Small Business, Enterprise and Employment Act 2015

SCHEDULE 1A (1) This Part of this Schedule specifies the conditions at least one of which must be met by an individual (“X”) in relation to a company (“company Y”) in order for the individual to be a person with “significant control” over the company. (2) The first condition is that X holds, directly or indirectly, more than 25% of the shares in company Y. (3) The second condition is that X holds, directly or indirectly, more than 25% of the voting rights in company Y. (4) The third condition is that X holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of company Y. (5) The fourth condition is that X has the right to exercise, or actually exercises, significant influence or control over company Y. (6) The fifth condition is that— (a) the trustees of a trust or the members of a firm that, under the law by which it is governed, is not a legal person meet any of the other specified conditions (in their capacity as such) in relation to company Y, or would do so if they were individuals, and (b) X has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or firm. (7) This Part of this Schedule specifies the circumstances in which, for the purposes of section 790C(4) or (8)— (a) a person (“V”) is to be regarded as holding an interest in a company (“company W”); (b) an interest held by V in company W is to be regarded as held through a legal entity. (8) (1) V holds an interest in company W if— (a) V holds shares in company W, directly or indirectly, (b) V holds, directly or indirectly, voting rights in company W, (c) V holds, directly or indirectly, the right to appoint or remove any member of the board of directors of company W, (d) V has the right to exercise, or actually exercises, significant influence or control over company W, or (e) sub-paragraph (2) is satisfied. (2) This sub-paragraph is satisfied where— (a) the trustees of a trust or the members of a firm that, under the law by which it is governed, is not a legal person hold an interest in company W in a way mentioned in sub-paragraph (1)(a) to (d), and (b) V has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or firm. (9) (1) This paragraph applies where V— (a) holds an interest in company W by virtue of indirectly holding shares or a right, and (b) does so by virtue of having a majority stake (see paragraph 18) in— (i) a legal entity (“L”) which holds the shares or right directly, or (ii) a legal entity that is part of a chain of legal entities such as is described in paragraph 18(1)(b) or (2)(b) that includes L. (2) Where this paragraph applies, V holds the interest in company W— (a) through L, and (b) through each other legal entity in the chain mentioned in sub-paragraph (1)(b)(ii). (10) This Part sets out rules for the interpretation of this Schedule. (11) If two or more persons each hold a share or right jointly, each of them is treated for the purposes of this Schedule as holding that share or right. (12) (1) If shares or rights held by a person and shares or rights held by another person are the subject of a joint arrangement between those persons, each of them is treated for the purposes of this Schedule as holding the combined shares or rights of both of them. (2) A “joint arrangement” is an arrangement between the holders of shares (or rights) that they will exercise all or substantially all the rights conferred by their respective shares (or rights) jointly in a way that is pre-determined by the arrangement. (3) “Arrangement” has the meaning given by paragraph 21. (13) (1) In relation to a legal entity that has a share capital, a reference to holding “more than 25% of the shares” in that entity is to holding shares comprised in the issued share capital of that entity of a nominal value exceeding (in aggregate) 25% of that share capital. (2) In relation to a legal entity that does not have a share capital— (a) a reference to holding shares in that entity is to holding a right to share in the capital or, as the case may be, profits of that entity; (b) a reference to holding “more than 25% of the shares” in that entity is to holding a right or rights to share in more than 25% of the capital or, as the case may be, profits of that entity. (14) (1) A reference to the voting rights in a legal entity is to the rights conferred on shareholders in respect of their shares (or, in the case of an entity not having a share capital, on members) to vote at general meetings of the entity on all or substantially all matters. (2) In relation to a legal entity that does not have general meetings at which matters are decided by the exercise of voting rights— (a) a reference to exercising voting rights in the entity is to be read as a reference to exercising rights in relation to the entity that are equivalent to those of a person entitled to exercise voting rights in a company; (b) a reference to exercising more than 25% of the voting rights in the entity is to be read as a reference to exercising the right under the constitution of the entity to block changes to the overall policy of the entity or to the terms of its constitution. (15) In applying this Schedule, the voting rights in a legal entity are to be reduced by any rights held by the entity itself. (16) A reference to the right to appoint or remove a majority of the board of directors of a legal entity is to the right to appoint or remove directors holding a majority of the voting rights at meetings of the board on all or substantially all matters. (17) References to a board of directors, in the case of an entity that does not have such a board, are to be read as references to the equivalent management body of that entity. (18) (1) A person holds a share “indirectly” if the person has a majority stake in a legal entity and that entity— (a) holds the share in question, or (b) is part of a chain of legal entities— (i) each of which (other than the last) has a majority stake in the entity immediately below it in the chain, and (ii) the last of which holds the share. (2) A person holds a right “indirectly” if the person has a majority stake in a legal entity and that entity— (a) holds that right, or (b) is part of a chain of legal entities— (i) each of which (other than the last) has a majority stake in the entity immediately below it in the chain, and (ii) the last of which holds that right. (3) For these purposes, A has a “majority stake” in B if— (a) A holds a majority of the voting rights in B, (b) A is a member of B and has the right to appoint or remove a majority of the board of directors of B, (c) A is a member of B and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in B, or (d) A has the right to exercise, or actually exercises, dominant influence or control over B. (4) In the application of this paragraph to the right to appoint or remove a majority of the board of directors, a legal entity is to be treated as having the right to appoint a director if— (a) a person's appointment as director follows necessarily from that person's appointment as director of the legal entity, or (b) the directorship is held by the legal entity itself. (19) A share held by a person as nominee for another is to be treated for the purposes of this Schedule as held by the other (and not by the nominee). (20) (1) Where a person controls a right, the right is to be treated for the purposes of this Schedule as held by that person (and not by the person who in fact holds the right, unless that person also controls it). (2) A person “controls” a right if, by virtue of any arrangement between that person and others, the right is exercisable only— (a) by that person, (b) in accordance with that person's directions or instructions, or (c) with that person's consent or concurrence. (21) (1) “Arrangement” includes— (a) any scheme, agreement or understanding, whether or not it is legally enforceable, and (b) any convention, custom or practice of any kind. (2) But something does not count as an arrangement unless there is at least some degree of stability about it (whether by its nature or terms, the time it has been in existence or otherwise). (22) (1) Rights that are exercisable only in certain circumstances are to be taken into account only— (a) when the circumstances have arisen, and for so long as they continue to obtain, or (b) when the circumstances are within the control of the person having the rights. (2) But rights that are exercisable by an administrator or by creditors while a legal entity is in relevant insolvency proceedings are not to be taken into account even while the entity is in those proceedings. (3) “Relevant insolvency proceedings” means— (a) administration