the form of application was issued either—

• (a) in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures, or

• (b) in relation to shares or debentures which were not offered to the public.

• (4) If a person acts in contravention of subsection (2), he is liable to a fine.

• (5) This section does not apply—

• (a) to the issue to existing members or debenture holders of a company of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons, or

• (b) to the issue of a prospectus or form of application relating to shares or debentures which are or are to be in all respects uniform with shares or debentures previously issued and for the time being listed on a prescribed stock exchange;

but subject to this, it applies to a prospectus or a form of application whether issued on or with reference to the formation of a company or subsequently.

Attempted evasion of s. 56 to be void

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A condition requiring or binding an applicant for shares in or debentures of a company to waive compliance with any requirement of section 56, or purporting to affect him with notice of any contract, document or matter not specifically referred to in the prospectus, is void.

Document offering shares etc. for sale deemed a prospectus

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Rule governing what is an " offer to the public "

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Exceptions from rule in s. 59

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Prospectus containing statement by expert

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• (1) A prospectus inviting persons to subscribe for a company’s shares or debentures and including a statement purporting to be made by an expert shall not be issued unless—

• (a) he (the expert) has given and has not, before delivery of a copy of the prospectus for registration, withdrawn his written consent to its issue with the statement included in the form and context in which it is in fact included; and

• (b) a statement that he has given and not withdrawn that consent appears in the prospectus.

• (2) If a prospectus is issued in contravention of this section, the company and every person who is knowingly a party to the issue of the prospectus is liable to a fine.

Meaning of "expert"

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Prospectus to be dated

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A prospectus issued by or on behalf of a company, or in relation to an intended company, shall be dated; and that date shall, unless the contrary is proved, be taken as its date of publication.

Registration of prospectus

Registration requirement applicable in all cases

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• (1) No prospectus shall be issued by or on behalf of a company, or in relation to an intended company, unless on or before the date of its publication there has been delivered to the registrar of companies for registration a copy of the prospectus—

• (a) signed by every person who is named in it as a director or proposed director of the company, or by his agent authorised in writing, and

• (b) having endorsed on or attached to it any consent to its issue required by section 61 from any person as an expert.

• (2) Where the prospectus is such a document as is referred to in section 58, the signatures required by subsection (1) above include those of every person making the offer, or his agent authorised in writing.

Where the offer is made by a company or a firm, it is sufficient for the purposes of this subsection if the document is signed on its behalf by two directors or (as the case may be) not less than half of the partners; and a director or partner may sign by his agent authorised in writing.

• (3) Every prospectus shall on its face—

• (a) state that a copy has been delivered for registration as required by this section, and

• (b) specify, or refer to statements in the prospectus specifying, any documents required by this or the following section to be endorsed on or attached to the copy delivered.

• (4) The registrar shall not register a prospectus unless it is dated and the copy of it signed as required by this section and unless it has endorsed on or attached to it the documents (if any) specified in subsection (3)(b).

• (5) If a prospectus is issued without a copy of it being delivered to the registrar as required by this section, or without the copy so delivered having the required documents endorsed on or attached to it, the company and every person who is knowingly a party to the issue of the prospectus is liable to a fine and, for continued contravention, to a daily default fine.

Additional requirements in case of prospectus issued generally

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• (1) In the case of a prospectus issued generally (that is to persons who are not existing members or debenture holders of the company), the following provisions apply in addition to those of section 64.

• (2) The copy of the prospectus delivered to the registrar of companies must also have endorsed on or attached to it a copy of any contract required by paragraph 11 of Schedule 3 to be stated in the prospectus or, in the case of a contract not reduced into writing, a memorandum giving full particulars of it.

• (3) In the case of a contract wholly or partly in a foreign language—

• (a) the copy required by subsection (2) to be endorsed on or attached to the prospectus must be a copy of a translation of the contract into English or (as the case may be) a copy embodying a translation into English of the parts in a foreign language, and

• (b) the translation must be certified in the prescribed manner to be a correct translation.

• (4) If the persons making any report required by Part II of Schedule 3 have made in the report, or have (without giving reasons) indicated in it, any such adjustments as are mentioned in paragraph 21 of the Schedule (profits, losses, assets, liabilities), the copy of the prospectus delivered to the registrar must have endorsed on or attached to it a written statement signed by those persons setting out the adjustments and giving the reasons for them.

Liabilities and offences in connection with prospectus

Directors, etc. exempt from liability in certain cases

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• (1) In the event of non-compliance with or contravention of section 56, a director or other person responsible for the prospectus does not incur any liability by reason of that non-compliance or contravention if—

• (a) as regards any matter not disclosed, he proves that he was not cognisant of it, or

• (b) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part, or

• (c) the non-compliance or contravention was in respect of matters which, in the opinion of the court dealing with the case, were immaterial or was otherwise such as ought (in the court’s opinion, having regard to all the circumstances of the case) reasonably to be excused.

• (2) In the event of failure to include in a prospectus a statement with respect to the matters specified in paragraph 13 of Schedule 3 (disclosure of directors’ interests), no director or other person incurs any liability in respect of the failure unless it is proved that he had knowledge of the matters not disclosed.

• (3) Nothing in section 56 or 57 or this section limits or diminishes any liability which a person may incur under the general law or this Act apart from those provisions.

Compensation for subscribers misled by statement in prospectus

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• (1) Where a prospectus invites persons to subscribe for a company’s shares or debentures, compensation is payable to all those who subscribe for any shares or debentures on the faith of the prospectus for the loss or damage which they may have sustained by reason of any untrue statement included in it.

• (2) The persons liable to pay the compensation are—

• (a) every person who is a director of the company at the time of the issue of the prospectus,

• (b) every person who authorised himself to be named, and is named, in the prospectus as a director or as having agreed to become a director (either immediately or after an interval of time),

• (c) every person being a promoter of the company, and

• (d) every person who has authorised the issue of the prospectus.

