Companies Act 2006

Chapter 3 Division

Introductory

919 Divisions and companies involved in a division

(1) The scheme involves a division where under the scheme the undertaking, property and liabilities of the company in respect of which the compromise or arrangement is proposed are to be divided among and transferred to two or more companies each of which is either—

(a) an existing public company, or

(b) a new company (whether or not a public company).

(2) References in this Part to the companies involved in the division are to the transferor company and any existing transferee companies.

Requirements to be complied with in case of division

920 Draft terms of scheme (division)

(1) A draft of the proposed terms of the scheme must be drawn up and adopted by the directors of each of the companies involved in the division.

(2) The draft terms must give particulars of at least the following matters—

(a) in respect of the transferor company and each transferee company—

(i) its name,

(ii) the address of its registered office, and

(iii) whether it is a company limited by shares or a company limited by guarantee and having a share capital;

(b) the number of shares in a transferee company to be allotted to members of the transferor company for a given number of their shares (the “share exchange ratio”) and the amount of any cash payment;

(c) the terms relating to the allotment of shares in a transferee company;

(d) the date from which the holding of shares in a transferee company will entitle the holders to participate in profits, and any special conditions affecting that entitlement;

(e) the date from which the transactions of the transferor company are to be treated for accounting purposes as being those of a transferee company;

(f) any rights or restrictions attaching to shares or other securities in a transferee company to be allotted under the scheme to the holders of shares or other securities in the transferor company to which any special rights or restrictions attach, or the measures proposed concerning them;

(g) any amount of benefit paid or given or intended to be paid or given—

(i) to any of the experts referred to in section 924 (expert’s report), or

(ii) to any director of a company involved in the division,

and the consideration for the payment of benefit.

(3) The draft terms must also—

(a) give particulars of the property and liabilities to be transferred (to the extent that these are known to the transferor company) and their allocation among the transferee companies;

(b) make provision for the allocation among and transfer to the transferee companies of any other property and liabilities that the transferor company has acquired or may subsequently acquire; and

(c) specify the allocation to members of the transferor company of shares in the transferee companies and the criteria upon which that allocation is based.

921 Publication of draft terms (division)

(1) The directors of each company involved in the division must deliver a copy of the draft terms to the registrar.

(2) The registrar must publish in the Gazette notice of receipt by him from that company of a copy of the draft terms.

(3) That notice must be published at least one month before the date of any meeting of that company summoned for the purposes of approving the scheme.

(4) The requirements in this section are subject to section 934 (power of court to exclude certain requirements).

922 Approval of members of companies involved in the division

(1) The compromise or arrangement must be approved by a majority in number, representing 75% in value, of each class of members of each of the companies involved in the division, present and voting either in person or by proxy at a meeting.

(2) This requirement is subject to sections 931 and 932 (circumstances in which meeting of members not required).

923 Directors' explanatory report (division)

(1) The directors of the transferor and each existing transferee company must draw up and adopt a report.

(2) The report must consist of—

(a) the statement required by section 897 (statement explaining effect of compromise or arrangement), and

(b) insofar as that statement does not deal with the following matters, a further statement—

(i) setting out the legal and economic grounds for the draft terms, and in particular for the share exchange ratio and for the criteria on which the allocation to the members of the transferor company of shares in the transferee companies was based, and

(ii) specifying any special valuation difficulties.

(3) The report must also state—

(a) whether a report has been made to any transferee company under section 593 (valuation of non-cash consideration for shares), and

(b) if so, whether that report has been delivered to the registrar of companies.

(4) The requirement in this section is subject to section 933 (agreement to dispense with reports etc).

924 Expert’s report (division)

(1) An expert’s report must be drawn up on behalf of each company involved in the division.

(2) The report required is a written report on the draft terms to the members of the company.

(3) The court may on the joint application of the companies involved in the division approve the appointment of a joint expert to draw up a single report on behalf of all those companies.

If no such appointment is made, there must be a separate expert’s report to the members of each company involved in the division drawn up by a separate expert appointed on behalf of that company.

(4) The expert must be a person who—

(a) is eligible for appointment as a statutory auditor (see section 1212), and

(b) meets the independence requirement in section 936.