within the meaning of the Insolvency Act 1986, (b) administration within the meaning of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or (c) proceedings under the insolvency law of another country or territory during which an entity's assets and affairs are subject to the control or supervision of a third party or creditor. (4) Rights that are normally exercisable but are temporarily incapable of exercise are to continue to be taken into account. (23) Rights attached to shares held by way of security provided by a person are to be treated for the purposes of this Schedule as held by that person— (a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in accordance with that person's instructions, and (b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in that person's interests. (24) (1) The Secretary of State must issue guidance about the meaning of “significant influence or control” for the purposes of this Schedule. (2) Regard must be had to that guidance in interpreting references in this Schedule to “significant influence or control”. (3) Before issuing guidance under this paragraph the Secretary of State must lay a draft of it before Parliament. (4) If, within the 40-day period, either House of Parliament resolves not to approve the draft guidance, the Secretary of State must take no further steps in relation to it. (5) If no such resolution is made within that period, the Secretary of State must issue and publish the guidance in the form of the draft. (6) Sub-paragraph (4) does not prevent a new draft of proposed guidance from being laid before Parliament. (7) In this section “the 40-day period”, in relation to draft guidance, means the period of 40 days beginning with the day on which the draft is laid before Parliament (or, if it is not laid before each House on the same day, the later of the days on which it is laid). (8) In calculating the 40-day period, no account is to be taken of any period during which— (a) Parliament is dissolved or prorogued, or (b) both Houses are adjourned for more than 4 days. (9) The Secretary of State may revise guidance issued under this paragraph, and a reference in this paragraph to guidance includes a reference to revised guidance. (25) (1) An individual does not meet the specified condition in paragraph 2, 3 or 4 in relation to a company by virtue only of being a limited partner. (2) An individual does not meet the specified condition in paragraph 2, 3 or 4 in relation to a company by virtue only of, directly or indirectly— (a) holding shares, or (b) holding a right, in or in relation to a limited partner which (in its capacity as such) would meet the condition if it were an individual. (3) Sub-paragraphs (1) and (2) do not apply for the purposes of determining whether the requirement set out in paragraph (a) of the specified condition in paragraph 6 is met. (4) In this paragraph “limited partner” means— (a) a limited partner in a limited partnership registered under the Limited Partnerships Act 1907 (other than one who takes part in the management of the partnership business), or (b) a foreign limited partner. (5) In this paragraph “foreign limited partner” means an individual who— (a) participates in arrangements established under the law of a country or territory outside the United Kingdom, and (b) has the characteristics prescribed by regulations made by the Secretary of State. (6) Regulations under this paragraph may, in particular, prescribe characteristics by reference to— (a) the nature of arrangements; (b) the nature of an individual's participation in the arrangements. (7) Regulations under this paragraph are subject to affirmative resolution procedure. (26) (1) The Secretary of State may by regulations amend this Schedule for a permitted purpose. (2) The permitted purposes are— (a) to replace any or all references in this Schedule to a percentage figure with references to some other (larger or smaller) percentage figure; (b) to change or supplement the specified conditions in Part 1 of this Schedule so as to include circumstances (for example, circumstances involving more complex structures) that give individuals a level of control over company Y broadly similar to the level of control given by the other specified conditions; (c) in consequence of any provision made by virtue of paragraph (b), to change or supplement Part 2 of this Schedule so that circumstances specified in that Part in which a person is to be regarded as holding an interest in a company correspond to any of the specified conditions, or would do so but for the extent of the interest. (3) Regulations under this paragraph are subject to affirmative resolution procedure. SCHEDULE 1B (1) (1) This paragraph applies if— (a) a notice under section 790D or 790E is served by a company on a person who has a relevant interest in the company, and (b) the person fails to comply with that notice within the time specified in it. (2) The company may give the person a notice under this paragraph (a “warning notice”) informing the person that it is proposing to issue the person with a notice (a “restrictions notice”) with respect to the relevant interest. (3) The company may issue the restrictions notice if, by the end of the period of one month beginning with the date on which the warning notice was given— (a) the person has not complied with the notice served under section 790D or 790E, and (b) the company has not been provided with a valid reason sufficient to justify the person's failure to comply with the notice served under that section. (4) A restrictions notice is issued on a person by sending the notice to the person. (5) The effect of a restrictions notice is set out in paragraph 3. (6) In deciding whether to issue a restrictions notice, the company must have regard to the effect of the notice on the rights of third parties in respect of the relevant interest. (2) (1) For the purposes of this Schedule, a person has a relevant interest in a company if the person— (a) holds any shares in the company, (b) holds any voting rights in the company, or (c) holds the right to appoint or remove any member of the board of directors of the company. (2) References to “the relevant interest” are to the shares or right in question. (3) Part 3 of Schedule 1A applies for the interpretation of sub-paragraph (1) save that, where the relevant interest is by virtue of paragraph 19 or 20 of that Schedule treated for the purposes of that Schedule as held by a person other than the person who in fact holds the interest, both the holder and the other person are to be regarded for the purposes of this Schedule as having the relevant interest. (3) (1) The effect of a restrictions notice issued under paragraph 1 with respect to a relevant interest is as follows— (a) any transfer of the interest is void, (b) no rights are exercisable in respect of the interest, (c) no shares may be issued in right of the interest or in pursuance of an offer made to the interest-holder, (d) except in a liquidation, no payment may be made of sums due from the company in respect of the interest, whether in respect of capital or otherwise. (2) An agreement to transfer an interest that is subject to the restriction in sub-paragraph (1)(a) is void. (3) Sub-paragraph (2) does not apply to an agreement to transfer the interest on the making of an order under paragraph 8 made by virtue of sub-paragraph (3)(b) of that paragraph (removal of restrictions in case of court-approved transfer). (4) An agreement to transfer any associated right (otherwise than in a liquidation) is void. (5) Sub-paragraph (4) does not apply to an agreement to transfer any such right on the making of an order under paragraph 8 made by virtue of sub-paragraph (3)(b) of that paragraph (removal of restrictions in case of court-approved transfer). (6) An “associated right”, in relation to a relevant interest, is— (a) a right to be issued with any shares issued in right of the relevant interest, or (b) a right to receive payment of any sums due from the company in respect of the relevant interest. (7) The provisions of this section are subject to any directions given under paragraph 4. (4) (1) The court may give a direction under this paragraph if, on application by any person aggrieved, the court is satisfied that a restrictions notice issued by the company under paragraph 1 unfairly affects the rights of third parties in respect of the relevant interest. (2) The direction is given for the purpose of protecting those third party rights. (3) The direction is a direction that certain acts will not constitute a breach of the restrictions placed on the relevant