• (3) The above has effect subject to the two sections next following; and here and in those sections “promoter” means a promoter who was party to the preparation of the prospectus, or of the portion of it containing the untrue statement, but does not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company.

Exemption from s. 67 for those acting with propriety

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• (1) A person is not liable under section 67 if he proves—

• (a) that, having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent, or

• (b) that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue he forthwith gave reasonable public notice that it was issued without his knowledge or consent, or

• (c) that after issue of the prospectus and before allotment under it he, on becoming aware of any untrue statement in it, withdrew his consent to its issue and gave reasonable public notice of the withdrawal and of the reason for it.

• (2) A person is not liable under that section if he proves that—

• (a) as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures (as the case may be) believe, that the statement was true; and

• (b) as regards every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or extract from a report or valuation of an expert, it fairly represented the statement, or was a correct and fair copy of or extract from the report or valuation, and he had reasonable ground to believe and did up to the time of issue of the prospectus believe that the person making the statement was competent to make it and that person had given the consent required by section 61 to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the defendant’s knowledge, before allotment under it; and

• (c) as regards every untrue statement purporting to be made by an official person or contained in what purports to be a copy of or extract from a public official document, it was a correct and fair representation of the statement or copy of or extract from the document.

• (3) Subsections (1) and (2) of this section do not apply in the case of a person liable, by reason of his having given a consent required of him by section 61, as a person who has authorised the issue of the prospectus in respect of an untrue statement purporting to be made by him as an expert.

• (4) Where under section 61 the consent of a person is required to the issue of a prospectus and he has given that consent, he is not by reason of his having given it liable under section 67 as a person who has authorised the issue of the prospectus except in respect of an untrue statement purporting to be made by him as an expert.

• (5) A person who, apart from this subsection, would under section 67 be liable, by reason of his having given a consent required of him by section 61, as a person who has authorised the issue of a prospectus in respect of an untrue statement purporting to be made by him as an expert is not so liable if he proves—

• (a) that, having given his consent under the section to the issue of the prospectus, he withdrew it in writing before the delivery of a copy of the prospectus for registration; or

• (b) that, after delivery of a copy of the prospectus for registration and before allotment under it, he, on becoming aware of the untrue statement, withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reason for it; or

• (c) that he was competent to make the statement and that he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures (as the case may be) believe, that the statement was true.

Indemnity for innocent director or expert

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• (1) This section applies where—

• (a) the prospectus contains the name of a person as a director of the company, or as having agreed to become a director of it, and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus, and has not authorised or consented to its issue, or

• (b) the consent of a person is required under section 61 to the issue of the prospectus and he either has not given that consent or has withdrawn it before the issue of the prospectus.

• (2) The directors of the company (except any without whose knowledge or consent the prospectus was issued) and any other person who authorised its issue are liable to indemnify the person named, or whose consent was required under section 61 (as the case may be), against all damages, costs and expenses to which he may be liable by reason of his name having been inserted in the prospectus or of the inclusion in it of a statement purporting to be made by him as an expert (as the case may be), or in defending himself against any action or legal proceedings brought against him in respect of it.

• (3) A person is not deemed for purposes of this section to have authorised the issue of a prospectus by reason only of his having given the consent required by section 61 to the inclusion of a statement purporting to be made by him as an expert.

Criminal liability for untrue statements

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• (1) If a prospectus is issued with an untrue statement included in it, any person who authorised the issue of the prospectus is guilty of an offence and liable to imprisonment or a fine, or both, unless he proves either—

• (a) that the statement was immaterial, or

• (b) that he had reasonable ground to believe and did, up to the time of the issue of the prospectus, believe that the statement was true.

• (2) A person is not deemed for purposes of this section to have authorised the issue of a prospectus by reason only of his having given the consent required by section 61 to the inclusion in it of a statement purporting to be made by him as an expert.

Supplementary

Interpretation for ss. 56 to 70

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For purposes of sections 56 to 70—

• (a) a statement included in a prospectus is deemed to be untrue if it is misleading in the form and context in which it is included, and

• (b) a statement is deemed to be included in a prospectus if it is contained in it, or in any report or memorandum appearing on its face, or by reference incorporated in, or issued with, the prospectus.

Chapter II — Issues by Companies Incorporated, or to be Incorporated, Outside Great Britain

Prospectus of oversea company

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• (1) It is unlawful for a person to issue, circulate or distribute in Great Britain any prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside Great Britain (whether the company has or has not established, or when formed will or will not establish, a place of business in Great Britain) unless the prospectus complies with the requirements of the next two subsections.

• (2) The prospectus must be dated and contain particulars with respect to the following matters—

• (a) the instrument constituting or defining the constitution of the company;

• (b) the enactments, or provisions having the force of an enactment, by or under which the incorporation of the company was effected;

• (c) an address in Great Britain where that instrument, and those enactments or provisions, or copies of them (and, if they are in a foreign language, a translation of them certified in the prescribed manner), can be inspected;

• (d) the date on which, and the country in which, the company was incorporated; and

• (e) whether the company has established a place of business in Great Britain and, if so, the address of its principal office in Great Britain.

• (3) Subject to the following provisions, the prospectus must comply—

• (a) with Part I of Schedule 3, as respects the matters to be stated in the prospectus, and

• (b) with Part II of that Schedule, as respects the reports to be set out.

• (4) Paragraphs (a) to (c) of subsection (2) do not apply in the case of a prospectus issued more than 2 years after the company is entitled to commence business.

• (5) It is unlawful for a person to issue to any person in Great Britain a form of application for shares in or debentures of such a company or intended company as is mentioned in subsection (1) unless the form is issued with a prospectus which complies with this Chapter and the issue of which in Great Britain does not contravene section 74 or 75 below.

