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Companies Act 1985

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This is the original version (as it was originally enacted).

Companies Act 1985

1985 CHAPTER 6

An Act to consolidate the greater part of the Companies Acts.

[11th March 1985]

Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

PART IFormation and Registration of Companies ; Juridical Status and Membership

CHAPTER ICompany Formation

Memorandum of association

1Mode of forming incorporated company

(1)Any two or more persons associated for a lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability.

(2)A company so formed may be either—

(a)a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them ("a company limited by shares ");

(b)a company having the liability of its members limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the company in the event of its being wound up (" a company limited by guarantee "); or

(c)a company not having any limit on the liability of its members (" an unlimited company ").

(3)A " public company " is a company limited by shares or limited by guarantee and having a share capital, being a company—

(a)the memorandum of which states that it is to be a public company, and

(b)in relation to which the provisions of this Act or the former Companies Acts as to the registration or re-registration of a company as a public company have been complied with on or after 22nd December 1980;

and a " private company " is a company that is not a public company.

(4)With effect from 22nd December 1980, a company cannot be formed as, or become, a company limited by guarantee with a share capital.

2Requirements with respect to memorandum

(1)The memorandum of every company must state—

(a)the name of the company ;

(b)whether the registered office of the company is to be situated in England and Wales, or in Scotland ;

(c)the objects of the company.

(2)Alternatively to subsection (1)(b), the memorandum may contain a statement that the company's registered office is to be situated in Wales; and a company whose registered office is situated in Wales may by special resolution alter its memorandum so as to provide that its registered office is to be so situated.

(3)The memorandum of a company limited by shares or by guarantee must also state that the liability of its members is limited.

(4)The memorandum of a company limited by guarantee must also state that each member undertakes to contribute to the assets of the company if it should be wound up while he is a member, or within one year after he ceases to be a member, for payment of the debts and liabilities of the company contracted before he ceases to be a member, and of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.

(5)In the case of a company having a share capital—

(a)the memorandum must also (unless it is an unlimited company) state the amount of the share capital with which the company proposes to be registered and the division of the share capital into shares of a fixed amount;

(b)no subscriber of the memorandum may take less than one share; and

(c)there must be shown in the memorandum against the name of each subscriber the number of shares he takes.

(6)The memorandum must be signed by each subscriber in the presence of at least one witness, who must attest the signature ; and that attestation is sufficient in Scotland as well as in England and Wales.

(7)A company may not alter the conditions contained in its memorandum except in the cases, in the mode and to the extent, for which express provision is made by this Act.

3Forms of memorandum

(1)Subject to the provisions of sections 1 and 2, the form of the memorandum of association of—

(a)a public company, being a company limited by shares,

(b)a public company, being a company limited by guarantee and having a share capital,

(c)a private company limited by shares,

(d)a private company limited by guarantee and not having a share capital,

(e)a private company limited by guarantee and having a share capital, and

(f)an unlimited company having a share capital,

shall be as specified respectively for such companies by regulations made by the Secretary of State, or as near to that form as circumstances admit.

(2)Regulations under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

4Resolution to alter objects

A company may by special resolution alter its memorandum with respect to the objects of the company, so far as may be required to enable it—

(a)to carry on its business more economically or more efficiently ; or

(b)to attain its main purpose by new or improved means; or

(c)to enlarge or change the local area of its operations; or

(d)to carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company ; or

(e)to restrict or abandon any of the objects specified in the memorandum; or

(f)to sell or dispose of the whole or any part of the undertaking of the company ; or

(g)to amalgamate with any other company or body of persons;

but if an application is made under the following section, the alteration does not have effect except in so far as it is confirmed by the court.

5Procedure for objecting to alteration

(1)Where a company's memorandum has been altered by special resolution under section 4, application may be made to the court for the alteration to be cancelled.

(2)Such an application may be made—

(a)by the holders of not less in the aggregate than 15 per cent, in nominal value of the company's issued share capital or any class of it or, if the company is not limited by shares, not less than 15 per cent, of the company's members; or

(b)by the holders of not less than 15 per cent, of the company's debentures entitling the holders to object to an alteration of its objects ;

but an application shall not be made by any person who has consented to or voted in favour of the alteration.

(3)The application must be made within 21 days after the date on which the resolution altering the company's objects was passed, and may be made on behalf of the persons entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

(4)The court may on such an application make an order confirming the alteration either wholly or in part and on such terms and conditions as it thinks fit, and may—

(a)if it thinks fit, adjourn the proceedings in order that an arrangement may be made to its satisfaction for the purchase of the interests of dissentient members, and

(b)give such directions and make such orders as it thinks expedient for facilitating or carrying into effect any such arrangement.

(5)The court's order may (if the court thinks fit) provide for the purchase by the company of the shares of any members of the company, and for the reduction accordingly of its capital, and may make such alterations in the company's memorandum and articles as may be required in consequence of that provision.

(6)If the court's order requires the company not to make any, or any specified, alteration in its memorandum or articles, the company does not then have power without the leave of the court to make any such alteration in breach of that requirement.

(7)An alteration in the memorandum or articles of a company made by virtue of an order under this section, other than one made by resolution of the company, is of the same effect as if duly made by resolution; and this Act applies accordingly to the memorandum or articles as so altered.

(8)The debentures entitling the holders to object to an alteration of a company's objects are any debentures secured by a floating charge which were issued or first issued before 1st December 1947 or form part of the same series as any debentures so issued; and a special resolution altering a company's objects requires the same notice to the holders of any such debentures as to members of the company. In the absence of provisions regulating the giving of notice to any such debenture holders, the provisions of the company's articles regulating the giving of notice to members apply.

6Provisions supplementing ss. 4, 5

(1)Where a company passes a resolution altering its objects, then—

(a)if with respect to the resolution no application is made under section 5, the company shall within 15 days from the end of the period for making such an application deliver to the registrar of companies a printed copy of its memorandum as altered ; and

(b)if such an application is made, the company shall—

(i)forthwith give notice (in the prescribed form) of that fact to the registrar, and

(ii)within 15 days from the date of any order cancelling or confirming the alteration, deliver to the registrar an office copy of the order and, in the case of an order confirming the alteration, a printed copy of the memorandum as altered.

(2)The court may by order at any time extend the time for the delivery of documents to the registrar under subsection (1)(b) for such period as the court may think proper.

(3)If a company makes default in giving notice or delivering any document to the registrar of companies as required by subsection (1), 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.

(4)The validity of an alteration of a company's memorandum with respect to the objects of the company shall not be questioned on the ground that it was not authorised by section 4, except in proceedings taken for the purpose (whether under section 5 or otherwise) before the expiration of 21 days after the date of the resolution in that behalf.

(5)Where such proceedings are taken otherwise than under section 5, subsections (1) to (3) above apply in relation to the proceedings as if they had been taken under that section, and as if an order declaring the alteration invalid were an order cancelling it, and as if an order dismissing the proceedings were an order confirming the alteration.

Articles of association

7Articles prescribing regulations for companies

(1)There may in the case of a company limited by shares, and there shall in the case of a company limited by guarantee or unlimited, be registered with the memorandum articles of association signed by the subscribers to the memorandum and prescribing regulations for the company.

(2)In the case of an unlimited company having a share capital, the articles must state the amount of share capital with which the company proposes to be registered.

(3)Articles must—

(a)be printed,

(b)be divided into paragraphs numbered consecutively, and

(c)be signed by each subscriber of the memorandum in the presence of at least one witness who must attest the signature (which attestation is sufficient in Scotland as well as in England and Wales).

8Tables A, C, D and E

(1)Table A is as prescribed by regulations made by the Secretary of State ; and a company may for its articles adopt the whole or any part of that Table.

(2)In the case of a company limited by shares, if articles are not registered or, if articles are registered, in so far as they do not exclude or modify Table A, that Table (so far as applicable, and as in force at the date of the company's registration) constitutes the company's articles, in the same manner and to the same extent as if articles in the form of that Table had been duly registered.

(3)If in consequence of regulations under this section Table A is altered, the alteration does not affect a company registered before the alteration takes effect, or repeal as respects that company any portion of the Table.

(4)The form of the articles of association of—

(a)a company limited by guarantee and not having a share capital,

(b)a company limited by guarantee and having a share capital, and

(c)an unlimited company having a share capital,

shall be respectively in accordance with Table C, D or E prescribed by regulations made by the Secretary of State, or as near to that form as circumstances admit.

(5)Regulations under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

9Alteration of articles by special resolution

(1)Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may by special resolution alter its articles.

(2)Alterations so made in the articles are (subject to this Act) as valid as if originally contained in them, and are subject in like manner to alteration by special resolution.

Registration and its consequences

10Documents to be sent to registrar

(1)The company's memorandum and articles (if any) shall be delivered—

(a)to the registrar of companies for England and Wales, if the memorandum states that the registered office of the company is to be situated in England and Wales, or that it is to be situated in Wales ; and

(b)to the registrar of companies for Scotland, if the memorandum states that the registered office of the company is to be situated in Scotland.

(2)With the memorandum there shall be delivered a statement in the prescribed form containing the names and requisite particulars of—

(a)the person who is, or the persons who are, to be the first director or directors of the company; and

(b)the person who is, or the persons who are, to be the first secretary or joint secretaries of the company;

and the requisite particulars in each case are those set out in Schedule 1.

(3)The statement shall be signed by or on behalf of the subscribers of the memorandum and shall contain a consent signed by each of the persons named in it as a director, as secretary or as one of joint secretaries, to act in the relevant capacity.

(4)Where a memorandum is delivered by a person as agent for the subscribers, the statement shall specify that fact and the person's name and address.

(5)An appointment by any articles delivered with the memorandum of a person as director or secretary of the company is void unless he is named as a director or secretary in the statement.

(6)There shall in the statement be specified the intended situation of the company's registered office on incorporation.

11Minimum authorised capital (public companies)

When a memorandum delivered to the registrar of companies under section 10 states that the association to be registered is to be a public company, the amount of the share capital stated in the memorandum to be that with which the company proposes to be registered must not be less than the authorised minimum (defined in section 118).

12Duty of registrar

(1)The registrar of companies shall not register a company's memorandum delivered under section 10 unless he is satisfied that all the requirements of this Act in respect of registration and of matters precedent and incidental to it have been complied with.

(2)Subject to this, the registrar shall retain and register the memorandum and articles (if any) delivered to him under that section.

(3)A statutory declaration in the prescribed form by—

(a)a solicitor engaged in the formation of a company, or

(b)a person named as a director or secretary of the company in the statement delivered under section 10(2),

that those requirements have been complied with shall be delivered to the registrar of companies, and the registrar may accept such a declaration as sufficient evidence of compliance.

13Effect of registration

(1)On the registration of a company's memorandum, the registrar of companies shall give a certificate that the company is incorporated and, in the case of a limited company, that it is limited.

(2)The certificate may be signed by the registrar, or authenticated by his official seal.

(3)From the date of incorporation mentioned in the certificate, the subscribers of the memorandum, together with such other persons as may from time to time become members of the company, shall be a body corporate by the name contained in the memorandum.

(4)That body corporate is then capable forthwith of exercising all the functions of an incorporated company, but with such liability on the part of its members to contribute to its assets in the event of its being wound up as is provided by this Act.

This is subject, in the case of a public company, to section 117 (additional certificate as to amount of allotted share capital).

(5)The persons named in the statement under section 10 as directors, secretary or joint secretaries are, on the company's incorporation, deemed to have been respectively appointed as its first directors, secretary or joint secretaries.

(6)Where the registrar registers an association's memorandum which states that the association is to be a public company, the certificate of incorporation shall contain a statement that the company is a public company.

(7)A certificate of incorporation given in respect of an association is conclusive evidence—

(a)that the requirements of this Act in respect of registration and of matters precedent and incidental to it have been complied with, and that the association is a company authorised to be registered, and is duly registered, under this Act, and

(b)if the certificate contains a statement that the company is a public company, that the company is such a company.

14Effect of memorandum and articles

(1)Subject to the provisions of this Act, the memorandum and articles, when registered, bind the company and its members to the same extent as if they respectively had been signed and sealed by each member, and contained covenants on the part of each member to observe all the provisions of the memorandum and of the articles.

(2)Money payable by a member to the company under the memorandum or articles is a debt due from him to the company, and in England and Wales is of the nature of a specialty debt.

15Memorandum and articles of company limited by guarantee

(1)In the case of a company limited by guarantee and not having a share capital, every provision in the memorandum or articles, or in any resolution of the company purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member, is void.

(2)For purposes of provisions of this Act relating to the memorandum of a company limited by guarantee, and for those of section 1(4) and this section, every provision in the memorandum or articles, or in any resolution, of a company so limited purporting to divide the company's undertaking into shares or interests is to be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified by the provision.

16Effect of alteration on company's members

(1)A member of a company is not bound by an alteration made in the memorandum or articles after the date on which he became a member, if and so far as the alteration—

(a)requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made; or

(b)in any way increases his liability as at that date to contribute to the company's share capital or otherwise to pay money to the company.

(2)Subsection (1) operates notwithstanding anything in the memorandum or articles; but it does not apply in a case where the member agrees in writing, either before or after the alteration is made, to be bound by the alteration.

17Conditions in memorandum which could have been in articles

(1)A condition contained in a company's memorandum which could lawfully have been contained in articles of association instead of in the memorandum may be altered by the company by special resolution ; but if an application is made to the court for the alteration to be cancelled, the alteration does not have effect except in so far as it is confirmed by the court.

(2)This section—

(a)is subject to section 16, and also to Part XVII (court order protecting minority), and

(b)does not apply where the memorandum itself provides for or prohibits the alteration of all or any of the conditions above referred to, and does not authorise any variation or abrogation of the special rights of any class of members.

(3)Section 5 (except subsections (2)(b) and (8)) and section 6(1) to (3) apply in relation to any alteration and to any application made under this section as they apply in relation to alterations and applications under sections 4 to 6.

18Amendments of memorandum or articles to be registered

(1)Where an alteration is made in a company's memorandum or articles by any statutory provision, whether contained in an Act of Parliament or in an instrument made under an Act, a printed copy of the Act or instrument shall, not later than 15 days after that provision comes into force, be forwarded to the registrar of companies and recorded by him.

(2)Where a company is required (by this section or otherwise) to send to the registrar any document making or evidencing an alteration in the company's memorandum or articles (other than a special resolution under section 4), the company shall send with it a printed copy of the memorandum or articles as altered.

(3)If a company fails to comply with this section, the company and any officer of it who is in default is liable to a fine and, for continued contravention, to a daily default fine.