interest by the restrictions notice. (4) An order containing a direction under this paragraph— (a) must specify the acts that will not constitute a breach of the restrictions, and (b) may confine the direction to cases where those acts are done by persons, or for purposes, described in the order. (5) The direction may be given subject to such terms as the court thinks fit. (5) (1) A person commits an offence if the person does anything listed in sub-paragraph (2) knowing that the interest is subject to restrictions. (2) The things are— (a) exercising or purporting to exercise any right to dispose of a relevant interest, (b) exercising or purporting to exercise any right to dispose of any right to be issued with a relevant interest, or (c) voting in respect of a relevant interest (whether as holder of the interest or as proxy) or appointing a proxy to vote in respect of a relevant interest. (3) A person who has a relevant interest that the person knows to be subject to restrictions commits an offence if the person— (a) knows a person to be entitled (apart from the restrictions) to vote in respect of the interest, whether as holder or as proxy, (b) does not know the person to be aware of the fact that the interest is subject to restrictions, and (c) fails to notify the person of that fact. (4) A person commits an offence if the person— (a) either has a relevant interest that the person knows to be subject to restrictions or is entitled to an associated right, and (b) enters in that capacity into an agreement that is void by virtue of paragraph 3(2) or (4). (5) References in this Schedule to an interest being “subject to restrictions” are to an interest being subject to restrictions by virtue of a restrictions notice under paragraph 1. (6) If shares in a company are issued in contravention of a restriction imposed by virtue of a restrictions notice under paragraph 1, an offence is committed by— (a) the company, and (b) every officer of the company who is in default. (7) (1) A person guilty of an offence under paragraph 5 or 6 is liable— (a) on conviction on indictment, to a fine; (b) on summary conviction— (i) in England and Wales, to a fine, (ii) in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum. (2) The provisions of those paragraphs are subject to any direction given under paragraph 4 or 8. (8) (1) An application may be made to the court for an order directing that the relevant interest cease to be subject to restrictions. (2) An application for an order under this paragraph may be made by the company in question or by any person aggrieved. (3) The court must not make an order under this paragraph unless— (a) it is satisfied that the information required by the notice served under section 790D or 790E has been disclosed to the company and no unfair advantage has accrued to any person as a result of the earlier failure to make that disclosure, or (b) the relevant interest is to be transferred for valuable consideration and the court approves the transfer. (4) An order under this paragraph made by virtue of sub-paragraph (3)(b) may continue, in whole or in part, the restrictions mentioned in paragraph 3(1)(c) and (d) so far as they relate to a right acquired or offer made before the transfer. (5) Where any restrictions continue in force under sub-paragraph (4)— (a) an application may be made under this paragraph for an order directing that the relevant interest cease to be subject to those restrictions, and (b) sub-paragraph (3) does not apply in relation to the making of such an order. (9) (1) The court may order that the relevant interest subject to restrictions be sold subject to the court's approval as to the sale. (2) An application for an order under sub-paragraph (1) may only be made by the company in question. (3) If the court makes an order under this paragraph, it may make such further order relating to the sale or transfer of the interest as it thinks fit. (4) An application for an order under sub-paragraph (3) may be made— (a) by the company in question, (b) by the person appointed by or in pursuance of the order to effect the sale, or (c) by any person with an interest in the relevant interest. (5) On making an order under sub-paragraph (1) or (3), the court may order that the applicant's costs (in Scotland, expenses) be paid out of the proceeds of sale. (10) (1) If a relevant interest is sold in pursuance of an order under paragraph 9, the proceeds of the sale, less the costs of the sale, must be paid into court for the benefit of those who are beneficially interested in the relevant interest. (2) A person who is beneficially interested in the relevant interest may apply to the court for the whole or part of those proceeds to be paid to that person. (3) On such an application, the court must order the payment to the applicant of— (a) the whole of the proceeds of sale together with any interest on the proceeds, or (b) if another person was also beneficially interested in the relevant interest at the time of the sale, such proportion of the proceeds (and any interest) as the value of the applicant's interest bears to the total value of the relevant interest. (4) If the court has ordered under paragraph 9 that the costs (in Scotland, expenses) of an applicant under that paragraph are to be paid out of the proceeds of sale, the applicant is entitled to payment of those costs (or expenses) out of the proceeds before any person receives any part of the proceeds under this paragraph. (11) A company that issues a person with a restrictions notice under paragraph 1 must by notice withdraw the restrictions notice if— (a) it is satisfied that there is a valid reason sufficient to justify the person's failure to comply with the notice served under section 790D or 790E, (b) the notice served under section 790D or 790E is complied with, or (c) it discovers that the rights of a third party in respect of the relevant interest are being unfairly affected by the restrictions notice. (12) (1) The Secretary of State may by regulations make provision about the procedure to be followed by companies in issuing and withdrawing restrictions notices. (2) The regulations may in particular make provision about— (a) the form and content of warning notices and restrictions notices, and the manner in which they must be given, (b) the factors to be taken into account in deciding what counts as a “valid reason” sufficient to justify a person's failure to comply with a notice under section 790D or 790E, and (c) the effect of withdrawing a restrictions notice on matters that are pending with respect to the relevant interest when the notice is withdrawn. (3) Regulations under this paragraph are subject to negative resolution procedure. (13) (1) A person to whom a notice under section 790D or 790E is addressed commits an offence if the person— (a) fails to comply with the notice, or (b) in purported compliance with the notice— (i) makes a statement that the person knows to be false in a material particular, or (ii) recklessly makes a statement that is false in a material particular. (2) Where the person is a legal entity, an offence is also committed by every officer of the entity who is in default. (3) A person does not commit an offence under sub-paragraph (1)(a) (or sub-paragraph (2) as it applies in relation to that sub-paragraph) if the person proves that the requirement to give information was frivolous or vexatious. (4) A person guilty of an offence under this paragraph is liable— (a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both); (b) on summary conviction— (i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine (or both); (ii) in Scotland, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both); (iii) in Northern Ireland, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum (or both). (14) (1) A person commits an offence if the person— (a) fails to comply with a duty under section 790G or 790H, or (b) in purported compliance with such a duty— (i) makes a statement that the person knows to be false in a material particular, or (ii) recklessly makes a statement that is false in a material particular. (2) Where the person is a legal entity, an offence is also committed by every officer of the entity who is in default. (3) A person guilty of an offence under this paragraph is liable— (a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both); (b) on summary conviction— (i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine (or both); (ii) in Scotland, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both); (iii) in Northern Ireland, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum (or both).