This subsection does not apply if it is shown that the form of application was issued in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures.

• (6) This section—

• (a) does not apply to the issue to a company’s existing members or debenture holders of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons; and

• (b) except in so far as it requires a prospectus to be dated, does not apply to the issue of a prospectus relating to shares or debentures which are or are to be in all respects uniform with shares or debentures previously issued and for the time being listed on a prescribed stock exchange;

but subject to this, it applies to a prospectus or form of application whether issued on or with reference to the formation of a company or subsequently.

Attempted evasion of s. 72 to be void

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A condition requiring or binding an applicant for shares or debentures to waive compliance with any requirement imposed—

• (a) by subsection (2) of section 72, as regards the particulars to be contained in the prospectus, or

• (b) by subsection (3) of that section, as regards compliance with Schedule 3,

or purporting to affect an applicant with notice of any contract, document or matter not specifically referred to in the prospectus, is void.

Prospectus containing statement by expert

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• (1) This section applies in the case of a prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside Great Britain (whether it has or has not established, or when formed will or will not establish, a place of business in Great Britain), if the prospectus includes a statement purporting to be made by an expert.

• (2) It is unlawful for any person to issue, circulate or distribute in Great Britain such a prospectus if—

• (a) the expert has not given, or has before delivery of the prospectus for registration withdrawn, his written consent to the issue of the prospectus with the statement included in the form and context in which it is included, or

• (b) there does not appear in the prospectus a statement that he has given and has not withdrawn his consent as above mentioned.

• (3) For purposes of this section, a statement is deemed to be included in a prospectus if it is contained in it, or in any report or memorandum appearing on its face, or by reference incorporated in, or issued with, the prospectus.

Restrictions on allotment to be secured in prospectus

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• (1) It is unlawful for a person to issue, circulate or distribute in Great Britain a prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside Great Britain (whether the company has or has not established, or when formed will or will not establish, a place of business in Great Britain), unless the prospectus complies with the following condition.

• (2) The prospectus must have the effect, where an application is made in pursuance of it, of rendering all persons concerned bound by all the provisions (other than penal provisions) of sections 82, 86 and 87 (restrictions on allotment), so far as applicable.

Stock exchange certificate exempting from compliance with Sch. 3

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• (1) The following applies where—

• (a) it is proposed to offer to the public by a prospectus issued generally any shares in or debentures of a company incorporated or to be incorporated outside Great Britain (whether the company has or has not established, or when formed will or will not establish, a place of business in Great Britain), and

• (b) application is made to a prescribed stock exchange for permission for those shares or debentures to be listed on that stock exchange.

“Issued generally” means issued to persons who are not existing members or debenture holders of the company.

• (2) There may on the applicant’s request be given by or on behalf of that stock exchange a certificate that, having regard to the proposals (as stated in the request) as to the size and other circumstances of the issue of shares or debentures and as to any limitation on the number and class of persons to whom the offer is to be made, compliance with Schedule 3 would be unduly burdensome.

• (3) If a certificate is given under subsection (2), and if the proposals above mentioned are adhered to and the particulars and information required to be published in connection with the application for permission to the stock exchange are so published, then—

• (a) a prospectus giving the particulars and information in the form in which they are so required to be published is deemed to comply with Schedule 3, and

• (b) except as respects the requirement for the prospectus to be dated, section 72 does not apply to any issue, after the permission applied for is given, of a prospectus or form of application relating to the shares or debentures.

Registration of oversea prospectus before issue

77

• (1) It is unlawful for a person to issue, circulate or distribute in Great Britain a prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside Great Britain (whether the company has or has not established, or when formed will or will not establish, a place of business in Great Britain), unless before the issue, circulation or distribution the requirements of this section have been complied with.

• (2) A copy of the prospectus, certified by the chairman and two other directors of the company as having been approved by resolution of the managing body, must have been delivered for registration to the registrar of companies.

• (3) The prospectus must state on the face of it that a copy has been so delivered to the registrar of companies; and the following must be endorsed on or attached to that copy of the prospectus—

• (a) any consent to the issue of the prospectus which is required by section 74;

• (b) a copy of any contract required by paragraph 11 of Schedule 3 to be stated in the prospectus or, in the case of a contract not reduced into writing, a memorandum giving full particulars of it; and

• (c) where the persons making any report required by Part II of Schedule 3 have made in it or have, without giving the reasons, indicated in it any such adjustments as are mentioned in paragraph 21 of the Schedule, a written statement signed by those persons setting out the adjustments and giving the reasons for them.

• (4) If in the case of a prospectus deemed by virtue of a certificate under section 76 to comply with Schedule 3, a contract or a copy of it, or a memorandum of a contract, is required to be available for inspection in connection with application under that section to the stock exchange, a copy or (as the case may be) a memorandum of the contract must be endorsed on or attached to the copy of the prospectus delivered to the registrar for registration.

• (5) References in subsections (3)(b) and (4) to the copy of a contract are, in the case of a contract wholly or partly in a foreign language, to a copy of a translation of the contract into English, or a copy embodying a translation into English of the parts in a foreign language (as the case may be); and—

• (a) the translation must in either case be certified in the prescribed manner to be a correct translation, and

• (b) the reference in subsection (4) to a copy of a contract required to be available for inspection includes a copy of a translation of it or a copy embodying a translation of parts of it.

Consequences (criminal and civil) of non-compliance with ss. 72 to 77

78

• (1) A person who is knowingly responsible for the issue, circulation or distribution of a prospectus, or for the issue of a form of application for shares or debentures, in contravention of any of sections 72 to 77 is liable to a fine.

• (2) Sections 67, 68 and 69 extend to every prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside Great Britain (whether the company has or has not established, or when formed will or will not establish, a place of business in Great Britain), substituting for any reference to section 61 a reference to section 74.