19Copies of memorandum and articles to be given to members

(1)A company shall, on being so required by any member, send to him a copy of the memorandum and of the articles (if any), and a copy of any Act of Parliament which alters the memorandum, subject to payment—

(a)in the case of a copy of the memorandum and of the articles, of 5 pence or such less sum as the company may prescribe, and

(b)in the case of a copy of an Act, of such sum not exceeding its published price as the company may require.

(2)If a company makes default in complying with this section, the company and every officer of it who is in default is liable for each offence to a fine.

20Issued copy of memorandum to embody alterations

(1)Where an alteration is made in a company's memorandum, every copy of the memorandum issued after the date of the alteration shall be in accordance with the alteration.

(2)If, where any such alteration has been made, the company at any time after the date of the alteration issues any copies of the memorandum which are not in accordance with the alteration, it is liable to a fine, and so too is every officer of the company who is in default.

21Registered documentation of Welsh companies

(1)Where a company is to be registered with a memorandum stating that its registered office is to be situated in Wales, the memorandum and articles to be delivered for registration under section 10 may be in Welsh; but, if they are, they shall be accompanied by a certified translation into English.

(2)Where a company whose registered office is situated in Wales has altered its memorandum as allowed by section 2(2), it may deliver to the registrar of companies for registration a certified translation into Welsh of its memorandum and articles.

(3)A company whose memorandum states that its registered office is to be situated in Wales may comply with any provision of this Act requiring it to deliver any document to the registrar of companies by delivering to him that document in Welsh (or, if it consists of a prescribed form, completed in Welsh), together with a certified translation into English.

But any document making or evidencing an alteration in the company's memorandum or articles, and any copy of a company's memorandum or articles as altered, shall be in the same language as the memorandum and articles originally registered and, if that language is Welsh, shall be accompanied by a certified translation into English.

(4)Where a company has under subsection (2) delivered a translation into Welsh of its memorandum and articles, it may, when delivering to the registrar of companies a document making or evidencing an alteration in the memorandum or articles or a copy of the memorandum or articles as altered, deliver with it a certified translation into Welsh.

(5)In this section " certified translation " means a translation certified in the prescribed manner to be a correct translation ; and a reference to delivering a document includes sending, forwarding, producing or (in the case of a notice) giving it.

A company's membership

22Definition of " member "

(1)The subscribers of a company's memorandum are deemed to have agreed to become members of the company, and on its registration shall be entered as such in its register of members.

(2)Every other person who agrees to become a member of a company, and whose name is entered in its register of members, is a member of the company.

23Membership of holding company

(1)Except in the cases mentioned below in this section, a body corporate cannot be a member of a company which is its holding company ; and any allotment or transfer of shares in a company to its subsidiary is void.

(2)This does not prevent a subsidiary which was, on 1st July 1948, a member of its holding company, from continuing to be a member; but (subject to subsection (4)) the subsidiary has no right to vote at meetings of the holding company or any class of its members.

(3)Subject as follows, subsections (1) and (2) apply in relation to a nominee for a body corporate which is a subsidiary, as if references to such a body corporate included a nominee for it.

(4)Nothing in this section applies where the subsidiary is concerned as personal representative, or where it is concerned as trustee, unless the holding company or a subsidiary of it is beneficially interested under the trust and is not so interested only by way of security for the purposes of a transaction entered into by it in the ordinary course of a business which includes the lending of money.

Schedule 2 has effect for the interpretation of the reference in this subsection to a company or its subsidiary being beneficially interested.

(5)In relation to a company limited by guarantee or unlimited which is a holding company, the reference in subsection (1) to shares (whether or not the company has a share capital) includes the interest of its members as such, whatever the form of that interest

24Minimum membership for carrying on business

If a company carries on business without having at least two members and does so for more than 6 months, a person who, for the whole or any part of the period that it so carries on business after those 6 months—

(a)is a member of the company, and

(b)knows that it is carrying on business with only one member,

is liable (jointly and severally with the company) for the payment of the company's debts contracted during the period or, as the case may be, that part of it.

CHAPTER IICompany Names

25Name as stated in memorandum

(1)The name of a public company must end with the words " public limited company " or, if the memorandum states that the company's registered office is to be situated in Wales, those words or their equivalent in Welsh ("cwmni cyfyngedig cyhoeddus "); and those words or that equivalent may not be preceded by the word " limited " or its equivalent in Welsh (" cyfyngedig ").

(2)In the case of a company limited by shares or by guarantee (not being a public company), the name must have " limited " as its last word, except that—

(a)this is subject to section 30 (exempting, in certain circumstances, a company from the requirement to have " limited " as part of the name), and

(b)if the company is to be registered with a memorandum stating that its registered office is to be situated in Wales, the name may have " cyfyngedig " as its last word.

26Prohibition on registration of certain names

(1)A company shall not be registered under this Act by a name—

(a)which includes, otherwise than at the end of the name, any of the following words or expressions, that is to say, " limited ", " unlimited " or " public limited company " or their Welsh equivalents (" cyfyngedig ". " anghyfyngedig " and " cwmni cyfyngedig cyhoeddus" respectively) ;

(b)which includes, otherwise than at the end of the name, an abbreviation of any of those words or expressions;

(c)which is the same as a name appearing in the registrar's index of company names;

(d)the use of which by the company would in the opinion of the Secretary of State constitute a criminal offence; or

(e)which in the opinion of the Secretary of State is offensive.

(2)Except with the approval of the Secretary of State, a company shall not be registered under this Act by a name which—

(a)in the opinion of the Secretary of State would be likely to give the impression that the company is connected in any way with Her Majesty's Government or with any local authority; or

(b)includes any word or expression for the time being specified in regulations under section 29.

" Local authority " means any local authority within the meaning of the [1972 c. 70.] Local Government Act 1972 or the [1973 c. 65.] Local Government (Scotland) Act 1973, the Common Council of the City of London or the Council of the Isles of Scilly.

(3)In determining for purposes of subsection (1)(c) whether one name is the same as another, there are to be disregarded—

(a)the definite article, where it is the first word of the name;

(b)the following words and expressions where they appear at the end of the name, that is to say—

  • " company " or its Welsh equivalent (" cwmni "), " and company" or its Welsh equivalent (" a'r cwmni"),

  • " company limited" or its Welsh equivalent (" cwmni cyfyngedig "), " and company limited " or its Welsh equivalent (" a'r cwmni cyfyngedig "),

  • " limited " or its Welsh equivalent (" cyfyngedig "), " unlimited " or its Welsh equivalent (" anghyfyngedig "), and

  • " public limited company " or its Welsh equivalent (" cwmni cyfyngedig cyhoeddus ");

(c)abbreviations of any of those words or expressions where they appear at the end of the name; and

(d)type and case of letters, accents, spaces between letters and punctuation marks;

and " and " and " & " are to be taken as the same.

27Alternatives of statutory designations

(1)A company which by any provision of this Act is either required or entitled to include in its name, as its last part, any of the words specified in subsection (4) below may, instead of those words, include as the last part of the name the abbreviations there specified as alternatives in relation to those words.

(2)A reference in this Act to the name of a company or to the inclusion of any of those words in a company's name includes a reference to the name including (in place of any of the words so specified) the appropriate alternative, or to the inclusion of the appropriate alternative, as the case may be.

(3)A provision of this Act requiring a company not to include any of those words in its name also requires it not to include the abbreviated alternative specified in subsection (4).

(4)For the purposes of this section—

(a)the alternative of " limited " is " ltd.";

(b)the alternative of " public limited company" is p.l.c. ;

(c)the alternative of " cyfyngedig " is " cyf."; and

(d)the alternative of "cwmni cyfyngedig cyhoeddus" is " c.c.c.".

28Change of name

(1)A company may by special resolution change its name (but subject to section 31 in the case of a company which has received a direction under subsection (2) of that section from the Secretary of State).

(2)Where a company has been registered by a name which—

(a)is the same as or, in the opinion of the Secretary of State, too like a name appearing at the time of the registration in the registrar's index of company names, or

(b)is the same as or, in the opinion of the Secretary of State, too like a name which should have appeared in that index at that time,

the Secretary of State may within 12 months of that time, in writing, direct the company to change its name within such period as he may specify.

Section 26(3) applies in determining under this subsection whether a name is the same as or too like another.

(3)If it appears to the Secretary of State that misleading information has been given for the purpose of a company's registration with a particular name, or that undertakings or assurances have been given for that purpose and have not been fulfilled, he may within 5 years of the date of its registration with that name in writing direct the company to change its name within such period as he may specify.

(4)Where a direction has been given under subsection (2) or (3), the Secretary of State may by a further direction in writing extend the period within which the company is to change its name, at any time before the end of that period.

(5)A company which fails to comply with a direction under this section, and any officer of it who is in default, is liable to a fine and, for continued contravention, to a daily default fine.

(6)Where a company changes its name under this section, the registrar of companies shall (subject to section 26) enter the new name on the register in place of the former name, and shall issue a certificate of incorporation altered to meet the circumstances of the case; and the change of name has effect from the date on which the altered certificate is issued.

(7)A change of name by a company under this section does not affect any rights or obligations of the company or render defective any legal proceedings by or against it; and any legal proceedings that might have been continued or commenced against it by its former name may be continued or commenced against it by its new name.

29Regulations about names

(1)The Secretary of State may by regulations—

(a)specify words or expressions for the registration of which as or as part of a company's corporate name his approval is required under section 26(2)(b), and

(b)in relation to any such word or expression, specify a Government department or other body as the relevant body for purposes of the following subsection.

(2)Where a company proposes to have as, or as part of, its corporate name any such word or expression and a Government department or other body is specified under subsection (1)(b) in relation to that word or expression, a request shall be made (in writing) to the relevant body to indicate whether (and if so why) it has any objections to the proposal; and the person to make the request is—

(a)in the case of a company seeking to be registered under this Part, the person making the statutory declaration required by section 12(3),

(b)in the case of a company seeking to be registered under section 680, the persons making the statutory declaration required by section 686(2), and

(c)in any other case, a director or secretary of the company concerned.

(3)The person who has made that request to the relevant body shall submit to the registrar of companies a statement that it has been made and a copy of any response received from that body, together with—

(a)the requisite statutory declaration, or

(b)a copy of the special resolution changing the company's name,

according as the case is one or other of those mentioned in subsection (2).

(4)Sections 709 and 710 (public rights of inspection of documents kept by registrar of companies) do not apply to documents sent under subsection (3) of this section.

(5)Regulations under this section may contain such transitional provisions and savings as the Secretary of State thinks appropriate and may make different provision for different cases or classes of case.

(6)The regulations shall be made by statutory instrument, to be laid before Parliament after it is made; and the regulations shall cease to have effect at the end of 28 days beginning with the day on which the regulations were made (but without prejudice to anything previously done by virtue of them or to the making of new regulations), unless during that period they are approved by resolution of each House. In reckoning that period, no account is to be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.

30Exemption from requirement of " limited " as part of the name

(1)Certain companies are exempt from requirements of this Act relating to the use of " limited " as part of the company name.

(2)A private company limited by guarantee is exempt from those requirements, and so too is a company which on 25th February 1982 was a private company limited by shares with a name which, by virtue of a licence under section 19 of the [1948 c. 38.] Companies Act 1948, did not include " limited "; but in either case the company must, to have the exemption, comply with the requirements of the following subsection.

(3)Those requirements are that—

(a)the objects of the company are (or. in the case of a company about to be registered, are to be) the promotion of commerce, art, science, education, religion, charity or any profession, and anything incidental or conducive to any of those objects; and

(b)the company's memorandum or articles—

(i)require its profits (if any) or other income to be applied in promoting its objects,

(ii)prohibit the payment of dividends to its members, and

(iii)require all the assets which would otherwise be available to its members generally to be transferred on its winding up either to another body with objects similar to its own or to another body the objects of which are the promotion of charity and anything incidental or conducive thereto (whether or not the body is a member of the company).

(4)A statutory declaration that a company complies with the requirements of subsection (3) may be delivered to the registrar of companies, who may accept the declaration as sufficient evidence of the matters stated in it; and the registrar may refuse to register a company by a name which does not include the word " limited " unless such a declaration has been delivered to him.

(5)The statutory declaration must be in the prescribed form and be made—

(a)in the case of a company to be formed, by a solicitor engaged in its formation or by a person named as director or secretary in the statement delivered under section 10(2);

(b)in the case of a company to be registered in pursuance of section 680, by two or more directors or other principal officers of the company ; and

(c)in the case of a company proposing to change its name so that it ceases to have the word " limited " as part of its name, by a director or secretary of the company.

(6)References in this section to the word " limited " include (in an appropriate case) its Welsh equivalent (" cyfyngedig "), and the appropriate alternative (" ltd." or " cyf.", as the case may be).

(7)A company which is exempt from requirements relating to the use of " limited " and does not include that word as part of its name, is also exempt from the requirements of this Act relating to the publication of its name and the sending of lists of members to the registrar of companies.

31Provisions applying to company exempt under s. 30

(1)A company which is exempt under section 30 and whose name does not include " limited" shall not alter its memorandum or articles of association so that it ceases to comply with the requirements of subsection (3) of that section.

(2)If it appears to the Secretary of State that such a company—

(a)has carried on any business other than the promotion of any of the objects mentioned in that subsection, or

(b)has applied any of its profits or other income otherwise than in promoting such objects, or

(c)has paid a dividend to any of its members,

he may, in writing, direct the company to change its name by resolution of the directors within such period as may be specified in the direction, so that its name ends with " limited ".

A resolution passed by the directors in compliance with a direction under this subsection is subject to section 380 of this Act (copy to be forwarded to the registrar of companies within 15 days).

(3)A company which has received a direction under subsection (2) shall not thereafter be registered by a name which does not include " limited ", without the approval of the Secretary of State.

(4)References in this section to the word " limited " include (in an appropriate case) its Welsh equivalent (" cyfyngedig"), and the appropriate alternative (" ltd." or " cyf.", as the case may be).

(5)A company which contravenes subsection (1), and any officer of it who is in default, is liable to a fine and, for continued contravention, to a daily default fine.

(6)A company which fails to comply with a direction by the Secretary of State under subsection (2), and any officer of the company who is in default, is liable to a fine and, for continued contravention, to a daily default fine.

32Power to require company to abandon misleading name

(1)If in the Secretary of State's opinion the name by which a company is registered gives so misleading an indication of the nature of its activities as to be likely to cause harm to the public, he may direct it to change its name.

(2)The direction must, if not duly made the subject of an application to the court under the following subsection, be complied with within a period of 6 weeks from the date of the direction or such longer period as the Secretary of State may think fit to allow.

(3)The company may, within a period of 3 weeks from the date of the direction, apply to the court to set it aside; and the court may set the direction aside or confirm it and, if it confirms the direction, shall specify a period within which it must be complied with.