PART 2 — Related amendments

3

The Companies Act 2006 is amended as follows.

4

In section 9 (registration documents), in subsection (4), at the end of paragraph (c) insert

; (d) a statement of initial significant control (see section 12A).

5

After section 12 insert—

(12A) (1) The statement of initial significant control required to be delivered to the registrar must— (a) state whether, on incorporation, there will be anyone who will count for the purposes of section 790M (register of people with significant control over a company) as either a registrable person or a registrable relevant legal entity in relation to the company, (b) include the required particulars of anyone who will count as such, and (c) include any other matters that on incorporation will be required (or, in the absence of an election under section 790X, would be required) to be entered in the company's PSC register by virtue of section 790M. (2) It is not necessary to include under subsection (1)(b) the date on which someone becomes a registrable person or a registrable relevant legal entity in relation to the company. (3) If the statement includes required particulars of an individual, it must also contain a statement that those particulars are included with the knowledge of that individual. (4) “Registrable person”, “registrable relevant legal entity” and “required particulars” have the meanings given in Part 21A (see sections 790C and 790K).

6

In section 120 (information as to state of register and index), in subsection (1), for “there were no” substitute “ whether there are ”.

7

In section 1068 (registrar's requirements as to form, authentication and manner of delivery), in subsection (6A) (inserted by Schedule 5 to this Act), after “central register)” insert “ or Chapter 4 of Part 21A (option to keep PSC information on central register) ”.

8

In section 1087 (material not available for public inspection), in subsection (1), after paragraph (ba) insert—

(bb) information to which sections 240 to 244 are applied by section 790ZF(1) (residential addresses of people with significant control over the company) or any corresponding provision of regulations under section 1046 (overseas companies); (bc) information that, by virtue of regulations under section 790ZG or any corresponding provision of regulations under section 1046, the registrar must omit from the material on the register that is available for inspection;

.

9

• (1) Section 1126 (consents required for certain prosecutions) is amended as follows.

• (2) In subsection (1), at the end insert—

section 1112 of this Act (general false statement offence); paragraph 5 or 6 of Schedule 1B to this Act (breach of certain restrictions imposed under that Schedule)

.

• (3) In subsection (2)(a)—

• (a) omit the “or” at the end of sub-paragraph (ii), and

• (b) after sub-paragraph (iii) insert

or (iv) section 1112 of this Act,

.

• (4) In subsection (2)(b), after “section 798 of” insert “ , or paragraph 5 or 6 of Schedule 1B to, ”.

• (5) In subsection (3)(a)—

• (a) omit the “or” at the end of sub-paragraph (ii), and

• (b) after sub-paragraph (iii) insert

or (iv) section 1112 of this Act,

.

• (6) In subsection (3)(b), after “section 798 of” insert “ , or paragraph 5 or 6 of Schedule 1B to, ”.

10

In section 1136 (regulations about where certain company records to be kept available for inspection), in subsection (2), after the entry for section 743 insert—

section 790M (register of people with significant control over a company); section 790Z (historic PSC register);

.

11

In Schedule 8 (index of defined expressions), in the appropriate places insert—

legal entity (in Part 21A)	section 790C(5)

,

PSC register	section 790C(10)

,

registrable person (in Part 21A)	section 790C(4)

,

registrable relevant legal entity (in Part 21A)	section 790C(8)

,

relevant legal entity (in Part 21A)	section 790C(6)

,

significant control (in Part 21A)	section 790C(2)

.