(5) The expert’s report must—

(a) indicate the method or methods used to arrive at the share exchange ratio;

(b) give an opinion as to whether the method or methods used are reasonable in all the circumstances of the case, indicate the values arrived at using each such method and (if there is more than one method) give an opinion on the relative importance attributed to such methods in arriving at the value decided on;

(c) describe any special valuation difficulties that have arisen;

(d) state whether in the expert’s opinion the share exchange ratio is reasonable; and

(e) in the case of a valuation made by a person other than himself (see section 935), state that it appeared to him reasonable to arrange for it to be so made or to accept a valuation so made.

(6) The expert (or each of them) has—

(a) the right of access to all such documents of the companies involved in the division, and

(b) the right to require from the companies' officers all such information,

as he thinks necessary for the purposes of making his report.

(7) The requirement in this section is subject to section 933 (agreement to dispense with reports etc).

925 Supplementary accounting statement (division)

(1) If the last annual accounts of a company involved in the division relate to a financial year ending more than seven months before the first meeting of the company summoned for the purposes of approving the scheme, the directors of that company must prepare a supplementary accounting statement.

(2) That statement must consist of—

(a) a balance sheet dealing with the state of affairs of the company as at a date not more than three months before the draft terms were adopted by the directors, and

(b) where the company would be required under section 399 to prepare group accounts if that date were the last day of a financial year, a consolidated balance sheet dealing with the state of affairs of the company and the undertakings that would be included in such a consolidation.

(3) The requirements of this Act (and where relevant Article 4 of the IAS Regulation) as to the balance sheet forming part of a company’s annual accounts, and the matters to be included in notes to it, apply to the balance sheet required for an accounting statement under this section, with such modifications as are necessary by reason of its being prepared otherwise than as at the last day of a financial year.

(4) The provisions of section 414 as to the approval and signing of accounts apply to the balance sheet required for an accounting statement under this section.

(5) The requirement in this section is subject to section 933 (agreement to dispense with reports etc).

926 Inspection of documents (division)

(1) The members of each company involved in the division must be able, during the period specified below—

(a) to inspect at the registered office of that company copies of the documents listed below relating to that company and every other company involved in the division, and

(b) to obtain copies of those documents or any part of them on request free of charge.

(2) The period referred to above is the period—

(a) beginning one month before, and

(b) ending on the date of,

the first meeting of the members, or any class of members, of the company for the purposes of approving the scheme.

(3) The documents referred to above are—

(a) the draft terms;

(b) the directors' explanatory report;

(c) the expert’s report;

(d) the company’s annual accounts and reports for the last three financial years ending on or before the first meeting of the members, or any class of members, of the company summoned for the purposes of approving the scheme; and

(e) any supplementary accounting statement required by section 925.

(4) The requirements in subsection (3)(b), (c) and (e) are subject to section 933 (agreement to dispense with reports etc) and section 934 (power of court to exclude certain requirements).

927 Report on material changes of assets of transferor company (division)

(1) The directors of the transferor company must report—

(a) to every meeting of the members, or any class of members, of that company summoned for the purpose of agreeing to the scheme, and

(b) to the directors of each existing transferee company,

any material changes in the property and liabilities of the transferor company between the date when the draft terms were adopted and the date of the meeting in question.

(2) The directors of each existing transferee company must in turn—

(a) report those matters to every meeting of the members, or any class of members, of that company summoned for the purpose of agreeing to the scheme, or

(b) send a report of those matters to every member entitled to receive notice of such a meeting.

(3) The requirement in this section is subject to section 933 (agreement to dispense with reports etc).

928 Approval of articles of new transferee company (division)

The articles of every new transferee company, or a draft of them, must be approved by ordinary resolution of the transferor company.

929 Protection of holders of securities to which special rights attached (division)

(1) The scheme must provide that where any securities of the transferor company (other than shares) to which special rights are attached are held by a person otherwise than as a member or creditor of the company, that person is to receive rights in a transferee company of equivalent value.

(2) Subsection (1) does not apply if—

(a) the holder has agreed otherwise, or

(b) the holder is, or under the scheme is to be, entitled to have the securities purchased by a transferee company on terms that the court considers reasonable.

930 No allotment of shares to transferor company or its nominee (division)

The scheme must not provide for shares in a transferee company to be allotted to the transferor company (or its nominee) in respect of shares in the transferor company held by it (or its nominee).

Exceptions where shares of transferor company held by transferee company

931 Circumstances in which meeting of members of transferor company not required (division)

(1) This section applies in the case of a division where all of the shares or other securities of the transferor company carrying the right to vote at general meetings of the company are held by or on behalf of one or more existing transferee companies.

(2) It is not necessary for the scheme to be approved by a meeting of the members, or any class of members, of the transferor company if the court is satisfied that the following conditions have been complied with.