(4)If a company makes default in complying with a direction under this section, it is liable to a fine and, for continued contravention, to a daily default fine.

(5)Where a company changes its name under this section, the registrar shall (subject to section 26) enter the new name on the register in place of the former name, and shall issue a certificate of incorporation altered to meet the circumstances of the case; and the change of name has effect from the date on which the altered certificate is issued.

(6)A change of name by a company under this section does not affect any of the rights or obligations of the company, or render defective any legal proceedings by or against it; and any legal proceedings that might have been continued or commenced against it by its former name may be continued or commenced against it by its new name.

33Prohibition on trading under misleading name

(1)A person who is not a public company is guilty of an offence if he carries on any trade, profession or business under a name which includes, as its last part, the words " public limited company" or their equivalent in Welsh (" cwmni cyfyngedig cyhoeddus").

(2)A public company is guilty of an offence if, in circumstances in which the fact that it is a public company is likely to be material to any person, it uses a name which may reasonably be expected to give the impression that it is a private company.

(3)A person guilty of an offence under subsection (1) or (2) and, if that person is a company, any officer of the company who is in default, is liable to a fine and, for continued contravention, to a dally default fine.

34Penalty for improper use of " limited " or " cyfyngedig "

If any person trades or carries on business under a name or title of which " limited " or " cyfyngedig ", or any contraction or imitation of either of those words, is the last word, that person, unless duly incorporated with limited liability, is liable to a fine and, for continued contravention, to a daily default fine.

CHAPTER IIIA Company's Capacity ; Formalities of Carrying on Business

35Company's capacity: power of directors to bind it

(1)In favour of a person dealing with a company in good faith, any transaction decided on by the directors is deemed to be one which it is within the capacity of the company to enter into, and the power of the directors to bind the company is deemed to be free of any limitation under the memorandum or articles.

(2)A party to a transaction so decided on is not bound to enquire as to the capacity of the company to enter into it or as to any such limitation on the powers of the directors, and is presumed to have acted in good faith unless the contrary is proved.

36Form of company contracts

(1)Contracts on behalf of a company may be made as follows—

(a)a contract which if made between private persons would be by law required to be in writing, and if made according to the law of England and Wales to be under seal, may be made on behalf of the company in writing under the company's common seal;

(b)a contract which if made between private persons would be by law required to be in writing, signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied;

(c)a contract which if made between private persons would by law be valid although made by parol only, and not reduced into writing, may be made by parol on behalf of the company by any person acting under its authority, express or implied.

(2)A contract made according to this section—

(a)is effectual in law, and binds the company and its successors and all other parties to it;

(b)may be varied or discharged in the same manner in which it is authorised by this section to be made.

(3)A deed to which a company is a party is held to be validly executed according to the law of Scotland on behalf of the company if it is executed in accordance with this Act or is sealed with the company's common seal and subscribed on behalf of the company by two of the directors, or by a director and the secretary; and such subscription on behalf of the company is binding whether attested by witnesses or not

(4)Where a contract purports to be made by a company, or by a person as agent for a company, at a time when the company has not been formed, then subject to any agreement to the contrary the contract has effect as one entered into by the person purporting to act for the company or as agent for it, and he is personally liable on the contract accordingly.

37Bills of exchange and promissory notes

A bill of exchange or promissory note is deemed to have been made, accepted or endorsed on behalf of a company if made, accepted or endorsed in the name of, or by or on behalf or on account of, the company by a person acting under its authority.

38Execution of deeds abroad

(1)A company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in any place elsewhere than in the United Kingdom.

(2)A deed signed by such an attorney on behalf of the company and under his seal binds the company and has the same effect as if it were under the company's common seal.

39Power of company to have official seal for use abroad

(1)A company whose objects require or comprise the transaction of business in foreign countries may, if authorised by its articles, have for use in any territory, district or place elsewhere than in the United Kingdom, an official seal, which shall be a facsimile of the common seal of the company, with the addition on its face of the name of every territory, district or place where it is to be used.

(2)A deed or other document to which the official seal is duly affixed binds the company as if it had been sealed with the company's common seal.

(3)A company having an official seal for use in any such territory, district or place may, by writing under its common seal, authorise any person appointed for the purpose in that territory, district or place to affix the official seal to any deed or other document to which the company is party in that territory, district or place.

(4)As between the company and a person dealing with such an agent, the agent's authority continues during the period (if any) mentioned in the instrument conferring the authority, or if no period is there mentioned, then until notice of the revocation or determination of the agent's authority has been given to the person dealing with him.

(5)The person affixing the official seal shall certify in writing on the deed or other instrument to which the seal is affixed the date on which and the place at which it is affixed.

40Official seal for share certificates, etc.

A company may have, for use for sealing securities issued by the company and for sealing documents creating or evidencing securities so issued, an official seal which is a facsimile of the company's common seal with the addition on its face of the word " Securities ".

41Authentication of documents

A document or proceeding requiring authentication by a company may be signed by a director, secretary or other authorised officer of the company, and need not be under the company's common seal.

42Events affecting a company's status

(1)A company is not entitled to rely against other persons on the happening of any of the following events—

(a)the making of a winding-up order in respect of the company, or the appointment of a liquidator in a voluntary winding up of the company, or

(b)any alteration of the company's memorandum or articles, or

(c)any change among the company's directors, or

(d)(as regards service of any document on the company) any change in the situation of the company's registered office,

if the event had not been officially notified at the material time and is not shown by the company to have been known at that time to the person concerned, or if the material time fell on or before the 15th day after the date of official notification (or, where the 15th day was a non-business day, on or before the next day that was not) and it is shown that the person concerned was unavoidably prevented from knowing of the event at that time.

(2)In subsection (1)—

(a)" official notification " and " officially notified " have the meanings given by section 711(2) (registrar of companies to give public notice of the issue or receipt by him of certain documents), and

(b)" non-business day" means a Saturday or Sunday, Christmas Day, Good Friday and any other day which is a bank holiday in the part of Great Britain where the company is registered.

PART IIRe-registration as a means of altering a company's status

Private company becoming public

43Re-registration of private company as public

(1)Subject to this and the following five sections, a private company (other than a company not having a share capital) may be re-registered as a public company if—

(a)a special resolution that it should be so re-registered is passed; and

(b)an application for re-registration is delivered to the registrar of companies, together with the necessary documents.

A company cannot be re-registered under this section if it has previously been re-registered as unlimited.

(2)The special resolution must—

(a)alter the company's memorandum so that it states that the company is to be a public company; and

(b)make such other alterations in the memorandum as are necessary to bring it (in substance and in form) into conformity with the requirements of this Act with respect to the memorandum of a public company (the alterations to include compliance with section 25(1) as regards the company's name); and

(c)make such alterations in the company's articles as are requisite in the circumstances.

(3)The application must be in the prescribed form and be signed by a director or secretary of the company; and the documents to be delivered with it are the following—

(a)a printed copy of the memorandum and articles as altered in pursuance of the resolution ;

(b)a copy of a written statement by the company's auditors that in their opinion the relevant balance sheet shows that at the balance sheet date the amount of the company's net assets (within the meaning given to that expression by section 264(2)) was not less than the aggregate of its called-up share capital and undistributable reserves;

(c)a copy of the relevant balance sheet, together with a copy of an unqualified report (defined in section 46) by the company's auditors in relation to that balance sheet;

(d)if section 44 applies, a copy of the valuation report under subsection (2)(b) of that section ; and

(e)a statutory declaration in the prescribed form by a director or secretary of the company—

(i)that the special resolution required by this section has been passed and that the conditions of the following two sections (so far as applicable) have been satisfied, and

(ii)that, between the balance sheet date and the application for re-registration, there has been no change in the company's financial position that has resulted in the amount of its net assets becoming less than the aggregate of its called-up share capital and undistributable reserves.

(4)"Relevant balance sheet" means a balance sheet prepared as at a date not more than 7 months before the company's application under this section.

(5)A resolution that a company be re-registered as a public company may change the company name by deleting the word " company" or the words " and company", or its or their equivalent in Welsh (" cwmni", " a'r cwmni"), including any abbreviation of them.

44Consideration for shares recently allotted to be valued

(1)The following applies if shares have been allotted by the company between the date as at which the relevant balance sheet was prepared and the passing of the special resolution under section 43, and those shares were allotted as fully or partly paid up as to their nominal value or any premium on them otherwise than in cash.

(2)Subject to the following provisions, the registrar of companies shall not entertain an application by the company under section 43 unless beforehand—

(a)the consideration for the allotment has been valued in accordance with section 108, and

(b)a report with respect to the value of the consideration has been made to the company (in accordance with that section) during the 6 months immediately preceding the allotment of the shares.

(3)Where an amount standing to the credit of any of the company's reserve accounts, or of its profit and loss account, has been applied in paying up (to any extent) any of the shares allotted or any premium on those shares, the amount applied does not count as consideration for the allotment, and accordingly subsection (2) does not apply to it.

(4)Subsection (2) does not apply if the allotment is in connection with an arrangement providing for it to be on terms that the whole or part of the consideration for the shares allotted is to be provided by the transfer to the company or the cancellation of all or some of the shares, or of all or some of the shares of a particular class, in another company (with or without the issue to the company applying under section 43 of shares, or of shares of any particular class, in that other company).

(5)But subsection (4) does not exclude the application of subsection (2), unless under the arrangement it is open to all the holders of the shares of the other company in question (or, where the arrangement applies only to shares of a particular class, all the holders of the other company's shares of that class) to take part in the arrangement.

In determining whether that is the case, shares held by or by a nominee of the company allotting shares in connection with the arrangement, or by or by a nominee of a company which is that company's holding company or subsidiary or a company which is a subsidiary of its holding company, are to be disregarded.

(6)Subsection (2) does not apply to preclude an application under section 43, if the allotment of the company's shares is in connection with its proposed merger with another company ; that is, where one of the companies concerned proposes to acquire all the assets and liabilities of the other in exchange for the issue of shares or other securities of that one to shareholders of the other, with or without any cash payment to shareholders.

(7)In this section—

(a)" arrangement" means any agreement, scheme or arrangement, including an arrangement sanctioned in accordance with section 425 (company compromise with creditors and members) or section 582 (liquidator in winding up accepting shares as consideration for sale of company's property), and

(b)"another company" includes any body corporate and any body to which letters patent have been issued under the [1837 c. 73.] Chartered Companies Act 1837.

45Additional requirements relating to share capital

(1)For a private company to be re-registered under section 43 as a public company, the following conditions with respect to its share capital must be satisfied at the time the special resolution under that section is passed.

(2)Subject to subsections (5) to (7) below—

(a)the nominal value of the company's allotted share capital must be not less than the authorised minimum, and

(b)each of the company's allotted shares must be paid up at least as to one-quarter of the nominal value of that share and the whole of any premium on it.

(3)Subject to subsection (5), if any shares in the company or any premium on them have been fully or partly paid up by an undertaking given by any person that he or another should do work or perform services (whether for the company or any other person), the undertaking must have been performed or otherwise discharged.

(4)Subject to subsection (5), if shares have been allotted as fully or partly paid up as to their nominal value or any premium on them otherwise than in cash, and the consideration for the allotment consists of or includes an undertaking to the company (other than one to which subsection (3) applies), then either—

(a)the undertaking must have been performed or otherwise discharged, or

(b)there must be a contract between the company and some person pursuant to which the undertaking is to be performed within 5 years from the time the resolution under section 43 is passed.

(5)For the purpose of determining whether subsections (2)(b), (3) and (4) are complied with, certain shares in the company may be disregarded ; and these are—

(a)subject to the next subsection, any share which was allotted before 22nd June 1982, and

(b)any share which was allotted in pursuance of an employees' share scheme and by reason of which the company would, but for this subsection, be precluded under subsection (2)(b) (but not otherwise) from being reregistered as a public company.

(6)A share is not to be disregarded under subsection (5)(a) if the aggregate in nominal value of that share and other shares proposed to be so disregarded is more than one-tenth of the nominal value of the company's allotted share capital; but for this purpose the allotted share capital is treated as not including any shares disregarded under subsection (5)(b).

(7)Any shares disregarded under subsection (5) are treated as not forming part of the allotted share capital for the purposes of subsection (2)(a).

46Meaning of " unqualified report " in s. 43(3)

(1)The following subsections explain the reference in section 43(3)(c) to an unqualified report of the company's auditors on the relevant balance sheet.

(2)If the balance sheet was prepared in respect of an accounting reference period of the company, that reference is to a report made by the auditors and stating without material qualification, that in their opinion the balance sheet—

(a)has been properly prepared in accordance with this Act, and

(b)gives a true and fair view of the state of the company's affairs as at the balance sheet date.

(3)In any other case the reference is to a report by the auditors stating without material qualification that in their opinion the balance sheet—

(a)complies with the applicable accounting provisions, and

(b)without prejudice to that (but subject to subsection (4) below), gives a true and fair view of the state of the company's affairs as at the balance sheet date;

and the accounting provisions referred to in paragraph (a) are sections 228 and 238(1) in Chapter I of Part VII and (where applicable) section 258 in Chapter II of that Part.

(4)Where the balance sheet is prepared under Chapter II of Part VII (special category companies), and the company is entitled to avail itself, and has availed itself, of any of the provisions of Part III of Schedule 9, the auditors' report is not required to state that the balance sheet gives a true and fair view of the company's state of affairs as at the balance sheet date.

(5)For purposes of references in this section to the auditors' report, a qualification is not material if, but only if, the auditors in their report state that the thing giving rise to the qualification is not material for the purpose of determining (by reference to the balance sheet) whether at the balance sheet date the amount of the company's net assets was not less than the aggregate of its called up share capital and undistributable reserves.

(6)For the purposes of a report of the auditors falling within subsection (3)—

(a)section 228 in Chapter I of Part VII, and Schedule 4 (form and content of company accounts), and

(b)(where applicable) section 258 in Chapter II of that Part, and Schedule 9 (the same, in relation to special category companies),

are deemed to have effect in relation to the balance sheet with such modifications as are necessary by reason of the fact that the balance sheet is prepared otherwise than as at the end of an accounting reference period.

47Certificate of re-registration under s. 43

(1)If the registrar of companies is satisfied, on an application under section 43, that a company may be re-registered under that section as a public company, he shall—

(a)retain the application and other documents delivered to him under the section ; and

(b)issue the company with a certificate of incorporation stating that the company is a public company.

(2)The registrar may accept a declaration under section 43 (3)(e) as sufficient evidence that the special resolution required by that section has been passed and the other conditions of re-registration satisfied.

(3)The registrar shall not issue the certificate if it appears to him that the court has made an order confirming a reduction of the company's capital which has the effect of bringing the nominal value of the company's allotted share capital below the authorised minimum.