• (3) In the event of non-compliance with or contravention of any of the requirements of section 72(2) as regards the particulars to be contained in the prospectus, or section 72(3) as regards compliance with Schedule 3, a director or other person responsible for the prospectus incurs no liability by reason of the non-compliance or contravention if—

• (a) as regards any matter not disclosed, he proves that he was not cognisant of it, or

• (b) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part, or

• (c) the non-compliance or contravention was in respect of matters which, in the opinion of the court dealing with the case, were immaterial or were otherwise such as ought, in the court’s opinion, having regard to all the circumstances of the case, reasonably to be excused.

• (4) In the event of failure to include in a prospectus to which this Chapter applies a statement with respect to the matters contained in paragraph 13 of Schedule 3, no director or other person incurs any liability in respect of the failure unless it is proved that he had knowledge of the matters not disclosed.

• (5) Nothing in section 72 or 73 or this section, limits or diminishes any liability which a person may incur under the general law or this Act, apart from those provisions.

Supplementary

79

• (1) Where a document by which the shares or debentures of a company incorporated outside Great Britain are offered for sale to the public would, if the company had been a company incorporated under this Act, have been deemed by virtue of section 58 to be a prospectus issued by the company, that document is deemed, for the purposes of this Chapter, a prospectus so issued.

• (2) An offer of shares or debentures for subscription or sale to a person whose ordinary business it is to buy or sell shares or debentures (whether as principal or agent) is not deemed an offer to the public for those purposes.

• (3) In this Chapter “shares” and “debentures” have the same meaning as when those expressions are used, elsewhere in this Act, in relation to a company incorporated under this Act.

Part IV — Allotment of Shares and Debentures

General provisions as to allotment

Authority of company required for certain allotments

80

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restriction on public offers by private company

81

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Application for, and allotment of, shares and debentures

82

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

No allotment unless minimum subscription received

83

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allotment where issue not fully subscribed

84

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effect of irregular allotment

85

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allotment of shares, etc. to be dealt in on stock exchange

86

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operation of s. 86 where prospectus offers shares for sale

87

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Return as to allotments, etc.

88

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pre-emption rights

Offers to shareholders to be on pre-emptive basis

89

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Communication of pre-emption offers to shareholders

90

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exclusion of ss. 89, 90 by private company

91

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequences of contravening ss. 89, 90

92

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Saving for other restrictions as to offers

93

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Definitions for ss. 89-96

94

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disapplication of pre-emption rights

95

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Saving for company's pre-emption procedure operative before 1982

96

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commissions and discounts

Power of company to pay commissions

97

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Apart from s. 97, commissions and discounts barred

98

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount to be paid for shares; the means of payment

General rules as to payment for shares on allotment

99

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prohibition on allotment of shares at a discount

100

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares to be allotted as at least one-quarter paid-up

101

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restriction on payment by long-term undertaking

102

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-cash consideration to be valued before allotment

103

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfer to public company of non-cash asset in initial period

104

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Agreements contravening s. 104

105

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares issued to subscribers of memorandum

106

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of " the appropriate rate "

107

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation provisions

Valuation and report (s. 103)

108

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation and report (s. 104)

109

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Entitlement of valuer to full disclosure

110

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Matters to be communicated to registrar

111

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other matters arising out of allotment &c.

Liability of subsequent holders of shares allotted

112

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relief in respect of certain liabilities under ss. 99 ff

113

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Penalty for contravention

114

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Undertakings to do work, etc.

115

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Application of ss. 99 ff to special cases

116

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part V — Share Capital, its Increase, Maintenance and Reduction

Chapter I — General Provisions about Share Capital

Public company share capital requirements

117

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The authorised minimum

118

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision for different amounts to be paid on shares

119

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reserve liability of limited company

120

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alteration of share capital (limited companies)

121

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notice to registrar of alteration

122

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notice to registrar of increased share capital

123

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reserve capital of unlimited company

124

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter II — Class Rights

Variation of class rights

125

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Saving for court's powers under other provisions

126

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shareholders' right to object to variation

127

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Registration of particulars of special rights

128

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Registration of newly created class rights

129

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter III — Share Premiums

Application of share premiums

130

• (1) If a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account called “the share premium account”.

• (2) The share premium account may be applied by the company in paying up unissued shares to be allotted to members as fully paid bonus shares, or is writing off—

• (a) the company’s preliminary expenses; or

• (b) the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company,

or in providing for the premium payable on redemption of debentures of the company.

• (3) Subject to this, the provisions of this Act relating to the reduction of a company’s share capital apply as if the share premium account were part of its paid up share capital.

• (4) Sections 131 and 132 below give relief from the requirements of this section, and in those sections references to the issuing company are to the company issuing shares as above mentioned.

Merger relief

131

• (1) With the exception made by section 132(8) (group reconstruction) this section applies where the issuing company has secured at least a 90 per cent. equity holding in another company in pursuance of an arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be provided—

• (a) by the issue or transfer to the issuing company of equity shares in the other company, or

• (b) by the cancellation of any such shares not held by the issuing company.

• (2) If the equity shares in the issuing company allotted in pursuance of the arrangement in consideration for the acquisition or cancellation of equity shares in the other company are issued at a premium, section 130 does not apply to the premiums on those shares.

• (3) Where the arrangement also provides for the allotment of any shares in the issuing company on terms that the consideration for those shares is to be provided by the issue or transfer to the issuing company of non-equity shares in the other company or by the cancellation of any such shares in that company not held by the issuing company, relief under subsection (2) extends to any shares in the issuing company allotted on those terms in pursuance of the arrangement.

• (4) Subject to the next subsection, the issuing company is to be regarded for purposes of this section as having secured at least a 90 per cent. equity holding in another company in pursuance of such an arrangement as is mentioned in subsection (1) if in consequence of an acquisition or cancellation of equity shares in that company (in pursuance of that arrangement) it holds equity shares in that company (whether all or any of those shares were acquired in pursuance of that arrangement, or not) of an aggregate nominal value equal to 90 per cent. or more of the nominal value of that company’s equity share capital (excluding any shares in that company held as treasury shares).