SCHEDULE 4

PART 1 — Arrangements for conversion and cancellation of existing share warrants

Right of surrender during surrender period

1

• (1) This paragraph applies in relation to a company which has issued a share warrant which has not been surrendered for cancellation before the day on which section 84 comes into force (the “commencement date”).

• (2) During the period of 9 months beginning with the commencement date (the “surrender period”) the bearer of the share warrant has a right of surrender in relation to the warrant.

• (3) For the purposes of this Schedule, if the bearer of a share warrant has a right of surrender in relation to the warrant, the bearer is entitled on surrendering the warrant for cancellation—

• (a) to have the bearer's name entered as a member in the register of members of the company concerned, or

• (b) where an election is in force under section 128B of the Companies Act 2006 (option to keep membership information on central register) in respect of the company, to have the bearer's name and other particulars delivered to the registrar, and the document containing that information registered by the registrar and the date recorded, as if the information were information required to be delivered under section 128E of that Act.

• (4) A company must, as soon as reasonably practicable and in any event before the end of the period of 2 months beginning with the day on which a share warrant is surrendered for cancellation pursuant to a right of surrender, complete and have ready for delivery the certificates of the shares specified in the warrant.

• (5) If a company fails to comply with sub-paragraph (4) an offence is committed by every officer of the company who is in default.

2

• (1) A company must, as soon as reasonably practicable and in any event before the end of the period of 1 month beginning with the commencement date, give notice to the bearer of a share warrant issued by the company of—

• (a) the bearer's right of surrender,

• (b) the consequences of not exercising that right before the end of the period of 7 months beginning with the commencement date (see paragraph 3),

• (c) the fact that the right will cease to be exercisable at the end of the surrender period, and

• (d) the consequences of not exercising the right before the end of that period (see in particular paragraphs 5, 6 and 9 to 12).

• (2) If a company fails to comply with this paragraph an offence is committed by every officer of the company who is in default.

Consequences of failure to surrender during first 7 months of surrender period

3

• (1) This paragraph applies in relation to a share warrant of a company which has not been surrendered by the bearer for cancellation before the end of the period of 7 months beginning with the commencement date.

• (2) Any transfer of, or agreement to transfer, the share warrant made after the end of that period is void.

• (3) With effect from the end of that period, all rights which are attached to the shares specified in the warrant are suspended (including any voting rights and any right to receive a dividend or other distribution).

• (4) The company must pay into a separate bank account that complies with sub-paragraph (5) any dividend or other distribution which the bearer of the share warrant would, but for the suspension, have been entitled to receive.

• (5) A bank account complies with this sub-paragraph if the balance of the account—

• (a) bears interest at an appropriate rate, and

• (b) can be withdrawn by such notice (if any) as is appropriate.

• (6) If the share warrant is subsequently surrendered in accordance with this Schedule—

• (a) the suspension ceases to have effect on surrender, and

• (b) the suspension period amount must be paid to the bearer by the company.

• (7) The “suspension period amount”, in relation to a share warrant, is—

• (a) the aggregate amount of any dividends or other distributions which the bearer of the warrant would, but for the suspension, have been entitled to receive, plus

• (b) any interest accrued on that amount.

Second notice of right to surrender

4

• (1) A company must, before the end of the period of 8 months beginning with the commencement date, give further notice to the bearer of a share warrant of the company of—

• (a) the bearer's right of surrender,

• (b) the consequences of not having exercised the right of surrender before the end of the period of 7 months beginning with the commencement date (see paragraph 3), and

• (c) the matters referred to in paragraph 2(1)(c) and (d).

• (2) If a company fails to comply with this paragraph an offence is committed by every officer of the company who is in default.

Expiry of right to surrender and applications for cancellation of outstanding share warrants

5

• (1) This paragraph applies in relation to a company which has issued a share warrant which has not been surrendered for cancellation before the end of the surrender period.

• (2) The company must, as soon as reasonably practicable and in any event before the end of the period of 3 months beginning with the day after the end of the surrender period, apply to the court for an order (referred to in this Schedule as a “cancellation order”) cancelling with effect from the date of the order—

• (a) the share warrant, and

• (b) the shares specified in it.

• (3) The company must give notice to the bearer of the share warrant of the fact that an application has been made under this paragraph before the end of the period of 14 days beginning with the day on which it is made; and the notice must include a copy of the application.

• (4) If a company fails to comply with sub-paragraph (2) or (3) an offence is committed by every officer of the company who is in default.

• (5) A company must, on making an application for a cancellation order, immediately give notice to the registrar.

• (6) If a company fails to comply with sub-paragraph (5) an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

Cancellation orders and suspended cancellation orders

6

• (1) The court must make a cancellation order in respect of a share warrant if, on an application under paragraph 5, it is satisfied that—

• (a) the company has given notice to the bearer of the share warrant as required by paragraphs 2 and 4, or

• (b) the bearer had actual notice by other means of the matters mentioned in paragraph 2(1).

• (2) If, on such an application, the court is not so satisfied, it must instead make a suspended cancellation order in respect of the share warrant.

• (3) A “suspended cancellation order” is an order—

• (a) requiring the company to give notice to the bearer of the share warrant containing the information set out in sub-paragraph (4) before the end of the period of 5 working days beginning with the day the order is made,

• (b) providing that the bearer of the share warrant has a right of surrender during the period of 2 months beginning with the day the order is made (referred to in this Schedule as “the grace period”), and

• (c) if the share warrant is not so surrendered, cancelling it and the shares specified in it with effect from the end of the grace period.