(4)Upon the issue to a company of a certificate of incorporation under this section—

(a)the company by virtue of the issue of that certificate becomes a public company ; and

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

(5)The certificate is conclusive evidence—

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

(b)that the company is a public company.

48Modification for unlimited company re-registering

(1)In their application to unlimited companies, sections 43 to 47 are modified as follows.

(2)The special resolution required by section 43(1) must, in addition to the matters mentioned in subsection (2) of that section—

(a)state that the liability of the members is to be limited by shares, and what the company's share capital is to be; and

(b)make such alterations in the company's memorandum as are necessary to bring it in substance and in form into conformity with the requirements of this Act with respect to the memorandum of a company limited by shares.

(3)The certificate of incorporation issued under section 47(1) shall, in addition to containing the statement required by paragraph (b) of that subsection, state that the company has been incorporated as a company limited by shares; and—

(a)the company by virtue of the issue of the certificate becomes a public company so limited ; and

(b)the certificate is conclusive evidence of the fact that it is such a company.

Limited company becoming unlimited

49Re-registration of limited company as unlimited

(1)Subject as follows, a company which is registered as limited may be re-registered as unlimited in pursuance of an application in that behalf complying with the requirements of this section.

(2)A company is excluded from re-registering under this section if it is limited by virtue of re-registration under section 44 of the [1967 c. 81.] Companies Act 1967 or section 51 of this Act.

(3)A public company cannot be re-registered under this section; nor can a company which has previously been reregistered as unlimited.

(4)An application under this section must be in the prescribed form and be signed by a director or the secretary of the company, and be lodged with the registrar of companies, together with the documents specified in subsection (8) below.

(5)The application must set out such alterations in the company's memorandum as—

(a)if it is to have a share capital, are requisite to bring it (in substance and in form) into conformity with the requirements of this Act with respect to the memorandum of a company to be formed as an unlimited company having a share capital; or

(b)if it is not to have a share capital, are requisite in the circumstances.

(6)If articles have been registered, the application must set out such alterations in them as—

(a)if the company is to have a share capital, are requisite to bring the articles (in substance and in form) into conformity with the requirements of this Act with respect to the articles of a company to be formed as an unlimited company having a share capital; or

(b)if the company is not to have a share capital, are requisite in the circumstances.

(7)If articles have not been registered, the application must have annexed to it, and request the registration of, printed articles; and these must, if the company is to have a share capital, comply with the requirements mentioned in subsection (6)(a) and, if not, be articles appropriate to the circumstances.

(8)The documents to be lodged with the registrar are—

(a)the prescribed form of assent to the company's being registered as unlimited, subscribed by or on behalf of all the members of the company ;

(b)a statutory declaration made by the directors of the company—

(i)that the persons by whom or on whose behalf the form of assent is subscribed constitute the whole membership of the company, and

(ii)if any of the members have not subscribed that form themselves, that the directors have taken all reasonable steps to satisfy themselves that each person who subscribed it on behalf of a member was lawfully empowered to do so ;

(c)a printed copy of the memorandum incorporating the alterations in it set out in the application; and

(d)if articles have been registered, a printed copy of them incorporating the alterations set out in the application.

(9)For purposes of this section—

(a)subscription to a form of assent by the legal personal representative of a deceased member of a company is deemed subscription by him ; and

(b)a trustee in bankruptcy of a member of a company is,

to the exclusion of the latter, deemed a member of the company.

50Certificate of re-registration under s. 49

(1)The registrar of companies shall retain the application and other documents lodged with him under section 49 and shall—

(a)if articles are annexed to the application, register them; and

(b)issue to the company a certificate of incorporation appropriate to the status to be assumed by it by virtue of that section.

(2)On the issue of the certificate—

(a)the status of the company, by virtue of the issue, is changed from limited to unlimited ; and

(b)the alterations in the memorandum set out in the application and (if articles have been previously registered) any alterations to the articles so set out take effect as if duly made by resolution of the company; and

(c)the provisions of this Act apply accordingly to the memorandum and articles as altered.

(3)The certificate is conclusive evidence that the requirements of section 49 in respect of re-registration and of matters precedent and incidental to it have been complied with, and that the company was authorised to be re-registered under this Act in pursuance of that section and was duly so re-registered.

Unlimited company becoming limited

51Re-registration of unlimited company as limited

(1)Subject as follows, a company which is registered as unlimited may be re-registered as limited if a special resolution that it should be so re-registered is passed, and the requirements of this section are complied with in respect of the resolution and otherwise.

(2)A company cannot under this section be re-registered as a public company; and a company is excluded from reregistering under it if it is unlimited by virtue of re-registration under section 43 of the [1967 c. 81.] Companies Act 1967 or section 49 of this Act.

(3)The special resolution must state whether the company is to be limited by shares or by guarantee and—

(a)if it is to be limited by shares, must state what the share capital is to be and provide for the making of such alterations in the memorandum as are necessary to bring it (in substance and in form) into conformity with the requirements of this Act with respect to the memorandum of a company so limited, and such alterations in the articles as are requisite in the circumstances;

(b)if it is to be limited by guarantee, must provide for the making of such alterations in its memorandum and articles as are necessary to bring them (in substance and in form) into conformity with the requirements of this Act with respect to the memorandum and articles of a company so limited.

(4)The special resolution is subject to section 380 of this Act (copy to be forwarded to registrar within 15 days); and an application for the company to be re-registered as limited, framed in the prescribed form and signed by a director or by the secretary of the company, must be lodged with the registrar of companies, together with the necessary documents, not earlier than the day on which the copy of the resolution forwarded under section 380 is received by him.

(5)The documents to be lodged with the registrar are—

(a)a printed copy of the memorandum as altered in pursuance of the resolution ; and

(b)a printed copy of the articles as so altered.

(6)This section does not apply in relation to the re-registration of an unlimited company as a public company under section 43.

52Certificate of re-registration under s. 51

(1)The registrar shall retain the application and other documents lodged with him under section 51. and shall issue to the company a certificate of incorporation appropriate to the status to be assumed by the company by virtue of that section.

(2)On the issue of the certificate—

(a)the status of the company is, by virtue of the issue, changed from unlimited to limited ; and

(b)the alterations in the memorandum specified in the resolution and the alterations in, and additions to, the articles so specified take effect

(3)The certificate is conclusive evidence that the requirements of section 51 in respect of re-registration and of matters precedent and incidental to it have been complied with, and that the company was authorised to be re-registered in pursuance of that section and was duly so re-registered.

Public company becoming private

53Re-registration of public company as private

(1)A public company may be re-registered as a private company if—

(a)a special resolution complying with subsection (2) below that it should be so re-registered is passed and has not been cancelled by the court under the following section;

(b)an application for the purpose in the prescribed form and signed by a director or the secretary of the company is delivered to the registrar of companies, together with a printed copy of the memorandum and articles of the company as altered by the resolution; and

(c)the period during which an application for the cancellation of the resolution under the following section may be made has expired without any such application having been made ; or

(d)where such an application has been made, the application has been withdrawn or an order has been made under section 54(5) confirming the resolution and a copy of that order has been delivered to the registrar.

(2)The special resolution must alter the company's memorandum so that it no longer states that the company is to be a public company and must make such other alterations in the company's memorandum and articles as are requisite in the circumstances.

(3)A company cannot under this section be re-registered otherwise than as a company limited by shares or by guarantee.

54Litigated objection to resolution under s. 53

(1)Where a special resolution by a public company to be re-registered under section 53 as a private company has been passed, an application may be made to the court for the cancellation of that resolution.

(2)The application may be made—

(a)by the holders of not less in the aggregate than 5 per cent, in nominal value of the company's issued share capital or any class thereof;

(b)if the company is not limited by shares, by not less than 5 per cent, of its members; or

(c)by not less than 50 of the company's members ;

but not by a person who has consented to or voted in favour of the resolution.

(3)The application must be made within 28 days after the passing of the resolution and may be made on behalf of the persons entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

(4)If such an application is made, the company shall forthwith give notice in the prescribed form of that fact to the registrar of companies.

(5)On the hearing of the application, the court shall make an order either cancelling or confirming the resolution and—

(a)may make that order on such terms and conditions as it thinks fit, and may (if it thinks fit) adjourn the proceedings in order that an arrangement may be made to the satisfaction of the court for the purchase of the interests of dissentient members ; and

(b)may give such directions and make such orders as it thinks expedient for facilitating or carrying into effect any such arrangement.

(6)The court's order may. if the court thinks fit, provide for the purchase by the company of the shares of any of its members and for the reduction accordingly of the company's capital, and may make such alterations in the company's memorandum and articles as may be required in consequence of that provision.

(7)The company shall, within 15 days from the making of the court's order, or within such longer period as the court may at any time by order direct, deliver to the registrar of companies an office copy of the order.

(8)If the court's order requires the company not to make any. or any specified, alteration in its memorandum or articles, the company has not then power without the leave of the court to make any such alteration in breach of the requirement.

(9)An alteration in the memorandum or articles made by virtue of an order under this section, if not made by resolution of the company, is of the same effect as if duly made by resolution ; and this Act applies accordingly to the memorandum or articles as so altered.

(10)A company which fails to comply with subsection (4) or subsection (7). and any officer of it who is in default, is liable to a fine and, for continued contravention, to a daily default fine.

55Certificate of re-registration under s. 53

(1)If the registrar of companies is satisfied that a company may be re-registered under section 53, he shall—

(a)retain the application and other documents delivered to him under that section ; and

(b)issue the company with a certificate of incorporation appropriate to a private company.

(2)On the issue of the certificate—

(a)the company by virtue of the issue becomes a private company; and

(b)the alterations in the memorandum and articles set out in the resolution under section 53 take effect accordingly.

(3)The certificate is conclusive evidence—

(a)that the requirements of section 53 in respect of re-registration and of matters precedent and incidental to it have been complied with ; and

(b)that the company is a private company.

PART IIICapital Issues

CHAPTER IIssues by Companies Registered, or to be Registered, in Great Britain

The prospectus

56Matters to be stated, and reports to be set out, in prospectus

(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.

57Attempted evasion of s. 56 to be void

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.

58Document offering shares etc. for sale deemed a prospectus

(1)If a company allots or agrees to allot its shares or debentures with a view to all or any of them being offered for sale to the public, any document by which the offer for sale to the public is made is deemed for all purposes a prospectus issued by the company.

(2)All enactments and rules of law as to the contents of prospectuses, and to liability in respect of statements in and omissions from prospectuses, or otherwise relating to prospectuses, apply and have effect accordingly, as if the shares or debentures had been offered to the public for subscription and as if persons accepting the offer in respect of any shares or debentures were subscribers for those shares or debentures.

This is without prejudice to the liability (if any) of the persons by whom the offer is made, in respect of mis-statements in the document or otherwise in respect of it.

(3)For purposes of this Act it is evidence (unless the contrary is proved) that an allotment of, or an agreement to allot, shares or debentures was made with a view to their being offered for sale to the public if it is shown—

(a)that an offer of the shares or debentures (or of any of them) for sale to the public was made within 6 months after the allotment or agreement to allot, or

(b)that at the date when the offer was made the whole consideration to be received by the company in respect of the shares or debentures had not been so received.

(4)Section 56 as applied by this section has effect as if it required a prospectus to state, in addition to the matters required by that section—

(a)the net amount of the consideration received or to be received by the company in respect of the shares or debentures to which the offer relates, and

(b)the place and time at which the contract under which those shares or debentures have been or are to be allotted may be inspected.

59Rule governing what is an " offer to the public "

(1)Subject to the next section, any reference in this Act to offering shares or debentures to the public is to be read (subject to any provision to the contrary) as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned, or as clients of the person issuing the prospectus, or in any other manner.

(2)The same applies to any reference in this Act. or in a company's articles, to an invitation to the public to subscribe for shares or debentures.

60Exceptions from rule in s. 59

(1)Section 59 does not require an offer or invitation to be treated as made to the public if it can properly be regarded, in all the circumstances, as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation, or otherwise as being a domestic concern of the persons receiving and making it.

(2)In particular, a provision in a company's articles prohibiting invitations to the public to subscribe for shares or debentures is not to be taken as prohibiting the making to members or debenture holders of an invitation which can properly be regarded as falling within the preceding subsection.

(3)For purposes of that subsection, an offer of shares in or debentures of a private company, or an invitation to subscribe for such shares or debentures, is to be regarded (unless the contrary is proved) as being a domestic concern of the persons making and receiving the offer or invitation if it falls within any of the following descriptions.

(4)It is to be so regarded if it is made to—

(a)an existing member of the company making the offer or invitation,

(b)an existing employee of that company,

(c)a member of the family of such a member or employee. or

(d)an existing debenture holder.

(5)For purposes of subsection (4)(c), the members of a person's family are—

(a)the person's husband or wife, widow or widower and children (including stepchildren) and their descendants, and

(b)any trustee (acting in his capacity as such) of a trust the principal beneficiary of which is the person him or herself, or any of those relatives.

(6)The offer or invitation is also to be so regarded if it is to subscribe for shares or debentures to be held under an employees share scheme.

(7)The offer or invitation is also to be so regarded if it falls within subsection (4) or (6) and it is made on terms which permit the person to whom it is made to renounce his right to the allotment of shares or issue of debentures, but only in favour—

(a)of such a person as is mentioned in any of the paragraphs of subsection (4), or

(b)where there is an employees' share scheme, of a person entitled to hold shares or debentures under the scheme.

(8)Where application has been made to the Council of The Stock Exchange for admission of any securities to the Official List of the Stock Exchange, then an offer of those securities 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 purposes of this Part.

61Prospectus containing statement by expert

(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.

62Meaning of "expert"

The expression " expert", in both Chapters of this Part, includes engineer, valuer, accountant and any other person whose profession gives authority to a statement made by him.

63Prospectus to be dated

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

64Registration requirement applicable in all cases

(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.

65Additional requirements in case of prospectus issued generally

(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

66Directors, etc. exempt from liability in certain cases

(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.

67Compensation for subscribers misled by statement in prospectus

(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.

68Exemption from s. 67 for those acting with propriety

(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.

69Indemnity for innocent director or expert

(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 proceeding 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.

70Criminal liability for untrue statements

(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

71Interpretation for ss. 56 to 70

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 IIIssues by Companies Incorporated, or to be Incorporated, Outside Great Britain

72Prospectus of oversea company

(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.

73Attempted evasion of s. 72 to be void

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.

74Prospectus containing statement by expert

(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.

75Restrictions on allotment to be secured in prospectus

(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.

76Stock exchange certificate exempting from compliance with Sch. 3

(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.

77Registration of oversea prospectus before issue

(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.

78Consequences (criminal and civil) of non-compliance with ss. 72 to 77

(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.