• (5) Where the equity share capital of the other company is divided into different classes of shares, this section does not apply unless the requirements of subsection (1) are satisfied in relation to each of those classes of shares taken separately.

• (6) Shares held by a company which is the issuing company’s holding company or subsidiary, or a subsidiary of the issuing company’s holding company, or by its or their nominees, are to be regarded for purposes of this section as held by the issuing company.

• (7) In relation to a company and its shares and capital, the following definitions apply for purposes of this section—

• (a) “equity shares” means shares comprised in the company’s equity share capital; and

• (b) “non-equity shares” means shares (of any class) not so comprised;

and “arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement with creditors or members) or section 110 of the Insolvency Act (liquidator accepting shares etc. as consideration for sale of company property)).

• (8) The relief allowed by this section does not apply if the issue of shares took place before 4th February 1981.

Relief in respect of group reconstructions

132

• (1) This section applies where the issuing company—

• (a) is a wholly-owned subsidiary of another company (“the holding company”), and

• (b) allots shares to the holding company or to another wholly-owned subsidiary of the holding company in consideration for the transfer to the issuing company of assets other than cash, being assets of any company (“the transferor company”) which is a member of the group of companies which comprises the holding company and all its wholly-owned subsidiaries.

• (2) Where the shares in the issuing company allotted in consideration for the transfer are issued at a premium, the issuing company is not required by section 130 to transfer any amount in excess of the minimum premium value to the share premium account.

• (3) In subsection (2), “the minimum premium value” means the amount (if any) by which the base value of the consideration for the shares allotted exceeds the aggregate nominal value of those shares.

• (4) For the purposes of subsection (3), the base value of the consideration for the shares allotted is the amount by which the base value of the assets transferred exceeds the base value of any liabilities of the transferor company assumed by the issuing company as part of the consideration for the assets transferred.

• (5) For the purposes of subsection (4)—

• (a) the base value of the assets transferred is to be taken as—

• (i) the cost of those assets to the transferor company, or

• (ii) the amount at which those assets are stated in the transferor company’s accounting records immediately before the transfer,

whichever is the less; and

• (b) the base value of the liabilities assumed is to be taken as the amount at which they are stated in the transferor company’s accounting records immediately before the transfer.

• (6) The relief allowed by this section does not apply (subject to the next subsection) if the issue of shares took place before the date of the coming into force of the Companies (Share Premium Account) Regulations 1984 (which were made on 21st December 1984).

• (7) To the extent that the relief allowed by this section would have been allowed by section 38 of the Companies Act 1981 as originally enacted (the text of which section is set out in Schedule 25 to this Act), the relief applies where the issue of shares took place before the date of the coming into force of those Regulations, but not if the issue took place before 4th February 1981.

• (8) Section 131 does not apply in a case falling within this section.

Provisions supplementing ss. 131, 132

133

• (1) An amount corresponding to one representing the premiums or part of the premiums on shares issued by a company which by virtue of section 131 or 132 of this Act, or section 12 of the Consequential Provisions Act, is not included in the company’s share premium account may also be disregarded in determining the amount at which any shares or other consideration provided for the shares issued is to be included in the company’s balance sheet.

• (2) References in this Chapter (however expressed) to—

• (a) the acquisition by a company of shares in another company; and

• (b) the issue or allotment of shares to, or the transfer of shares to or by, a company,

include (respectively) the acquisition of any of those shares by, and the issue or allotment or (as the case may be) the transfer of any of those shares to or by, nominees of that company; and the reference in section 132 to the company transferring the shares is to be construed accordingly.

• (3) References in this Chapter to the transfer of shares in a company include the transfer of a right to be included in the company’s register of members in respect of those shares.

• (4) In sections 131 to 133 “company”, except in references to the issuing company, includes any body corporate.

Provision for extending or restricting relief from s. 130

134

• (1) The Secretary of State may by regulations in a statutory instrument make such provision as appears to him to be appropriate—

• (a) for relieving companies from the requirements of section 130 in relation to premiums other than cash premiums, or

• (b) for restricting or otherwise modifying any relief from those requirements provided by this Chapter.

• (2) Regulations under this section may make different provision for different cases or classes of case and may contain such incidental and supplementary provisions as the Secretary of State thinks fit.

• (3) No such regulations shall be made unless a draft of the instrument containing them has been laid before Parliament and approved by a resolution of each House.

Chapter IV — Reduction of Share Capital

Special resolution for reduction of share capital

135

• (1) Subject to confirmation by the court, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles, by special resolution reduce its share capital in any way.

• (2) In particular, and without prejudice to subsection (1), the company may—

• (a) extinguish or reduce the liability on any of its shares in respect of share capital not paid up; or

• (b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or unrepresented by available assets; or

• (c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the company’s wants;

and the company may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.

• (3) A special resolution under this section is in this Act referred to as “a resolution for reducing share capital”.

Application to court for order of confirmation

136

• (1) Where a company has passed a resolution for reducing share capital, it may apply to the court for an order confirming the reduction.

• (2) If the proposed reduction of share capital involves either—

• (a) diminution of liability in respect of unpaid share capital; or

• (b) the payment to a shareholder of any paid-up share capital,

and in any other case if the court so directs, the next three subsections have effect, but subject throughout to subsection (6).

• (3) Every creditor of the company who —

• (a) at the date fixed by the court is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the company, and

• (b) can show that there is a real likelihood that the reduction would result in the company being unable to discharge his debt or claim when it fell due,

is entitled to object to the reduction of capital.

• (4) The court shall settle a list of creditors entitled to object, and for that purpose—

• (a) shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims; and

• (b) may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction of capital.