• (4) A notice required to be given by a suspended cancellation order must—

• (a) inform the bearer of the share warrant of the fact that the bearer has a right of surrender during the grace period,

• (b) inform the bearer of the consequences of not having exercised that right before the end of the period of 7 months beginning with the commencement date (see paragraph 3), and

• (c) explain that the share warrant will be cancelled with effect from the end of the grace period if it is not surrendered before then.

• (5) Where a share warrant is cancelled by an order under this paragraph, the company concerned must, as soon as reasonably practicable—

• (a) enter the cancellation date in its register of members, or

• (b) where an election is in force under section 128B of the Companies Act 2006 (option to keep membership information on central register) in respect of the company, deliver that information to the registrar as if it were information required to be delivered under section 128E of that Act.

• (6) In this Schedule “the cancellation date”, in relation to a share warrant, means the day its cancellation by a cancellation order or suspended cancellation order takes effect.

Registration of reduction of share capital

7

• (1) This paragraph applies in relation to a company if a share warrant of the company and the shares specified in it are cancelled by a cancellation order or a suspended cancellation order.

• (2) The company must, before the end of the period of 15 days beginning with the cancellation date, deliver to the registrar—

• (a) a copy of the order,

• (b) in the case of a suspended cancellation order, a statement confirming that the share warrant and the shares specified in it have been cancelled by the order with effect from the cancellation date, and

• (c) a statement of capital.

• (3) The statement of capital must state with respect to the company's share capital as reduced by the cancellation of the share warrant and the shares specified in it—

• (a) the total number of shares of the company,

• (b) the aggregate nominal value of those shares,

• (c) the aggregate amount (if any) unpaid on those shares (whether on account of their nominal value or by way of premium), and

• (d) for each class of shares—

• (i) such particulars of the rights attached to the shares as are prescribed by the Secretary of State under section 644(2)(c)(i) of the Companies Act 2006,

• (ii) the total number of shares of that class, and

• (iii) the aggregate nominal value of shares of that class.

• (4) If the company fails to comply with this paragraph an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (5) In the case of a public company, a statement of capital delivered under this paragraph is to be treated as a document subject to the Directive disclosure requirements for the purposes of the Companies Act 2006 (see section 1078 of that Act).

Reduction of share capital below authorised minimum in case of public company

8

• (1) This paragraph applies where the court makes a cancellation order or a suspended cancellation order in relation to a public company and—

• (a) in the case of a cancellation order, the order has the effect of bringing the nominal value of its allotted share capital below the authorised minimum, or

• (b) in the case of a suspended cancellation order, the order may have that effect from the end of the grace period.

• (2) The registrar must not register the cancellation order or (as the case may be) the suspended cancellation order if it has that effect from the end of the grace period unless—

• (a) the court so directs in the order concerned, or

• (b) the company is first re-registered as a private company.

• (3) The expedited procedure for re-registration provided by section 651 of the Companies Act 2006 applies for the purposes of this paragraph as it applies for the purposes of section 650 of that Act.

• (4) Where the court makes an order under section 651 of that Act in connection with a suspended cancellation order, the order under section 651 must be conditional on the suspended cancellation order having the effect mentioned in sub-paragraph (1)(b) from the end of the grace period.

Payment into court in connection with cancellation

9

• (1) Where a share warrant is cancelled by a cancellation order or suspended cancellation order, the company concerned must, before the end of the period of 14 days beginning with the cancellation date, make a payment into court of an amount equal to—

• (a) the aggregate nominal value of the shares specified in the warrant and the whole of any premium paid on them, plus

• (b) the suspension period amount.

• (2) If a company fails to comply with sub-paragraph (1) an offence is committed by every officer of the company who is in default.

10

• (1) A person who, at the end of the period of 7 months beginning with the commencement date, was the bearer of a share warrant which has been cancelled by a cancellation order or a suspended cancellation order may apply to the court for the sum paid into court under paragraph 9(1) in respect of the shares specified in the warrant to be paid to that person.

• (2) Such an application may only be made during the period—

• (a) beginning with the day which is 6 months after the cancellation date, and

• (b) ending with the day which is 3 years after the cancellation date.

• (3) The court may grant an application under sub-paragraph (1) only if it is satisfied that there are exceptional circumstances justifying the failure of the bearer of the share warrant to exercise the right of surrender—

• (a) in the case of a warrant cancelled by a cancellation order, before the end of the surrender period, or

• (b) in the case of a warrant cancelled by a suspended cancellation order, before the end of the grace period.

11

• (1) This paragraph applies in relation to a company in respect of which a cancellation order or suspended cancellation order has been made if any of the following is appointed in relation to the company after the cancellation date—

• (a) an administrator;

• (b) an administrative receiver;

• (c) a liquidator;

and that person is referred to in this paragraph as the “office-holder”.

• (2) The office-holder may apply to the court for the sum paid into court under paragraph 9(1)(a) to be paid to the office-holder by way of a contribution to the company's assets.

• (3) Such an application may only be made during the period—

• (a) beginning with the cancellation date, and

• (b) ending with the day which is 3 years after that date.

12

• (1) Anything left of a sum paid into court under paragraph 9(1) immediately after the end of the period mentioned in paragraph 11(3) must be paid into the Consolidated Fund.

• (2) Sub-paragraph (1) does not apply to any amount in respect of which an application under paragraph 10(1) or 11(2) has been made but not yet determined before the end of that period unless and until the application is dismissed and either—

• (a) the period for bringing an appeal against the dismissal has expired, or

• (b) in a case where an appeal is brought before the end of that period, the appeal is dismissed, abandoned or otherwise ceases to have effect.

Company with outstanding share warrants: prohibition on striking off

13

• (1) An application under section 1003 of the Companies Act 2006 (application for voluntary striking off) on behalf of a company must not be made at a time when there is a share warrant issued by the company.

• (2) It is an offence for a person to make an application in contravention of this section.