79Supplementary

(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 IVAllotment of Shares and Debentures

General provisions as to allotment

80Authority of company required for certain allotments

(1)The directors of a company shall not exercise any power of the company to allot relevant securities, unless they are, in accordance with this section, authorised to do so by—

(a)the company in general meeting; or

(b)the company's articles.

(2)In this section " relevant securities " means—

(a)shares in the company other than shares shown in the memorandum to have been taken by the subscribers to it or shares allotted in pursuance of an employees' share scheme, and

(b)any right to subscribe for, or to convert any security into, shares in the company (other than shares so allotted);

and a reference to the allotment of relevant securities includes the grant of such a right but (subject to subsection (6) below), not the allotment of shares pursuant to such a right.

(3)Authority under this section may be given for a particular exercise of the power or for its exercise generally, and may be unconditional or subject to conditions.

(4)The authority must state the maximum amount of relevant securities that may be allotted under it and the date on which it will expire, which must be not more than 5 years from whichever is relevant of the following dates—

(a)in the case of an authority contained in the company's articles at the time of its original incorporation, the date of that incorporation ; and

(b)in any other case, the date on which the resolution is passed by virtue of which the authority is given;

but such an authority (including an authority contained in the articles) may be previously revoked or varied by the company in general meeting.

(5)The authority may be renewed or further renewed by the company in general meeting for a further period not exceeding 5 years; but the resolution must state (or restate) the amount of relevant securities which may be allotted under the authority or, as the case may be, the amount remaining to be allotted under it, and must specify the date on which the renewed authority will expire.

(6)In relation to authority under this section for the grant of such rights as are mentioned in subsection (2)(b), the reference in subsection (4) (as also the corresponding reference in subsection (5)) to the maximum amount of relevant securities that may be allotted under the authority is to the maximum amount of shares which may be allotted pursuant to the rights.

(7)The directors may allot relevant securities, notwithstanding that authority under this section has expired, if they are allotted in pursuance of an offer or agreement made by the company before the authority expired and the authority allowed it to make an offer or agreement which would or might require relevant securities to be allotted after the authority expired.

(8)A resolution of a company to give, vary, revoke or renew such an authority may, notwithstanding that it alters the company's articles, be an ordinary resolution; but it is in any case subject to section 380 of this Act (copy to be forwarded to registrar within 15 days).

(9)A director who knowingly and wilfully contravenes, or permits or authorises a contravention of, this section is liable to a fine.

(10)Nothing in this section affects the validity of any allotment.

(11)This section does not apply to any allotment of relevant securities by a company, other than a public company registered as such on its original incorporation, if it is made in pursuance of an offer or agreement made before the earlier of the following two dates—

(a)the date of the holding of the first general meeting of the company after its registration or re-registration as a public company, and

(b)22nd June 1982;

but any resolution to give, vary or revoke an authority for the purposes of section 14 of the [1980 c. 22.] Companies Act 1980 or this section has effect for those purposes if passed at any time after the end of April 1980.

81Restriction on public offers by private company

(1)A private limited company (other than a company limited by guarantee and not having a share capital) commits an offence if it—

(a)offers to the public (whether for cash or otherwise) any shares in or debentures of the company; or

(b)allots or agrees to allot (whether for cash or otherwise) any shares in or debentures of the company with a view to all or any of those shares or debentures being offered for sale to the public (within the meaning given to that expression by sections 58 to 60).

(2)A company guilty of an offence under this section, and any officer of it who is in default, is liable to a fine.

(3)Nothing in this section affects the validity of any allotment or sale of shares or debentures, or of any agreement to allot or sell shares or debentures.

82Application for, and allotment of, shares and debentures

(1)No allotment shall be made of a company's shares or debentures in pursuance of a prospectus issued generally, and no proceedings shall be taken on applications made in pursuance of a prospectus so issued, until the beginning of the third day after that on which the prospectus is first so issued or such later time (if any) as may be specified in the prospectus.

(2)The beginning of that third day, or that later time, is " the time of the opening of the subscription lists ".

(3)In subsection (1), the reference to the day on which the prospectus is first issued generally is to the day when it is first so issued as a newspaper advertisement; and if it is not so issued as a newspaper advertisement before the third day after that on which it is first so issued in any other manner, the reference is to the day on which it is first so issued in any manner.

(4)In reckoning for this purpose the third day after another day—

(a)any intervening day which is a Saturday or Sunday, or is a bank holiday in any part of Great Britain, is to be disregarded; and

(b)if the third day (as so reckoned) is itself a Saturday or Sunday, or a bank holiday, there is to be substituted the first day after that which is none of them.

(5)The validity of an allotment is not affected by any contravention of subsections (1) to (4); but in the event of contravention, the company and every officer of it who is in default is liable to a fine.

(6)As applying to a prospectus offering shares or debentures for sale, the above provisions are modified as follows—

(a)for references to allotment, substitute references to sale; and

(b)for the reference to the company and every officer of it who is in default, substitute a reference to any person by or through whom the offer is made and who knowingly and wilfully authorises or permits the contravention.

(7)An application for shares in or debentures of a company which is made in pursuance of a prospectus issued generally is not revocable until after the expiration of the third day after the time of the opening of the subscription lists, or the giving before the expiration of that day of the appropriate public notice ; and that notice is one given by some person responsible under sections 67 to 69 for the prospectus and having the effect under those sections of excluding or limiting the responsibility of the giver.

83No allotment unless minimum subscription received

(1)No allotment shall be made of any share capital of a company offered to the public for subscription unless—

(a)there has been subscribed the amount stated in the prospectus as the minimum amount which, in the opinion of the directors, must be raised by the issue of share capital in order to provide for the matters specified in paragraph 2 of Schedule 3 (preliminary expenses, purchase of property, working capital, etc.); and

(b)the sum payable on application for the amount so stated has been paid to and received by the company.

(2)For purposes of subsection (1)(b), a sum is deemed paid to the company, and received by it, if a cheque for that sum has been received in good faith by the company and the directors have no reason for suspecting that the cheque will not be paid.

(3)The amount so stated in the prospectus is to be reckoned exclusively of any amount payable otherwise than in cash and is known as " the minimum subscription ".

(4)If the above conditions have not been complied with on the expiration of 40 days after the first issue of the prospectus, all money received from applicants for shares shall be forthwith repaid to them without interest.

(5)If any of the money is not repaid within 48 days after the issue of the prospectus, the directors of the company are jointly and severally liable to repay it with interest at the rate of 5 per cent, per annum from the expiration of the 48th day; except that a director is not so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

(6)Any condition requiring or binding an applicant for shares to waive compliance with any requirement of this section is void.

(7)This section does not apply to an allotment of shares subsequent to the first allotment of shares offered to the public for subscription.

84Allotment where issue not fully subscribed

(1)No allotment shall be made of any share capital of a public company offered for subscription unless—

(a)that capital is subscribed for in full; or

(b)the offer states that, even if the capital is not subscribed for in full, the amount of that capital subscribed for may be allotted in any event or in the event of the conditions specified in the offer being satisfied;

and, where conditions are so specified, no allotment of the capital shall be made by virtue of paragraph (b) unless those conditions are satisfied.

This is without prejudice to section 83.

(2)If shares are prohibited from being allotted by subsection (1) and 40 days have elapsed after the first issue of the prospectus, all money received from applicants for shares shall be forthwith repaid to them without interest.

(3)If any of the money is not repaid within 48 days after the issue of the prospectus, the directors of the company are jointly and severally liable to repay it with interest at the rate of 5 per cent, per annum from the expiration of the 48th day; except that a director is not so liable if he proves that the default in repayment was not due to any misconduct or negligence on his part.

(4)This section applies in the case of shares offered as wholly or partly payable otherwise than in cash as it applies in the case of shares offered for subscription (the word " subscribed " In subsection (1) being construed accordingly).

(5)In subsections (2) and (3) as they apply to the case of shares offered as wholly or partly payable otherwise than in cash, references to the repayment of money received from applicants for shares include—

(a)the return of any other consideration so received (including, if the case so requires, the release of the applicant from any undertaking), or

(b)if it is not reasonably practicable to return the consideration, the payment of money equal to its value at the time it was so received,

and references to interest apply accordingly.

(6)Any condition requiring or binding an applicant for shares to waive compliance with any requirement of this section is void.

85Effect of irregular allotment

(1)An allotment made by a company to an applicant in contravention of section 83 or 84 is voidable at the instance of the applicant within one month after the date of the allotment, and not later, and is so voidable notwithstanding that the company is in the course of being wound up.

(2)If a director of a company knowingly contravenes, or permits or authorises the contravention of, any provision of either of those sections with respect to allotment, he is liable to compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred by the contravention.

(3)But proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of 2 years from the date of the allotment

86Allotment of shares, etc. to be dealt in on stock exchange

(1)The following applies where a prospectus, whether issued generally or not states that application has been or will be made for permission for the shares or debentures offered by it to be listed on any stock exchange.

(2)An allotment made on an application in pursuance of the prospectus is, whenever made, void if the permission has not been applied for before the third day after the first issue of the prospectus or if the permission has been refused before the expiration of 3 weeks from the date of the closing of the subscription lists or such longer period (not exceeding 6 weeks) as may, within those 3 weeks, be notified to the applicant for permission by or on behalf of the stock exchange.

(3)In reckoning for this purpose the third day after another day—

(a)any intervening day which is a Saturday or Sunday, or is a bank holiday in any part of Great Britain, is to be disregarded; and

(b)if the third day (as so reckoned) is itself a Saturday or Sunday, or a bank holiday, there is to be substituted the first day after that which is none of them.

(4)Where permission has not been applied for as above, or has been refused as above, the company shall forthwith repay (without interest) all money received from applicants in pursuance of the prospectus.

(5)If any of the money is not repaid within 8 days after the company becomes liable to repay it, the directors of the company are jointly and severally liable to repay the money with interest at the rate of 5 per cent, per annum from the expiration of the 8th day, except that a director is not liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part

(6)All money received from applicants in pursuance of the prospectus shall be kept in a separate bank account so long as the company may become liable to repay it under subsection (4); and if default is made in complying with this subsection, the company and every officer of it who is in default is liable to a fine.

(7)Any condition requiring or binding an applicant for shares or debentures to waive compliance with any requirement of this section is void.

(8)For purposes of this section, permission is not deemed to be refused if it is intimated that the application for it though not at present granted, will be given further consideration.

(9)This section has effect in relation to shares or debentures agreed to be taken by a person underwriting an offer of them by a prospectus as if he had applied for them in pursuance of the prospectus.

87Operation of s. 86 where prospectus offers shares for sale

(1)The following has effect as regards the operation of section 86 in relation to a prospectus offering shares for sale.

(2)Subsections (1) and (2) of that section apply, but with the substitution for the reference in subsection (2) to allotment of a reference to sale.

(3)Subsections (4) and (5) of that section do not apply; but—

(a)if the permission referred to in section 86(2) has not been applied for as there mentioned, or has been refused as there mentioned, the offeror of the shares shall forthwith repay (without interest) all money received from applicants in pursuance of the prospectus, and

(b)if any such money is not repaid within 8 days after the offeror becomes liable to repay it he becomes liable to pay interest on the money due, at the rate of 5 per cent, per annum from the end of the 8th day.

(4)Subsections (6) to (9) apply, except that in subsection (6)—

(a)for the first reference to the company there is substituted a reference to the offeror, and

(b)for the reference to the company and every officer of the company who is in default there is substituted a reference to any person by or through whom the offer is made and who knowingly and wilfully authorises or permits the default.

88Return as to allotments, etc.

(1)This section applies to a company limited by shares and to a company limited by guarantee and having a share capital.

(2)When such a company makes an allotment of its shares, the company shall within one month thereafter deliver to the registrar of companies for registration—

(a)a return of the allotments (in the prescribed form) stating the number and nominal amount of the shares comprised in the allotment, the names and addresses of the allottees, and the amount (if any) paid or due and payable on each share, whether on account of the nominal value of the share or by way of premium ; and

(b)in the case of shares allotted as fully or partly paid up otherwise than in cash—

(i)a contract in writing constituting the title of the allottee to the allotment together with any contract of sale, or for services or other consideration in respect of which that allotment was made (such contracts being duly stamped), and

(ii)a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid up, and the consideration for which they have been allotted.

(3)Where such a contract as above mentioned is not reduced to writing, the company shall within one month after the allotment deliver to the registrar of companies for registration the prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing.

(4)Those particulars are deemed an instrument within the meaning of the [54 & 55 Vict c. 39.] Stamp Act 1891; and the registrar may. as a condition of filing the particulars, require that the duty payable on them be adjudicated under section 12 of that Act.

(5)If default is made in complying with this section, every officer of the company who is in default is liable to a fine and, for continued contravention, to a daily default fine, but subject as follows.

(6)In the case of default in delivering to the registrar within one month after the allotment any document required by this section to be delivered, the company, or any officer liable for the default, may apply to the court for relief; and the court, if satisfied that the omission to deliver the document was accidental or due to inadvertence, or that it is just and equitable to grant relief, may make an order extending the time for the delivery of the document for such period as the court thinks proper.

Pre-emption rights

89Offers to shareholders to be on pre-emptive basis

(1)Subject to the provisions of this section and the seven sections next following, a company proposing to allot equity securities (defined in section 94)—

(a)shall not allot any of them on any terms to a person unless it has made an offer to each person who holds relevant shares or relevant employee shares to allot to him on the same or more favourable terms a proportion of those securities which is as nearly as practicable equal to the proportion in nominal value held by him of the aggregate of relevant shares and relevant employee shares, and

(b)shall not allot any of those securities to a person unless the period during which any such offer may be accepted has expired or the company has received notice of the acceptance or refusal of every offer so made.

(2)Subsection (3) below applies to any provision of a company's memorandum or articles which requires the company, when proposing to allot equity securities consisting of relevant shares of any particular class, not to allot those securities on any terms unless it has complied with the condition that it makes such an offer as is described in subsection (1) to each person who holds relevant shares or relevant employee shares of that class.

(3)If in accordance with a provision to which this subsection applies—

(a)a company makes an offer to allot securities to such a holder, and

(b)he or anyone in whose favour he has renounced his right to their allotment accepts the offer,

subsection (1) does not apply to the allotment of those securities, and the company may allot them accordingly; but this is without prejudice to the application of subsection (1) in any other case.

(4)Subsection (1) does not apply to a particular allotment of equity securities if these are, or are to be, wholly or partly paid up otherwise than in cash; and securities which a company has offered to allot to a holder of relevant shares or relevant employee shares may be allotted to him, or anyone in whose favour he has renounced his right to their allotment, without contravening subsection (1)(b).

(5)Subsection (1) does not apply to the allotment of securities which would, apart from a renunciation or assignment of the right to their allotment, be held under an employees' share scheme.