• (5) If a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction, the court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating (as the court may direct) the following amount—

• (a) if the company admits the full amount of the debt or claim or, though not admitting it, is willing to provide for it, then the full amount of the debt or claim;

• (b) if the company does not admit, and is not willing to provide for, the full amount of the debt or claim, or if the amount is contingent or not ascertained, then an amount fixed by the court after the like enquiry and adjudication as if the company were being wound up by the court.

• (6) If a proposed reduction of share capital involves either the diminution of any liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, the court may, if having regard to any special circumstances of the case it thinks proper to do so, direct that subsections (3) to (5) of this section shall not apply as regards any class or any classes of creditors.

Court order confirming reduction

137

• (1) The court, if satisfied with respect to every creditor of the company who under section 136 is entitled to object to the reduction of capital that either—

• (a) his consent to the reduction has been obtained; or

• (b) his debt or claim has been discharged or has determined, or has been secured,

may make an order confirming the reduction on such terms and conditions as it thinks fit.

• (2) Where the court so orders, it may also—

• (a) if for any special reason it thinks proper to do so, make an order directing that the company shall, during such period (commencing on or at any time after the date of the order) as is specified in the order, add to its name as its last words the words “and reduced”; and

• (b) make an order requiring the company to publish (as the court directs) the reasons for reduction of capital or such other information in regard to it as the court thinks expedient with a view to giving proper information to the public and (if the court thinks fit) the causes which led to the reduction.

• (3) Where a company is ordered to add to its name the words “and reduced”, those words are, until the expiration of the period specified in the order, deemed to be part of the company’s name.

Registration of order and minute of reduction

138

• (1) The registrar of companies, on production to him of an order of the court confirming the reduction of a company’s share capital, and the delivery to him of a copy of the order and of a minute (approved by the court) showing, with respect to the company’s share capital as altered by the order—

• (a) the amount of the share capital;

• (b) the number of shares into which it is to be divided, and the amount of each share; and

• (c) the amount (if any) at the date of the registration deemed to be paid up on each share,

shall register the order and minute (but subject to section 139).

• (2) On the registration of the order and minute, and not before, the resolution for reducing share capital as confirmed by the order so registered takes effect.

• (3) Notice of the registration shall be published in such manner as the court may direct.

• (4) The registrar shall certify the registration of the order and minute; and the certificate—

• (a) may be either signed by the registrar, or authenticated by his official seal;

• (b) is conclusive evidence that all the requirements of this Act with respect to the reduction of share capital have been complied with, and that the company’s share capital is as stated in the minute.

• (5) The minute when registered is deemed to be substituted for the corresponding part of the company’s memorandum, and is valid and alterable as if it had been originally contained therein.

• (6) The substitution of such a minute for part of the company’s memorandum is deemed an alteration of the memorandum for purposes of section 20.

Public company reducing capital below authorised minimum

139

• (1) This section applies where the court makes an order confirming a reduction of a public company’s capital which has the effect of bringing the nominal value of its allotted share capital below the authorised minimum.

• (2) The registrar of companies shall not register the order under section 138 unless the court otherwise directs, or the company is first re-registered as a private company.

• (3) The court may authorise the company to be so re-registered without its having passed the special resolution required by section 53; and where that authority is given, the court shall specify in the order the alterations in the company’s memorandum and articles to be made in connection with that re-registration.

• (4) The company may then be re-registered as a private company, if an application in the prescribed form and signed by a director or secretary of the company is delivered to the registrar, together with a printed copy of the memorandum and articles as altered by the court’s order.

• (5) On receipt of such an application, the registrar shall retain it and the other documents delivered with it and issue the company with a certificate of incorporation appropriate to a company that is not a public company; and—

• (a) the company by virtue of the issue of the certificate becomes a private company, and the alterations in the memorandum and articles set out in the court’s order take effect; and

• (b) the certificate is conclusive evidence that the requirements of this section in respect of re-registration and of matters precedent and incidental thereto have been complied with, and that the company is a private company.

Liability of members on reduced shares

140

• (1) Where a company’s share capital is reduced, a member of the company (past or present) is not liable in respect of any share to any call or contribution exceeding in amount the difference (if any) between the amount of the share as fixed by the minute and the amount paid on the share or the reduced amount (if any), which is deemed to have been paid on it, as the case may be.

• (2) But the following two subsections apply if—

• (a) a creditor, entitled in respect of a debt or claim to object to the reduction of share capital, by reason of his ignorance of the proceedings for reduction of share capital, or of their nature and effect with respect to his claim, is not entered on the list of creditors; and

• (b) after the reduction of capital, the company is unable (within the meaning of section 123 of the Insolvency Act) to pay the amount of his debt or claim.

• (3) Every person who was a member of the company at the date of the registration of the order for reduction and minute is then liable to contribute for the payment of the debt or claim in question an amount not exceeding that which he would have been liable to contribute if the company had commenced to be wound up on the day before that date.

• (4) If the company is wound up, the court, on the application of the creditor in question and proof of ignorance referred to in subsection (2)(a), may (if it thinks fit) settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up.

• (5) Nothing in this section affects the rights of the contributories among themselves.

Penalty for concealing name of creditor, etc.

141

If an officer of the company—

• (a) wilfully conceals the name of a creditor entitled to object to the reduction of capital; or

• (b) wilfully misrepresents the nature or amount of the debt or claim of any creditor; or

• (c) aids, abets or is privy to any such concealment or misrepresentation as is mentioned above,

he is guilty of an offence and liable to a fine.

Chapter V — Maintenance of Capital

Duty of directors on serious loss of capital

142

• (1) Where the net assets of a public company are half or less of its called-up share capital, the directors 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 the purpose of considering whether any, and if so what, steps should be taken to deal with the situation.