(3) The first condition is that publication of notice of receipt of the draft terms by the registrar took place in respect of all the companies involved in the division at least one month before the date of the court’s order.

(4) The second condition is that the members of every company involved in the division were able during the period beginning one month before, and ending on, that date—

(a) to inspect at the registered office of their company copies of the documents listed in section 926(3) relating to every company involved in the division, and

(b) to obtain copies of those documents or any part of them on request free of charge.

(5) The third condition is that—

(a) one or more members of the transferor company, who together held not less than 5% of the paid-up capital of the company (excluding any shares in the company held as treasury shares) would have been able, during that period, to require a meeting of each class of members to be called for the purpose of deciding whether or not to agree to the scheme, and

(b) no such requirement was made.

(6) The fourth condition is that the directors of the transferor company have sent—

(a) to every member who would have been entitled to receive notice of a meeting to agree to the scheme (had any such meeting been called), and

(b) to the directors of every existing transferee company,

a report of any material change in the property and liabilities of the transferor company between the date when the terms were adopted by the directors and the date one month before the date of the court’s order.

Other exceptions

932 Circumstances in which meeting of members of transferee company not required (division)

(1) In the case of a division, it is not necessary for the scheme to be approved by the members of a transferee company if the court is satisfied that the following conditions have been complied with in relation to that company.

(2) The first condition is that publication of notice of receipt of the draft terms by the registrar took place in respect of that company at least one month before the date of the first meeting of members of the transferor company summoned for the purposes of agreeing to the scheme.

(3) The second condition is that the members of that company were able during the period beginning one month before, and ending on, that date—

(a) to inspect at the registered office of that company copies of the documents specified in section 926(3) relating to that company and every other company involved in the division, and

(b) to obtain copies of those documents or any part of them on request free of charge.

(4) The third condition is that—

(a) one or more members of that company, who together held not less than 5% of the paid-up capital of the company which carried the right to vote at general meetings of the company (excluding any shares in the company held as treasury shares) would have been able, during that period, to require a meeting of each class of members to be called for the purpose of deciding whether or not to agree to the scheme, and

(b) no such requirement was made.

(5) The first and second conditions above are subject to section 934 (power of court to exclude certain requirements).

933 Agreement to dispense with reports etc (division)

(1) If all members holding shares in, and all persons holding other securities of, the companies involved in the division, being shares or securities that carry a right to vote in general meetings of the company in question, so agree, the following requirements do not apply.

(2) The requirements that may be dispensed with under this section are—

(a) the requirements of—

(i) section 923 (directors' explanatory report),

(ii) section 924 (expert’s report),

(iii) section 925 (supplementary accounting statement), and

(iv) section 927 (report on material changes in assets of transferor company); and

(b) the requirements of section 926 (inspection of documents) so far as relating to any document required to be drawn up under the provisions mentioned in paragraph (a)(i), (ii) or (iii) above.

(3) For the purposes of this section—

(a) the members, or holders of other securities, of a company, and

(b) whether shares or other securities carry a right to vote in general meetings of the company,

are determined as at the date of the application to the court under section 896.

934 Power of court to exclude certain requirements (division)

(1) In the case of a division, the court may by order direct that—

(a) in relation to any company involved in the division, the requirements of—

(i) section 921 (publication of draft terms), and

(ii) section 926 (inspection of documents),

do not apply, and

(b) in relation to an existing transferee company, section 932 (circumstances in which meeting of members of transferee company not required) has effect with the omission of the first and second conditions specified in that section,

if the court is satisfied that the following conditions will be fulfilled in relation to that company.

(2) The first condition is that the members of that company will have received, or will have been able to obtain free of charge, copies of the documents listed in section 926—

(a) in time to examine them before the date of the first meeting of the members, or any class of members, of that company summoned for the purposes of agreeing to the scheme, or

(b) in the case of an existing transferee company where in the circumstances described in section 932 no meeting is held, in time to require a meeting as mentioned in subsection (4) of that section.

(3) The second condition is that the creditors of that company will have received or will have been able to obtain free of charge copies of the draft terms in time to examine them—

(a) before the date of the first meeting of the members, or any class of members, of the company summoned for the purposes of agreeing to the scheme, or

(b) in the circumstances mentioned in subsection (2)(b) above, at the same time as the members of the company.

(4) The third condition is that no prejudice would be caused to the members or creditors of the transferor company or any transferee company by making the order in question.