90Communication of pre-emption offers to shareholders

(1)This section has effect as to the manner in which offers required by section 89(1), or by a provision to which section 89(3) applies, are to be made to holders of a company's shares.

(2)Subject to the following subsections, an offer shall be in writing and shall be made to a holder of shares either personally or by sending it by post (that is to say, prepaying and posting a letter containing the offer) to him or to his registered address or, if he has no registered address in the United Kingdom, to the address in the United Kingdom supplied by him to the company for the giving of notice to him.

If sent by post, the offer is deemed to be made at the time at which the letter would be delivered in the ordinary course of post.

(3)Where shares are held by two or more persons jointly, the offer may be made to the joint holder first named in the register of members in respect of the shares.

(4)In the case of a holder's death or bankruptcy, the offer may be made—

(a)by sending it by post in a prepaid letter addressed to the persons claiming to be entitled to the shares in consequence of the death or bankruptcy by name, or by the tide of representatives of the deceased, or trustee of the bankrupt, or by any like description, at the address in the United Kingdom supplied for the purpose by those so claiming, or

(b)(until such an address has been so supplied) by giving the notice in any manner in which it might have been given if the death or bankruptcy had not occurred.

(5)If the holder—

(a)has no registered address in the United Kingdom and has not given to the company an address in the United Kingdom for the service of notices on him, or

(b)is the holder of a share warrant. the offer may be made by causing it, or a notice specifying where a copy of it can be obtained or inspected, to be published in the Gazette.

(6)The offer must state a period of not less than 21 days during which it may be accepted; and the offer shall not be withdrawn before the end of that period.

(7)This section does not invalidate a provision to which section 89(3) applies by reason that that provision requires or authorises an offer under it to be made in contravention of any of subsections (1) to (6) above; but, to the extent that the provision requires or authorises such an offer to be so made, it is of no effect.

91Exclusion of ss. 89, 90 by private company

(1)Section 89(1), section 90(1) to (5) or section 90(6) may, as applying to allotments by a private company of equity securities or to such allotments of a particular description, be excluded by a provision contained in the memorandum or articles of that company.

(2)A requirement or authority contained in the memorandum or articles of a private company, if it is inconsistent with any of those subsections, has effect as a provision excluding that subsection ; but a provision to which section 89(3) applies is not to be treated as inconsistent with section 89(1).

92Consequences of contravening ss. 89, 90

(1)If there is a contravention of section 89(1), or of section 90(1) to (5) or section 90(6), or of a provision to which section 89(3) applies, the company, and every officer of it who knowingly authorised or permitted the contravention, are jointly and severally liable to compensate any person to whom an offer should have been made under the subsection or provision contravened for any loss, damage, costs or expenses which the person has sustained or incurred by reason of the contravention.

(2)However, no proceedings to recover any such loss, damage, costs or expenses shall be commenced after the expiration of 2 years from the delivery to the registrar of companies of the return of allotments in question or, where equity securities other than shares are granted, from the date of the grant.

93Saving for other restrictions as to offers

(1)Sections 89 to 92 are without prejudice to any enactment by virtue of which a company is prohibited (whether generally or in specified circumstances) from offering or allotting equity securities to any person.

(2)Where a company cannot by virtue of such an enactment offer or allot equity securities to a holder of relevant shares or relevant employee shares, those sections have effect as if the shares held by that holder were not relevant shares or relevant employee shares.

94Definitions for ss. 89-96

(1)The following subsections apply for the interpretation of sections 89 to 96.

(2)" Equity security ", in relation to a company, means a relevant share in the company (other than a share shown in the memorandum to have been taken by a subscriber to the memorandum or a bonus share), or a right to subscribe for, or to convert securities into, relevant shares in the company.

(3)A reference to the allotment of equity securities or of equity securities consisting of relevant shares of a particular class includes the grant of a right to subscribe for, or to convert any securities into, relevant shares in the company or (as the case may be) relevant shares of a particular class; but such a reference does not include the allotment of any relevant shares pursuant to such a right.

(4)" Relevant employee shares", in relation to a company, means shares of the company which would be relevant shares in it but for the fact that they are held by a person who acquired them in pursuance of an employees' share scheme.

(5)" Relevant shares ", in relation to a company, means shares in the company other than—

(a)shares which as respects dividends and capital carry a right to participate only up to a specified amount in a distribution, and

(b)shares which are held by a person who acquired them in pursuance of an employees' share scheme or, in the case of shares which have not been allotted, are to be allotted in pursuance of such a scheme.

(6)A reference to a class of shares is to shares to which the same rights are attached as to voting and as to participation, both as respects dividends and as respects capital, in a distribution.

(7)In relation to an offer to allot securities required by section 89(1) or by any provision to which section 89(3) applies, a reference in sections 89 to 94 (however expressed) to the holder of shares of any description is to whoever was at the close of business on a date, to be specified in the offer and to fall in the period of 28 days immediately before the date of the offer, the holder of shares of that description.

95Disapplication of pre-emption rights

(1)Where the directors of a company are generally authorised for purposes of section 80, they may be given power by the articles, or by a special resolution of the company, to allot equity securities pursuant to that authority as if—

(a)section 89(1) did not apply to the allotment, or

(b)that subsection applied to the allotment with such modifications as the directors may determine;

and where the directors make an allotment under this subsection, sections 89 to 94 have effect accordingly.

(2)Where the directors of a company are authorised for purposes of section 80 (whether generally or otherwise), the company may by special resolution resolve either—

(a)that section 89(1) shall not apply to a specified allotment of equity securities to be made pursuant to that authority, or

(b)that that subsection shall apply to the allotment with such modifications as may be specified in the resolution ;

and where such a resolution is passed, sections 89 to 94 have effect accordingly.

(3)The power conferred by subsection (1) or a special resolution under subsection (2) ceases to have effect when the authority to which it relates is revoked or would (if not renewed) expire; but if the authority is renewed, the power or (as the case may be) the resolution may also be renewed, for a period not longer than that for which the authority is renewed, by a special resolution of the company.

(4)Notwithstanding that any such power or resolution has expired, the directors may allot equity securities in pursuance of an offer or agreement previously made by the company, if the power or resolution enabled the company to make an offer or agreement which would or might require equity securities to be allotted after it expired.

(5)A special resolution under subsection (2), or a special resolution to renew such a resolution, shall not be proposed unless it is recommended by the directors and there has been circulated, with the notice of the meeting at which the resolution is proposed, to the members entitled to have that notice a written statement by the directors setting out—

(a)their reasons for making the recommendation.

(b)the amount to be paid to the company in respect of the equity securities to be allotted, and

(c)the directors' justification of that amount.

(6)A person who knowingly or recklessly authorises or permits the inclusion in a statement circulated under subsection (5) of any matter which is misleading, false or deceptive in a material particular is liable to imprisonment or a fine, or both.

96Saving for company's pre-emption procedure operative before 1982

(1)Where a company which is re-registered or registered as a public company is or, but for the provisions of the [1980 c. 22.] Companies Act 1980 and the enactments replacing it, would be subject at the time of re-registration or (as the case may be) registration to a pre-1982 pre-emption requirement, sections 89 to 95 do not apply to an allotment of the equity securities which are subject to that requirement.

(2)A " pre-1982 pre-emption requirement" is a requirement imposed (whether by the company's memorandum or articles, or otherwise) before the relevant date in 1982 by virtue of which the company must, when making an allotment of equity securities, make an offer to allot those securities or some of them in a manner which (otherwise than because involving a contravention of section 90(1) to (5) or 90(6)) is inconsistent with sections 89 to 94 ; and " the relevant date in 1982 " is—

(a)except in a case falling within the following paragraph, 22nd June in that year, and

(b)in the case of a company which was re-registered or registered as a public company on an application made before that date, the date on which the application was made.

(3)A requirement which—

(a)is imposed on a private company (having been so imposed before the relevant date in 1982) otherwise than by the company's memorandum or articles, and

(b)if contained in the company's memorandum or articles,

would have effect under section 91 to the exclusion of any provisions of sections 89 to 94, has effect, so long as the company remains a private company, as if it were contained in the memorandum or articles.

(4)If on the relevant date in 1982 a company, other than a public company registered as such on its original incorporation. was subject to such a requirement as is mentioned in section 89(2) imposed otherwise than by the memorandum or articles, the requirement is to be treated for purposes of sections 89 to 94 as if it were contained in the memorandum or articles.

Commissions and discounts

97Power of company to pay commissions

(1)It is lawful for a company to pay a commission to any person in consideration of his subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the company, if the following conditions are satisfied.

(2)The payment of the commission must be authorised by the company's articles ; and—

(a)the commission paid or agreed to be paid must not exceed 10 per cent, of the price at which the shares are issued or the amount or rate authorised by the articles, whichever is the less; and

(b)the amount or rate per cent, of commission paid or agreed to be paid, and the number of shares which persons have agreed for a commission to subscribe absolutely, must be disclosed in the manner required by the following subsection.

(3)Those matters must, in the case of shares offered to the public for subscription, be disclosed in the prospectus; and in the case of shares not so offered—

(a)they must be disclosed in a statement in the prescribed form signed by every director of the company or by his agent authorised in writing, and delivered (before payment of the commission) to the registrar of companies for registration; and

(b)where a circular or notice (not being a prospectus) inviting subscription for the shares is issued, they must also be disclosed in that circular or notice.

(4)If default is made in complying with subsection (3)(a) as regards delivery to the registrar of the statement in prescribed form, the company and every officer of it who is in default is liable to a fine.

98Apart from s. 97, commissions and discounts barred

(1)Except as permitted by section 97, no company shall apply any of its shares or capital money, either directly or indirectly in payment of any commission, discount or allowance to any person in consideration of his subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the company.

(2)This applies whether the shares or money be so applied by being added to the purchase money of any property acquired by the company or to the contract price of any work to be executed for the company, or the money be paid out of the nominal purchase money or contract price, or otherwise.

(3)Nothing in section 97 or this section affects the power of a company to pay such brokerage as has previously been lawful.

(4)A vendor to, or promoter of, or other person who receives payment in money or shares from, a company has, and is deemed always to have had, power to apply any part of the money or shares so received in payment of any commission, the payment of which, if made directly by the company, would have been lawful under section 97 and this section.

Amount to be paid for shares; the means of payment

99General rules as to payment for shares on allotment

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

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

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

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

(b)to pay interest at the appropriate rate on the amount payable under paragraph (a) above.

(4)This section does not prevent a company from allotting bonus shares to its members or from paying up, with sums available for the purpose, any amounts for the time being unpaid on any of its shares (whether on account of the nominal value of the shares or by way of premium).

(5)The reference in subsection (3) to the holder of shares includes any person who has an unconditional right to be included in the company's register of members in respect of those shares or to have an instrument of transfer of them executed in his favour.

100Prohibition on allotment of shares at a discount

(1)A company's shares shall not be allotted at a discount

(2)If shares are allotted in contravention of this section, the allottee is liable to pay the company an amount equal to the amount of the discount, with interest at the appropriate rate.

101Shares to be allotted as at least one-quarter paid-up

(1)A public company shall not allot a share except as paid up at least as to one-quarter of its nominal value and the whole of any premium on it

(2)Subsection (1) does not apply to shares allotted in pursuance of an employees' share scheme.

(3)If a company allots a share in contravention of subsection (1), the share is to be treated as if one-quarter of its nominal value, together with the whole of any premium on it, had been received.

(4)But the allottee is liable to pay the company the minimum amount which should have been received in respect of the share under subsection (1) (less the value of any consideration actually applied in payment up, to any extent, of the share and any premium on it), with interest at the appropriate rate.

(5)Subsections (3) and (4) do not apply to the allotment of bonus shares, unless the allottee knew or ought to have known the shares were allotted in contravention of subsection (1).

102Restriction on payment by long-term undertaking

(1)A public company shall not allot shares as fully or partly paid up (as to their nominal value or any premium on them) otherwise than in cash if the consideration for the allotment is or includes an undertaking which is to be, or may be, performed more than 5 years after the date of the allotment.

(2)If a company allots shares in contravention of subsection (1), the allottee is liable to pay the company an amount equal to the aggregate of their nominal value and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.

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

(4)Subsection (3) applies also to the variation by a public company of the terms of a contract entered into before the company was re-registered as a public company.

(5)The following subsection applies where a public company allots shares for a consideration which consists of or includes (in accordance with subsection (1)) an undertaking which is to be performed within 5 years of the allotment, but the undertaking is not performed within the period allowed by the contract for the allotment of the shares.

(6)The allottee is then liable to pay the company, at the end of the period so allowed, an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.

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

103Non-cash consideration to be valued before allotment

(1)A public company shall not allot shares as fully or partly paid up (as to their nominal value or any premium on them) otherwise than in cash unless—

(a)the consideration for the allotment has been independently valued under section 108; and

(b)a report with respect to its value has been made to the company by a person appointed by the company (in accordance with that section) during the 6 months immediately preceding the allotment of the shares; and

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

(2)Where an amount standing to the credit of any of a company's reserve accounts, or of its profit and loss account, is applied in paying up (to any extent) any shares allotted to members of the company or any premiums on shares so allotted, the amount applied does not count as consideration for the allotment, and accordingly subsection (1) does not apply in that case.

(3)Subsection (1) does not apply to the allotment of shares by a company in connection with an arrangement providing for the allotment of shares in that company on terms that the whole or part of the consideration for the shares allotted is to be provided by the transfer to that company (or the cancellation) of all or some of the shares, or of all or some of the shares of a particular class, in another company (with or without the issue to that company of shares, or of shares of any particular class, in that other company).

(4)But subsection (3) does not exclude the application of subsection (1) unless under the arrangement it is open to all the holders of the shares in the other company in question (or, where the arrangement applies only to shares of a particular class, to all the holders of shares in that other company, being holders of shares of that class) to take part in the arrangement.

In determining whether that is the case, shares held by or by a nominee of the company proposing to allot the shares in connection with the arrangement, or by or by a nominee of a company which is that company's holding company or subsidiary or a company which is a subsidiary of its holding company, shall be disregarded.

(5)Subsection (1) also does not apply to the allotment of shares by a company in connection with its proposed merger with another company ; that is, where one of the companies proposes to acquire all the assets and liabilities of the other in exchange for the issue of shares or other securities of that one to shareholders of the other, with or without any cash payment to shareholders.

(6)If a company allots shares in contravention of subsection (1) and either—

(a)the allottee has not received the valuer's report required by that subsection to be sent to him; or

(b)there has been some other contravention of this section or section 108 which the allottee knew or ought to have known amounted to a contravention,

the allottee is liable to pay the company an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the consideration), with interest at the appropriate rate.