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

• (a) knowingly and wilfully authorises or permits the failure, or

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

is liable to a fine.

• (3) Nothing in this section authorises 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.

General rule against company acquiring own shares

143

• (1) Subject to the following provisions, a company limited by shares or limited by guarantee and having a share capital shall not acquire its own shares, whether by purchase, subscription or otherwise.

• (2) If a company purports to act in contravention of this section, the company is liable to a fine, and every officer of the company who is in default is liable to imprisonment or a fine, or both; and , subject to subsection (2A), the purported acquisition is void.

• (2A) Where a company purchases qualifying shares out of distributable profits under section 162, any contravention by the company of any provision of section 162B(1) or (2) shall not render the acquisition void under subsection (2) above.

• (3) A company limited by shares may acquire any of its own fully paid shares otherwise than for valuable consideration; and subsection (1) does not apply in relation to—

• (a) the redemption or purchase of shares in accordance with Chapter VII of this Part,

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

• (c) the purchase of shares in pursuance of an order of the court under section 5 (alteration of objects), section 54 (litigated objection to resolution for company to be re-registered as private) or section 996 of the Companies Act 2006 (relief to members unfairly prejudiced), or

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

Acquisition of shares by company's nominee

144

• (1) Subject to section 145, where shares are issued to a nominee of a company mentioned in section 143(1), or are acquired by a nominee of such a company from a third person as partly paid up, then, for all purposes—

• (a) the shares are to be treated as held by the nominee on his own account; and

• (b) the company is to be regarded as having no beneficial interest in them.

• (2) Subject to that section, if a person is called on to pay any amount for the purpose of paying up, or paying any premium on, any shares in such a company which were issued to him, or which he otherwise acquired, as the company’s nominee 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 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,

are 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—

• (a) that he is or may be liable to pay that amount, but

• (b) that he has acted honestly and reasonably and, 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 the court has the same power to relieve him as it would have had in proceedings for the recovery of that amount.

Exceptions from s. 144

145

• (1) Section 144(1) does not apply to shares acquired otherwise than by subscription by a nominee of a public company, where a 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 the shares.

• (2) Section 144(1) and (2) do not apply—

• (a) to shares acquired by a nominee of a company when the company has no beneficial interest in those shares, or

• (b) to shares issued in consequence of an application made before 22nd December 1980, or transferred in pursuance of an agreement to acquire them made before that date.

• (3) Schedule 2 to this Act has effect for the interpretation of references in this section to a company having, or not having, a beneficial interest in shares.

Treatment of shares held by or for public company

146

• (1) Except as provided by section 148, the following applies to a public company—

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

• (aa) where shares in the company are surrendered to the company in pursuance of section 102C(1)(b) of the Building Societies Act 1986;

• (b) where shares in the company are acquired by it (otherwise than by any of the methods mentioned in section 143(3)(a) to (d)) and the company has a beneficial interest in the 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 the shares; or

• (d) where a 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 the shares.

Schedule 2 to this Act has effect for the interpretation of references in this subsection to the company having a beneficial interest in shares.

• (2) 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 within subsection (1)(b), (c) or (d), their acquisition—

• (a) cancel them and diminish the amount of the share capital by the nominal value of the shares cancelled, 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 a private company, stating the effect of the cancellation.

• (3) For this purpose “the relevant period” is—

• (a) 3 years 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);

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

• (4) The company and, in a case 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 is void.

Matters arising out of compliance with s. 146(2)

147

• (1) The directors may take such steps as are requisite to enable the company to carry out its obligations under section 146(2) without complying with sections 135 and 136 (resolution to reduce share capital; application to court for approval).

• (2) The steps taken may include the passing of a resolution to alter the company’s memorandum so that it no longer states that the company is to be a public company; and the resolution may make such other alterations in the memorandum as are requisite in the circumstances.Chapter 3 of Part 3 of the Companies Act 2006 (resolutions affecting a company's constitution) applies to such a resolution.

• (3) The application for re-registration required by section 146(2)(b) must be in the prescribed form and be signed by a director or secretary of the company, and must be delivered to the registrar of companies together with a printed copy of the memorandum and articles of the company as altered by the resolution.

• (4) If the registrar is satisfied that the company may be re-registered under section 146, he shall retain the application and other documents delivered with it and issue the company with a certificate of incorporation appropriate to a company that is not a public company; and—

• (a) the company by virtue of the issue of the certificate becomes a private company, and the alterations in the memorandum and articles set out in the resolution take effect accordingly, and

• (b) the certificate is conclusive evidence that the requirements of sections 146 to 148 in respect of re-registration and of matters precedent and incidental to it have been complied with, and that the company is a private company.

Further provisions supplementing ss. 146, 147

148

• (1) Where, after shares in a private company—

• (a) are forfeited in pursuance of the company’s articles or are surrendered to the company in lieu of forfeiture, or

• (b) are acquired by the company (otherwise than by such surrender or forfeiture, and otherwise than by any of the methods mentioned in section 143(3)), the company having a beneficial interest in the shares, or

• (c) are acquired by the nominee of a company in the circumstances mentioned in section 146(1)(c), or

• (d) are acquired by any person in the circumstances mentioned in section 146(1)(d),

the company is re-registered as a public company, sections 146 and 147, and also section 149, apply to the company as if it had been a public company at the time of the forfeiture, surrender or acquisition, but with the modification required by the following subsection.

• (2) That modification is to treat any reference to the relevant period from the forfeiture, surrender or acquisition as referring to the relevant period from the re-registration of the company as a public company.

• (3) Schedule 2 to this Act has effect for the interpretation of the reference in subsection (1)(b) to the company having a beneficial interest in shares.

• (4) Where a public company or a nominee of a public 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 them shall be transferred out of profits available for dividend to a reserve fund and are not then available for distribution.