• (3) In proceedings for such an offence it is a defence for the accused to prove that the accused did not know, and could not reasonably have known, of the existence of the share warrant.

Notices

14

• (1) A notice required by virtue of any provision of this Schedule to be given to the bearer of a share warrant must be—

• (a) published in the Gazette,

• (b) communicated to that person in the same way (if any) as the company concerned normally communicates with that person for other purposes relating to the shares specified in the warrant, and

• (c) made available in a prominent position on the company's website (if it has one) during the period mentioned in sub-paragraph (2) (and see sub-paragraph (3)).

• (2) That period is the period beginning with the day on which the notice is published in the Gazette and ending with—

• (a) in the case of a notice required by paragraph 2, the day on which a notice required by paragraph 4 is made available on the company's website;

• (b) in the case of a notice required by paragraph 4, the day on which a notice required by paragraph 5(3) is made available on the company's website;

• (c) in the case of a notice required by paragraph 5(3), the day on which the court makes a cancellation order or (as the case may be) suspended cancellation order in respect of the share warrant;

• (d) in the case of a notice required by virtue of paragraph 6(3)(a), the end of the grace period.

• (3) Nothing in this paragraph requires a notice to be made available on the company's website after the day on which the last of the share warrants issued by the company to be surrendered is surrendered.

• (4) Sections 1143 to 1148 of the Companies Act 2006 (company communications provisions) apply for the purposes of this Part of this Schedule as they apply for the purposes of the Companies Acts.

Company filings: language requirements

15

Sections 1103, 1104 and 1107 of the Companies Act 2006 (language requirements) apply to all documents required to be delivered to the registrar under this Part of this Schedule.

Application of sections 1112 and 1113 of the Companies Act 2006

16

Sections 1112 (general false statement offence) and 1113 (enforcement of company's filing obligations) of the Companies Act 2006 apply for the purposes of this Part of this Schedule as they apply for the purposes of the Companies Acts.

Offences

17

For the purposes of any offence under this Part of this Schedule a shadow director is treated as an officer of the company.

18

• (1) A person guilty of an offence under paragraph 1(5) of this Schedule is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

• (2) A person guilty of an offence under any other provision of this Schedule is liable—

• (a) on conviction on indictment, to a fine;

• (b) on summary conviction—

• (i) in England and Wales, to a fine;

• (ii) in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

19

The following sections of the Companies Act 2006 apply for the purposes of this Part of this Schedule as they apply for the purposes of the Companies Acts—

• (a) sections 1121 and 1122 (liability of officer in default);

• (b) section 1125 (meaning of “daily default fine”);

• (c) sections 1127 and 1128 (general provision about summary proceedings);

• (d) section 1129 (legal professional privilege);

• (e) section 1132 (production and inspection of documents).

Interpretation

20

• (1) In this Part of this Schedule—

• “cancellation date” has the meaning given by paragraph 6(6);

• “cancellation order” has the meaning given by paragraph 5(2);

• “commencement date” has the meaning given by paragraph 1(1);

• “Companies Acts” has the same meaning as in the Companies Act 2006 (see section 2 of that Act);

• “grace period” has the meaning given by paragraph 6(3)(b);

• “surrender period” has the meaning given by paragraph 1(2);

• “suspended cancellation order” has the meaning given by paragraph 6(3);

• “suspension period amount” has the meaning given by paragraph 3(7);

• “right of surrender” has the meaning given by paragraph 1(3).

• (2) Expressions defined for the purposes of the Companies Acts have the same meaning in this Part of this Schedule as in those Acts.

Transitory provision

21

• (1) Until section 94 (option to keep information on central register) comes into force, this Schedule has effect as if, in each of paragraphs 1(3) and 6(5), paragraph (b) (and the “or” preceding it) were omitted.

• (2) Until section 97 (contents of statements of capital) comes into force, paragraph 7(3) of this Schedule has effect as if—

• (a) paragraph (c) were omitted, and

• (b) after paragraph (d) there were inserted

, and (e) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).

PART 2 — Consequential amendments

22

The Companies Act 2006 is amended as follows.

23

In section 122 (share warrants)—

• (a) for subsections (1) and (2) substitute—

(1) Until a share warrant issued by a company is surrendered the following are deemed to be the particulars required to be entered in the register of members in respect of the warrant— (a) the fact of the issue of the warrant, (b) a statement of the shares included in the warrant, distinguishing each share by its number so long as the share has a number, and (c) the date of the issue of the warrant.

, and

• (b) omit subsection (4).

24

In section 617 (alteration of share capital of limited company), in subsection (5), after paragraph (e) insert—

(f) the cancellation of a share warrant issued by the company and of the shares specified in it by a cancellation order or suspended cancellation order made under paragraph 6 of Schedule 4 to the Small Business, Enterprise and Employment Act 2015 (cancellation where share warrants not surrendered in accordance with that Schedule); (g) the cancellation of a share warrant issued by the company and of the shares specified in it pursuant to section 1028A(2) or 1032A(2) (cancellation of share warrants on restoration of a company).

25

In section 652 (liability of members following reduction of capital), in subsection (1)(a), for “or 649” substitute “ , 649, 1028A or 1032A of this Act or paragraph 7 of Schedule 4 to the Small Business, Enterprise and Employment Act 2015 ”.

26

• (1) Omit section 780 (duty of company as to issue of share certificates on surrender of share warrant).

• (2) The repeal of section 780 has no effect in relation to a share warrant surrendered for cancellation before the day on which section 84 comes into force.