(7)In this section—

(a)"arrangement" means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with section 425 (company compromise with creditors and members) or section 582 (liquidator in winding up accepting shares as consideration for sale of company property)), and

(b)any reference to a company, except where it is or is to be construed as a reference to a public company, includes any body corporate and any body to which letters patent have been issued under the [1837 c. 73.] Chartered Companies Act 1837.

104Transfer to public company of non-cash asset in initial period

(1)A public company formed as such shall not, unless the conditions of this section have been complied with, enter into an agreement with a person for the transfer by him during the initial period of one or more non-cash assets to the company or another, if—

(a)that person is a subscriber to the company's memorandum, and

(b)the consideration for the transfer to be given by the company is equal in value at the time of the agreement to one-tenth or more of the company's nominal share capital issued at that time.

(2)The " initial period " for this purpose is 2 years beginning with the date of the company being issued with a certificate under section 117 (or the previous corresponding provision) that it was entitled to do business.

(3)This section applies also to a company re-registered as a public company (except one re-registered under section 8 of the [1980 c. 22.] Companies Act 1980 or section 2 of the Consequential Provisions Act), or registered under section 685 (joint stock company) or the previous corresponding provision ; but in that case—

(a)there is substituted a reference in subsection (1)(a) to a person who is a member of the company on the date of registration or re-registration, and

(b)the initial period is then 2 years beginning with that date. In this subsection the reference to a company re-registered as a public company includes a private company so re-registered which was a public company before it was a private company.

(4)The conditions of this section are as follows—

(a)the consideration to be received by the company, and any consideration other than cash to be given by the company, must have been independently valued under section 109;

(b)a report with respect to the consideration to be so received and given must have been made to the company in accordance with that section during the 6 months immediately preceding the date of the agreement ;

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

(d)not later than the giving of the notice of the meeting at which the resolution is proposed, copies of the resolution and report must have been circulated to the members of the company entitled to receive the notice and, if the person with whom the agreement in question is proposed to be made is not then a member of the company so entitled, to that person.

(5)In subsection (4)(a)—

(a)the reference to the consideration to be received by the company is to the asset to be transferred to it or the advantage to the company of the asset's transfer to another person ; and

(b)the specified condition is without prejudice to any requirement to value any consideration for purposes of section 103.

(6)In the case of the following agreements, this section does not apply—

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

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

105Agreements contravening s. 104

(1)The following subsection applies if a public company enters into an agreement contravening section 104, the agreement being made with the person referred to in subsection (1)(a) or (as the case may be) subsection (3) of that section, and either—

(a)that person has not received the valuer's report required for compliance with the conditions of the section, or

(b)there has been some other contravention of the section or of section 108(1), (2) or (5) or section 109, which he knew or ought to have known amounted to a contravention.

(2)The company is then entitled to recover from that person any consideration given by it under the agreement, or an amount equal to the value of the consideration at the time of the agreement; and the agreement, so far as not carried out, is void.

(3)However, if the agreement is or includes an agreement for the allotment of shares in the company, then—

(a)whether or not the agreement also contravenes section 103, subsection (2) above does not apply to it in so far as it is for the allotment of shares ; and

(b)the allottee is liable to pay the company an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the consideration), with interest at the appropriate rate.

106Shares issued to subscribers of memorandum

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

107Meaning of " the appropriate rate "

In sections 99 to 105 " the appropriate rate ", in relation to interest, means 5 per cent, per annum or such other rate as may be specified by order made by the Secretary of State by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

Valuation provisions

108Valuation and report (s. 103)

(1)The valuation and report required by section 103 (or, where applicable, section 44) shall be made by an independent person, that is to say a person qualified at the time of the report to be appointed, or continue to be, an auditor of the company.

(2)However, where it appears to the independent person (from here on referred to as " the valuer ") to be reasonable for the valuation of the consideration, or part of it, to be made (or for him to accept such a valuation) by another person who—

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

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

he may arrange for or accept such a valuation, together with a report which will enable him to make his own report under this section and provide the note required by subsection (6) below.

(3)The reference in subsection (2)(b) to an officer or servant does not include an auditor.

(4)The valuer's report shall state—

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

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

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

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

(i)by the consideration;

(ii)in cash.

(5)Where the consideration or part of it is valued by a person other than the valuer himself, the latter's report shall state that fact and shall also—

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

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

(6)The valuer's report shall contain or be accompanied by a note by him—

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

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

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

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

(7)Where the consideration to be valued is accepted partly in payment up of the nominal value of the shares and any premium and partly for some other consideration given by the company, section 103 (and, where applicable, section 44) and the foregoing provisions of this section apply as if references to the consideration accepted by the company included the proportion of that consideration which is properly attributable to the payment up of that value and any premium; and—

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

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

109Valuation and report (s. 104)

(1)Subsections (1) to (3) and (5) of section 108 apply also as respects the valuation and report for the purposes of section 104.

(2)The valuer's report for those purposes shall—

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

(b)state the method and date of valuation :

(c)contain or be accompanied by a note as to the matters mentioned in section 108(6)(a) to (c); and

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

(3)A reference in section 104 or this section to consideration given for the transfer of an asset includes consideration given partly for its transfer ; but—

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

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

(c)his report for purposes of section 104 shall state what valuation has been made under this subsection and also the reason for and method and date of any such valuation and any other matters which may be relevant to that determination.

110Entitlement of valuer to full disclosure

(1)A person carrying out a valuation or making a report under section 103 or 104, with respect to any consideration proposed to be accepted or given by a company, is entitled to require from the officers of the company such information and explanation as he thinks necessary to enable him to carry out the valuation or make the report and provide a note under section 108(6) or (as the case may be) section 109(2)(c).

(2)A person who knowingly or recklessly makes a statement which—

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

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

is guilty of an offence and liable to imprisonment or a fine, or both.

(3)Subsection (2) applies to any statement made (whether orally or in writing) to a person carrying out a valuation or making a report under section 108 or 109, being a statement which conveys or purports to convey any information or explanation which that person requires, or is entitled to require, under subsection (1) of this section.

111Matters to be communicated to registrar

(1)A company to which a report is made under section 108 as to the value of any consideration for which, or partly for which, it proposes to allot shares shall deliver a copy of the report to the registrar of companies for registration at the same time that it files the return of the allotments of those shares under section 88.

(2)A company which has passed a resolution under section 104 with respect to the transfer of an asset shall, within IS days of so doing, deliver to the registrar of companies a copy of the resolution together with the valuer's report required by that section.

(3)If default is made in complying with subsection (1), every officer of the company who is in default is liable to a fine and, for continued contravention, to a daily default fine; but this is subject to the same exception as is made by section 88(6) (relief on application to the court) in the case of default in complying with that section.

(4)If a company fails to comply with subsection (2), it and every officer of it who is in default is liable to a fine and, for continued contravention, to a daily default fine.

Other matters arising out of allotment &c

112Liability of subsequent holders of shares allotted

(1)If a person becomes a holder of shares in respect of which—

(a)there has been a contravention of section 99, 100, 101 or 103: and

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

that person is also liable to pay that amount (jointly and severally with any other person so liable), unless he is exempted from liability by subsection (3) below.

(2)If a company enters into an agreement in contravention of section 104 and—

(a)the agreement is or includes an agreement for the allotment of shares in the company ; and

(b)a person becomes a holder of shares allotted under the agreement; and

(c)by virtue of the agreement and allotment under it, an

other person is liable to pay any amount under section 105. the person who becomes the holder of the shares is also liable to pay that amount (jointly and severally with any other person so liable), unless he is exempted from liability by the following subsection ; and this applies whether or not the agreement also contravenes section 103.

(3)A person otherwise liable under subsection (1) or (2) is exempted from that liability if either—

(a)he is a purchaser for value and, at the time of the purchase, he did not have actual notice of the contravention concerned; or

(b)he derived title to the shares (directly or indirectly) from a person who became a holder of them after the contravention and was not liable under subsection (1) or (as the case may be) subsection (2).

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

(5)As subsections (1) and (3) apply in relation to the contraventions there mentioned, they also apply—

(a)to a contravention of section 102; and

(b)to a failure to carry out a term of a contract as mentioned in subsections (5) and (6) of that section.

113Relief in respect of certain liabilities under ss. 99 ff

(1)Where a person is liable to a company under—

(a)section 99, 102, 103 or 105 ;

(b)section 112(1) by reference to a contravention of section 99 or 103 ; or

(c)section 112(2) or (5),

in relation to payment in respect of any shares in the company, or is liable by virtue of an undertaking given to it in, or in connection with, payment for any such shares, the person so liable may make an application to the court to be exempted in whole or in part from the liability.

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

(a)if and to the extent that it appears to the court just and equitable to do so having regard to the matters mentioned in the following subsection,

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

(3)The matters to be taken into account by the court under subsection (2)(a) are—

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

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

(c)whether the applicant or any other person has performed in whole or in part, or is likely so to perform, any such undertaking, or has done or is likely to do any other thing in payment or part payment for the shares.

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

(a)whether the applicant has paid or is liable to pay any amount in respect of liability arising in relation to the shares under any of the provisions mentioned in that subsection; and

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

(5)In determining whether it should exempt the applicant in whole or in part from any liability, the court shall have regard to the following overriding principles, namely—

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

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

(6)If a person brings proceedings against another (" the contributor ") for a contribution in respect of liability to a company arising under any of sections 99 to 105 or 112, and it appears to the court that the contributor is liable to make such a contribution, the court may exercise the powers of the following subsection.

(7)The court may, if and to the extent that it appears to it, having regard to the respective culpability (in respect of the liability to the company) of the contributor and the person bringing the proceedings, that it is just and equitable to do so—

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

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

(8)Where a person is liable to a company under section 105 (2), the court may, on application, exempt him in whole or in part from that liability if and to the extent that it appears to the court just and equitable to do so having regard to any benefit accruing to the company by virtue of anything done by him towards the carrying out of the agreement mentioned in that subsection.

114Penalty for contravention

If a company contravenes any of the provisions of sections 99 to 104 and 106 the company and any officer of it who is in default is liable to a fine.

115Undertakings to do work, etc.

(1)Subject to section 113, an undertaking given by any person, in or in connection with payment for shares in a company, to do work or perform services or to do any other thing, if it is enforceable by the company apart from this Act, is so enforceable notwithstanding that there has been a contravention in relation to it of section 99, 102 or 103.

(2)Where such an undertaking is given in contravention of section 104 in respect of the allotment of shares, it is so enforceable notwithstanding the contravention.

116Application of ss. 99 ff to special cases

Except as provided by section 9 of the Consequential Provisions Act (transitional cases dealt with by section 31 of the [1980 c. 22.] Companies Act 1980), sections 99, 101 to 103, 106, 108 and 110 to 115 apply—

(a)to a company which has passed and not revoked a resolution to be re-registered under section 43 as a public company, and

(b)to a joint stock company which has passed, and not revoked, a resolution that the company be a public company,

as those sections apply to a public company.

PART VShare Capital, its Increase, Maintenance and Reduction

CHAPTER IGeneral Provisions about Share Capital

117Public company share capital requirements

(1)A company registered as a public company on its original incorporation shall not do business or exercise any borrowing powers unless the registrar of companies has issued it with a certificate under this section or the company is re-registered as a private company.

(2)The registrar shall issue a company with such a certificate if, on an application made to him by the company in the prescribed form, he is satisfied that the nominal value of the company's allotted share capital is not less than the authorised minimum, and there is delivered to him a statutory declaration complying with the following subsection.

(3)The statutory declaration must be in the prescribed form and be signed by a director or secretary of the company ; and it must—

(a)state that the nominal value of the company's allotted share capital is not less than the authorised minimum ;

(b)specify the amount paid up, at the time of the application, on the allotted share capital of the company;

(c)specify the amount, or estimated amount, of the company's preliminary expenses and the persons by whom any of those expenses have been paid or are payable; and

(d)specify any amount or benefit paid or given, or intended to be paid or given, to any promoter of the company, and the consideration for the payment or benefit.

(4)For the purposes of subsection (2), a share allotted in pursuance of an employees' share scheme may not be taken into account in determining the nominal value of the company's allotted share capital unless it is paid up at least as to one-quarter of the nominal value of the share and the whole of any premium on the share.

(5)The registrar may accept a statutory declaration delivered to him under this section as sufficient evidence of the matters stated in it.

(6)A certificate under this section in respect of a company is conclusive evidence that the company is entitled to do business and exercise any borrowing powers.

(7)If a company does business or exercises borrowing powers in contravention of this section, the company and any officer of it who is in default is liable to a fine.

(8)Nothing in this section affects the validity of any transaction entered into by a company; but, if a company enters into a transaction in contravention of this section and fails to comply with its obligations in that connection within 21 days from being called upon to do so, the directors of the company are jointly and severally liable to indemnify the other party to the transaction in respect of any loss or damage suffered by him by reason of the company's failure to comply with those obligations.

118The authorised minimum

(1)In this Act, "the authorised minimum" means £50,000, or such other sum as the Secretary of State may by order made by statutory instrument specify instead.

(2)An order under this section which increases the authorised minimum may—

(a)require any public company having an allotted share capital of which the nominal value is less than the amount specified in the order as the authorised minimum to increase that value to not less than that amount or make application to be re-registered as a private company;

(b)make, in connection with any such requirement, provision for any of the matters for which provision is made by this Act relating to a company's registration, re-registration or change of name, to payment for any share comprised in a company's capital and to offers of shares in or debentures of a company to the public, including provision as to the consequences (whether in criminal law or otherwise) of a failure to comply with any requirement of the order; and

(c)contain such supplemental and transitional provisions as the Secretary of State thinks appropriate, make different provision for different cases and, in particular, provide for any provision of the order to come into operation on different days for different purposes.

(3)An order shall not be made under this section unless a draft of it has been laid before Parliament and approved by resolution of each House.

119Provision for different amounts to be paid on shares

A company, if so authorised by its articles, may do any one or more of the following things—

(a)make arrangements on the issue of shares for a difference between the shareholders in the amounts and times of payment of calls on their shares;

(b)accept from any member the whole or a part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up;

(c)pay dividend in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.

120Reserve liability of limited company

A limited company may by special resolution determine that any portion of its share capital which has not been already called up shall not be capable of being called up except in the event and for the purposes of the company being wound up; and that portion of its share capital is then not capable of being called up except in that event and for those purposes.

121Alteration of share capital (limited companies)

(1)A company limited by shares or a company limited by guarantee and having a share capital, if so authorised by its articles, may alter the conditions of its memorandum in any of the following ways.

(2)The company may—

(a)increase its share capital by new shares of such amount as it thinks expedient;

(b)consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

(c)convert all or any of its paid-up shares into stock, and re-convert that stock into paid-up shares of any denomination;

(d)sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum (but subject to the following subsection);

(e)cancel shares which, at the date of the passing of the resolution to cancel them, have not been taken or agreed to be taken by any person, and diminish the amount of the company's share capital by the amount of the shares so cancelled.