Sanctions for non-compliance

149

• (1) If a public company required by section 146(2) to apply to be re-registered as a private company fails to do so before the end of the relevant period referred to in that subsection, Chapter 1 of Part 20 of the Companies Act 2006 (restriction on public offers) applies to it as if it were a private company such as is mentioned in that section; but, subject to this, the company continues to be treated for the purpose of this Act as a public company until it is so re-registered.

• (2) If a company when required to do so by section 146(2) (including that subsection as applied by section 148(1)) 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 it, the company and every officer of it who is in default is liable to a fine and, for continued contravention, to a daily default fine.

Charges of public companies on own shares

150

• (1) A lien or other charge of a public company on its own shares (whether taken expressly or otherwise), except a charge permitted by any of the following subsections, is void.

This is subject to section 6 of the Consequential Provisions Act (saving for charges of old public companies on their own shares).

• (2) In the case of any description of company, a charge on its own shares is permitted if the shares are not fully paid and the charge is for any amount payable in respect of the shares.

• (3) In the case of a company whose ordinary business—

• (a) includes the lending of money, or

• (b) consists of the provision of credit or the bailment (in Scotland, hiring) of goods under a hire purchase agreement, or both,

a charge of the company on its own shares is permitted (whether the shares are fully paid or not) if it arises in connection with a transaction entered into by the company in the ordinary course of its business.

• (4) In the case of a company which is re-registered or is registered under section 680 as a public company, a charge on its own shares is permitted if the charge was in existence immediately before the company’s application for re-registration or (as the case may be) registration.

This subsection does not apply in the case of such a company as is referred to in section 6(3) of the Consequential Provisions Act (old public company remaining such after 22nd March 1982, not having applied to be re-registered as public company).

Chapter VI — Financial Assistance by a Company for Acquisition of its Own Shares

Provisions applying to both public and private companies

Financial assistance generally prohibited

151

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Definitions for this Chapter

152

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transactions not prohibited by s. 151

153

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Special restriction for public companies

154

• (1) In the case of a public company, section 153(4) authorises the giving of financial assistance only if the company has net assets which are not thereby reduced or, to the extent that those assets are thereby reduced, if the assistance is provided out of distributable profits.

• (2) For this purpose the following definitions apply—

• (a) “net assets” means the amount by which the aggregate of the company’s assets exceeds the aggregate of its liabilities (taking the amount of both assets and liabilities to be as stated in the company’s accounting records immediately before the financial assistance is given);

• (b) “liabilities” includes any amount retained as reasonably necessary for the purpose of providing for any liability the nature of which is clearly defined and which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise.

Private companies

Relaxation of s. 151 for private companies

155

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statutory declaration under s. 155

156

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Special resolution under s. 155

157

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Time for giving financial assistance under s. 155

158

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter VII — Redeemable Shares; Purchase by a Company of its Own Shares

Redemption and purchase generally

Power to issue redeemable shares

159

• (1) Subject to the provisions of this Chapter, a company limited by shares or limited by guarantee and having a share capital may, if authorised to do so by its articles, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or the shareholder.

• (2) No redeemable shares may be issued at a time when there are no issued shares of the company which are not redeemable.

• (3) Redeemable shares may not be redeemed unless they are fully paid; and the terms of redemption must provide for payment on redemption.

Financing, etc., of redemption

160

• (1) Subject to the next subsection and to sections 171 (private companies redeeming or purchasing own shares out of capital) and 178(4) (terms of redemption or purchase enforceable in a winding up)—

• (a) redeemable shares may only be redeemed out of distributable profits of the company or out of the proceeds of a fresh issue of shares made for the purposes of the redemption; and

• (b) any premium payable on redemption must be paid out of distributable profits of the company.

• (2) If the redeemable shares were issued at a premium, any premium payable on their redemption may be paid out of the proceeds of a fresh issue of shares made for the purposes of the redemption, up to an amount equal to—

• (a) the aggregate of the premiums received by the company on the issue of the shares redeemed, or

• (b) the current amount of the company’s share premium account (including any sum transferred to that account in respect of premiums on the new shares),

whichever is the less; and in that case the amount of the company’s share premium account shall be reduced by a sum corresponding (or by sums in the aggregate corresponding) to the amount of any payment made by virtue of this subsection out of the proceeds of the issue of the new shares.

• (3) Subject to the following provisions of this Chapter, redemption of shares may be effected on such terms and in such manner as may be provided by the company’s articles.

• (4) Shares redeemed under this sectionredeemed under this Chapter shall be treated as cancelled on redemption, and the amount of the company’s issued share capital shall be diminished by the nominal value of those shares accordingly; but the redemption of shares by a company is not to be taken as reducing the amount of the company’s authorised share capital.

• (5) Without prejudice to subsection (4), where a company is about to redeem shares, it has power to issue shares up to the nominal value of the shares to be redeemed as if those shares had never been issued.

Stamp duty on redemption of shares

161

Power of company to purchase own shares

162

• (1) Subject to the following provisions of this Chapter, a company limited by shares or limited by guarantee and having a share capital may, if authorised to do so by its articles, purchase its own shares (including any redeemable shares).

• (2) Sections 159 and 160 apply to the purchase by a company under this section of its own shares as they apply to the redemption of redeemable shares.

This is subject to subsections (2A) and (2B).

• (2A) The terms and manner of a purchase under this section need not be determined by the articles as required by section 160(3).

• (2B) Where a company makes a purchase of qualifying shares out of distributable profits under this section, section 162A applies to the shares purchased; and accordingly section 160(4) does not apply to those shares.

• (3) A company may not under this section purchase its shares if as a result of the purchase there would no longer be any member of the company holding shares other than redeemable shares or shares held as treasury shares .

• (4) For the purposes of this Chapter “qualifying shares” are shares which—

• (a) are included in the official list in accordance with the provisions of Part 6 of the Financial Services and Markets Act 2000 ,