27

• (1) After section 1028 insert—

(1028A) (1) This section applies in relation to a company which has been struck off the register under section 1000 or 1001 and which, at the time it was struck off, had any share warrant in issue. (2) If the registrar restores the company to the register under section 1025, the share warrant and the shares specified in it are cancelled with effect from the date the restoration takes effect. (3) If as a result of subsection (2) the company has no issued share capital, the company must, before the end of the period of one month beginning with the date the restoration takes effect, allot at least one share in the company; and section 549(1) does not apply to such an allotment. (4) The company must, before the end of the period of 15 days beginning with the date the restoration takes effect, deliver a statement of capital to the registrar. (5) Subsection (4) does not apply in a case where the company is required under subsection (3) to make an allotment (because in such a case section 555 will apply). (6) The statement of capital must state with respect to the company's share capital as reduced by the cancellation of the share warrant and the shares specified in it— (a) the total number of shares of the company, (b) the aggregate nominal value of those shares, (c) the aggregate amount (if any) unpaid on those shares (whether on account of their nominal value or by way of premium), and (d) for each class of shares— (i) prescribed particulars of the rights attached to the shares, (ii) the total number of shares of that class, and (iii) the aggregate nominal value of shares of that class. (7) Where a share warrant is cancelled in accordance with subsection (2), the company must, as soon as reasonably practicable— (a) enter the date the cancellation takes effect in its register of members, or (b) where an election is in force under section 128B of the Companies Act 2006 (option to keep membership information on central register) in respect of the company, deliver that information to the registrar as if it were information required to be delivered under section 128E of that Act. (8) Subsection (9) applies where— (a) any property or right previously vested in or held on trust for the company in respect of any share specified in a share warrant has vested as bona vacantia (see section 1012), and (b) the warrant and the share are cancelled on the restoration of the company in accordance with this section. (9) On restoration of the company, that property or right— (a) may not be returned to the company, and (b) accordingly, remains vested as bona vacantia. (10) If default is made in complying with subsection (3) or (4), an offence is committed by— (a) the company, and (b) every officer of the company who is in default. For this purpose a shadow director is treated as an officer of the company. (11) A person guilty of an offence under this section is liable— (a) on conviction on indictment, to a fine; (b) on summary conviction— (i) in England and Wales, to a fine; (ii) in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

• (2) Until section 97 (contents of statements of capital) comes into force, the section 1028A inserted by sub-paragraph (1) has effect as if in subsection (6)—

• (a) paragraph (c) were omitted, and

• (b) after paragraph (d) there were inserted

, and (e) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).

• (3) Until section 94 (option to keep information on central register) comes into force, the section 1028A inserted by sub-paragraph (1) has effect as if, in subsection (7), paragraph (b) (and the “or” preceding it) were omitted.

28

• (1) After section 1032A insert—

(1032A) (1) This section applies in relation to a company falling within section 1029(1) if, at the time it was dissolved, deemed to be dissolved or (as the case may be) struck off, it had any share warrant in issue. (2) If the court orders the restoration of the company to the register, the order must also cancel the share warrant and the shares specified in it with effect from the date the restoration takes effect. (3) If as a result of subsection (2) the company has no issued share capital, the company must, before the end of the period of one month beginning with the date the restoration takes effect, allot at least one share in the company; and section 549(1) does not apply to such an allotment. (4) Subsection (6) applies in a case where— (a) the application under section 1029 was made by a person mentioned in subsection (2)(b) or (h) of that section, or (b) the court order specifies that it applies. (5) But subsection (6) does not apply in any case where the company is required under subsection (3) to make an allotment (because in such a case section 555 will apply). (6) In a case where this subsection applies, the company must, before the end of the period of 15 days beginning with the date the restoration takes effect, deliver a statement of capital to the registrar. (7) The statement of capital must state with respect to the company's share capital as reduced by the cancellation of the share warrant and the shares specified in it— (a) the total number of shares of the company, (b) the aggregate nominal value of those shares, (c) the aggregate amount (if any) unpaid on those shares (whether on account of their nominal value or by way of premium), and (d) for each class of shares— (i) prescribed particulars of the rights attached to the shares, (ii) the total number of shares of that class, and (iii) the aggregate nominal value of shares of that class. (8) Where a share warrant is cancelled by an order as mentioned in subsection (2), the company must, as soon as reasonably practicable— (a) enter the date the cancellation takes effect in its register of members, or (b) where an election is in force under section 128B of the Companies Act 2006 (option to keep membership information on central register) in respect of the company, deliver that information to the registrar as if it were information required to be delivered under section 128E of that Act. (9) Subsection (10) applies where— (a) any property or right previously vested in or held on trust for the company in respect of any share specified in a share warrant has vested as bona vacantia (see section 1012), and (b) the warrant and the share are cancelled on the restoration of the company in accordance with this section. (10) On restoration of the company, that property or right— (a) may not be returned to the company, and (b) accordingly, remains vested as bona vacantia. (11) If default is made in complying with subsection (3) or (6), an offence is committed by— (a) the company, and (b) every officer of the company who is in default. For this purpose a shadow director is treated as an officer of the company. (12) A person guilty of an offence under this section is liable— (a) on conviction on indictment, to a fine; (b) on summary conviction— (i) in England and Wales, to a fine; (ii) in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

• (2) Until section 97 (contents of statements of capital) comes into force, the section 1032A inserted by sub-paragraph (1) has effect as if in subsection (7)—

• (a) paragraph (c) were omitted, and

• (b) after paragraph (d) there were inserted

, and (e) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).

• (3) Until section 94 (option to keep information on central register) comes into force, the section 1032A inserted by sub-paragraph (1) has effect as if, in subsection (8), paragraph (b) (and the “or” preceding it) were omitted.

SCHEDULE 5

PART 1 — Creation of the option

Register of members

1

Part 8 of the Companies Act 2006 (a company's members) is amended as follows.

2

In Chapter 2 (register of members), before section 113 insert—

(112A) This Chapter must be read with Chapter 2A (which allows for an alternative method of record-keeping in the case of private companies).

3

After Chapter 2 insert—