(3)In any sub-division under subsection (2)(d) the proportion between the amount paid and the amount, if any, unpaid on each reduced share must be the same as it was in the case of the share from which the reduced share is derived.

(4)The powers conferred by this section must be exercised by the company in general meeting.

(5)A cancellation of shares under this section does not for purposes of this Act constitute a reduction of share capital.

122Notice to registrar of alteration

(1)If a company having a share capital has—

(a)consolidated and divided its share capital into shares of larger amount than its existing shares ; or

(b)converted any shares into stock ; or

(c)re-converted stock into shares; or

(d)sub-divided its shares or any of them ; or

(e)redeemed any redeemable shares; or

(f)cancelled any shares (otherwise than in connection with a reduction of share capital under section 135),

it shall within one month after so doing give notice in the prescribed form to the registrar of companies, specifying (as the case may be) the shares consolidated, divided, converted, subdivided, redeemed or cancelled, or the stock re-converted.

(2)If default is made in complying with this section, the company and every officer of it who is in default is liable to a fine and, for continued contravention, to a daily default tine.

123Notice to registrar of increased share capital

(1)If a company having a share capital (whether or not its shares have been converted into stock) increases its share capital beyond the registered capital, it shall within 15 days after the passing of the resolution authorising the increase, give to the registrar of companies notice of the increase, and the registrar shall record the increase.

(2)The notice must include such particulars as may be prescribed with respect to the classes of shares affected and the conditions subject to which the new shares have been or are to be issued.

(3)There shall be forwarded to the registrar together with the notice a printed copy of the resolution authorising the increase, or a copy of the resolution in some other form approved by the registrar.

(4)If default is made in complying with this section, 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.

124Reserve capital of unlimited company

An unlimited company having a share capital may by its resolution for re-registration as a public company under section 43, or as a limited company under section 51—

(a)increase the nominal amount of its share capital by increasing the nominal amount of each of its shares (but subject to the condition that no part of the increased capital is to be capable of being called up except in the event and for the purpose of the company being wound up), and

(b)alternatively or in addition, provide that a specified portion of its uncalled share capital is not to be capable of being called up except in that event and for that purpose.

CHAPTER IIClass Rights

125Variation of class rights

(1)This section is concerned with the variation of the rights attached to any class of shares in a company whose share capital is divided into shares of different classes.

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

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

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

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

(3)Where—

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

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

(c)the variation of those rights is connected with the giving, variation, revocation or renewal of an authority for allotment under section 80 or with a reduction of the company's share capital under section 135 ;

those rights shall not be varied unless—

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

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

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

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

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

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

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

(6)The provisions of section 369 (length of notice for calling company meetings), section 370 (general provisions as to meetings and votes), and sections 376 and 377 (circulation of members' resolutions) and the provisions of the articles relating to general meetings shall, so far as applicable, apply in relation to any meeting of shareholders required by this section or otherwise to take place in connection with the variation of the rights attached to a class of shares, and shall so apply with the necessary modifications and subject to the following provisions, namely—

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

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

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

(8)In this section and (except where the context otherwise requires) in any provision for the variation of the rights attached to a class of shares contained in a company's memorandum or articles, references to the variation of those rights are to be read as including references to their abrogation.

126Saving for court's powers under other provisions

Nothing in subsections (2) to (5) of section 125 derogates from the powers of the court under the following sections of this Act, namely—

  • sections 4 to 6 (company resolution to alter objects),

  • section 54 (litigated objection to public company becoming private by re-registration),

  • section 425 (court control of company compromising with members and creditors),

  • section 427 (company reconstruction or amalgamation),

  • sections 459 to 461 (protection of minorities).

127Shareholders' right to object to variation

(1)This section applies if, in the case of a company whose share capital is divided into different classes of shares—

(a)provision is made by the memorandum or articles for authorising the variation of the rights attached to any class of shares in the company, subject to—

(i)the consent of any specified proportion of the holders of the issued shares of that class, or

(ii)the sanction of a resolution passed at a separate meeting of the holders of those shares,

and in pursuance of that provision the rights attached to any such class of shares are at any time varied ; or

(b)the rights attached to any class of shares in the company are varied under section 125(2).

(2)The holders of not less in the aggregate than 15 per cent, of the issued shares of the class in question (being persons who did not consent to or vote in favour of the resolution for the variation), may apply to the court to have the variation cancelled ; and if such an application is made, the variation has no effect unless and until it is confirmed by the court.

(3)Application to the court must be made within 21 days after the date on which the consent was given or the resolution was passed (as the case may be), and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

(4)The court, after hearing the applicant and any other persons who apply to the court to be heard and appear to the court to be interested in the application, may, if satisfied having regard to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation and shall, if not so satisfied, confirm it.

The decision of the court on any such application is final.

(5)The company shall within 15 days after the making of an order by the court on such an application forward a copy of the order to the registrar of companies; and, if default is made in complying with this provision, the company and every officer of it who is in default is liable to a fine and, for continued contravention, to a daily default tine.

(6)" Variation ", in this section, includes abrogation ; and " varied " is to be construed accordingly.

128Registration of particulars of special rights

(1)If a company allots shares with rights which are not stated in its memorandum or articles, or in any resolution or agreement which is required by section 380 to be sent to the registrar of companies, the company shall deliver to the registrar of companies, within one month from allotting the shares, a statement in the prescribed form containing particulars of those rights.

(2)This does not apply if the shares are in all respects uniform with shares previously allotted ; and shares are not for this purpose to be treated as different from shares previously allotted by reason only that the former do not carry the same rights to dividends as the latter during the 12 months immediately following the former's allotment

(3)Where the rights attached to any shares of a company are varied otherwise than by an amendment of the company's memorandum or articles or by a resolution or agreement subject to section 380, the company shall within one month from the date on which the variation is made deliver to the registrar of companies a statement in the prescribed form containing particulars of the variation.

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

(5)If a company fails to comply with this section, 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.

129Registration of newly created class rights

(1)If a company not having a share capital creates a class of members with rights which are not stated in its memorandum or articles or in a resolution or agreement to which section 380 applies, the company shall deliver to the registrar of companies within one month from the date on which the new class is created a statement in the prescribed form containing particulars of the rights attached to that class.

(2)If the rights of any class of members of the company are varied otherwise than by an amendment of the memorandum or articles or by a resolution or agreement subject to section 380, the company shall within one month from the date on which the variation is made deliver to the registrar a statement in the prescribed form containing particulars of the variation.

(3)If a company (otherwise than by such an amendment, resolution or agreement as is mentioned above) assigns a name or other designation, or a new name or other designation, to any class of its members, it shall within one month from doing so deliver to the registrar a notice in the prescribed form giving particulars of the name or designation so assigned.

(4)If a company fails to comply with this section, 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.

CHAPTER IIIShare Premiums

130Application of share premiums

(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 in 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.

131Merger relief

(1)With the exception made by section 132(4) (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.

(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 425 (company compromise with members and creditors) or section 582 (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.

132Relief in respect of group reconstructions

(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 [S.I. 1984/2007.] 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 [1981 c. 62.] 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.

133Provisions supplementing ss. 131, 132

(1)An amount corresponding to one representing the premiums or part of the premiums on shares issued by a company which by virtue of sections 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.

134Provision for extending or restricting relief from s. 130

(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 IVReduction of Share Capital

135Special resolution for reduction of share capital

(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".

136Application to court for order of confirmation

(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 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 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.

137Court order confirming reduction

(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.

138Registration of order and minute of reduction

(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 cither 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.

139Public company reducing capital below authorised minimum

(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.

140Liability of members on reduced shares

(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 518) 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.

141Penalty for concealing name of creditor, etc.

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 VMaintenance of Capital

142Duty of directors on serious loss of capital

(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.

143General rule against company acquiring own shares

(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 the purported acquisition is void.

(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 reregistered as private) or Part XVII (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.

144Acquisition of shares by company's nominee

(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.

145Exceptions from s. 144

(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.

146Treatment of shares held by or for public company

(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;

(b)where shares in the company are acquired by it (other wise 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.

147Matters arising out of compliance with s. 146(2)

(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.

Such a resolution is subject to section 380 (copy to be forwarded to registrar within 15 days).

(3)The application for 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 reregistered 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.

148Further provisions supplementing ss. 146, 147

(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.

149Sanctions for non-compliance

(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, section 81 (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.

150Charges of public companies on own shares

(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 VIFinancial Assistance by a Company for Acquisition of its Own Shares

Provisions applying to both public and private companies

151Financial assistance generally prohibited

(1)Subject to the following provisions of this Chapter, where a person is acquiring or is proposing to acquire shares in a company, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place.

(2)Subject to those provisions, where a person has acquired shares in a company and any liability has been incurred (by that or any other person), for the purpose of that acquisition, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.

(3)If a company acts in contravention of this section, it is liable to a fine, and every officer of it who is in default is liable to imprisonment or a fine, or both.

152Definitions for this Chapter

(1)In this Chapter—

(a)" financial assistance " means—

(i)financial assistance given by way of gift,

(ii)financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier's own neglect or default, or by way of release or waiver,

(iii)financial assistance given by way of a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when in accordance with the agreement any obligation of another party to the agreement remains unfulfilled, or by way of the novation of, or the assignment of rights arising under, a loan or such other agreement, or

(iv)any other financial assistance given by a company the net assets of which are thereby reduced to a material extent or which has no net assets ;

(b)" distributable profits ", in relation to the giving of any financial assistance—

(i)means those profits out of which the company could lawfully make a distribution equal in value to that assistance, and

(ii)includes, in a case where the financial assistance is or includes a non-cash asset, any profit which, if the company were to make a distribution of that asset, would under section 276 (distributions in kind) be available for that purpose. and

(c)" distribution " has the meaning given by section 263(2).

(2)In subsection (1)(a)(iv), " net assets" means the aggregate of the company's assets, less the aggregate of its liabilities (" liabilities " to include any provision for liabilities or charges within paragraph 89 of Schedule 4).

(3)In this Chapter—

(a)a reference to a person incurring a liability includes his changing his financial position by making an agreement or arrangement (whether enforceable or unenforceable, and whether made on his own account or with any other person) or by any other means, and

(b)a reference to a company giving financial assistance for the purpose of reducing or discharging a liability incurred by a person for the purpose of the acquisition of shares includes its giving such assistance for the purpose of wholly or partly restoring his financial position to what it was before the acquisition took place.

153Transactions not prohibited by s. 151

(1)Section 151(1) does not prohibit a company from giving financial assistance for the purpose of an acquisition of shares in it or its holding company if—

(a)the company's principal purpose in giving that assistance is not to give it for the purpose of any such acquisition, or the giving of the assistance for that purpose is but an incidental part of some larger purpose of the company, and

(b)the assistance is given in good faith in the interests of the company.

(2)Section 151(2) does not prohibit a company from giving financial assistance if—

(a)the company's principal purpose in giving the assistance is not to reduce or discharge any liability incurred by a person for the purpose of the acquisition of shares in the company or its holding company, or the reduction or discharge of any such liability is but an incidental part of some larger purpose of the company, and

(b)the assistance is given in good faith in the interests of the company.

(3)Section 151 does not prohibit—

(a)a distribution of a company's assets by way of dividend lawfully made or a distribution made in the course of the company's winding up,

(b)the allotment of bonus shares ,

(c)a reduction of capital confirmed by order of the court under section 137,

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

(e)anything done in pursuance of an order of the court under section 425 (compromises and arrangements with creditors and members),

(f)anything done under an arrangement made in pursuance of section 582 (acceptance of shares by liquidator in winding up as consideration for sale of property), or

(g)anything done under an arrangement made between a company and its creditors which is binding on the creditors by virtue of section 601 (winding up imminent or in progress).

(4)Section 151 does not prohibit—

(a)where the lending of money is part of the ordinary business of the company, the lending of money by the company in the ordinary course of its business,

(b)the provision by a company in accordance with an employees' share scheme of money for the acquisition of fully paid shares in the company or its holding company,

(c)the making by a company of loans to persons (other than directors) employed in good faith by the company with a view to enabling those persons to acquire fully paid shares in the company or its holding company to be held by them by way of beneficial ownership.

154Special restriction for public companies

(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 or loss 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

155Relaxation of s. 151 for private companies

(1)Section 151 does not prohibit a private company from giving financial assistance in a case where the acquisition of shares in question is or was an acquisition of shares in the company or, if it is a subsidiary of another private company, in that other company if the following provisions of this section, and sections 156 to 158, are complied with as respects the giving of that assistance.

(2)The financial assistance may only be given if the company has net assets which are not thereby reduced or, to the extent that they are reduced, if the assistance is provided out of distributable profits.

Section 154(2) applies for the interpretation of this subsection.

(3)This section does not permit financial assistance to be given by a subsidiary, in a case where the acquisition of shares in question is or was an acquisition of shares in its holding company, if it is also a subsidiary of a public company which is itself a subsidiary of that holding company.

(4)Unless the company proposing to give the financial assistance is a wholly-owned subsidiary, the giving of assistance under this section must be approved by special resolution of the company in general meeting.

(5)Where the financial assistance is to be given by the company in a case where the acquisition of shares in question is or was an acquisition of shares in its holding company, that holding company and any other company which is both the company's holding company and a subsidiary of that other holding company (except, in any case, a company which is a wholly-owned subsidiary) shall also approve by special resolution in general meeting the giving of the financial assistance.

(6)The directors of the company proposing to give the financial assistance and, where the shares acquired or to be acquired are shares in its holding company, the directors of that company and of any other company which is both the company's holding company and a subsidiary of that other holding company shall before the financial assistance is given make a statutory declaration in the prescribed form, complying with the section next following.

156Statutory declaration under s. 155

(1)A statutory declaration made by a company's directors under section 155(6) shall contain such particulars of the financial assistance to be given, and of the business of the company of which they are directors, as may be prescribed, and shall identify the person to whom the assistance is to be given.

(2)The declaration shall state that the directors have formed the opinion, as regards the company's initial situation immediately following the date on which the assistance is proposed to be given, that there will be no ground on which it could then be found to be unable to pay its debts; and either—

(a)if it is intended to commence the winding up of the company within 12 months of that date, that the company will be able to pay its debts in full within 12 months of the commencement of the winding up, or

(b)in any other case, that the company will be able to pay its debts as they fall due during the year immediately following that date.

(3)In forming their opinion for purposes of subsection (2), the directors shall take into account the same liabilities (including contingent and prospective liabilities) as would be relevant under section 517 (winding up by the court) to the question whether the company is unable to pay its debts.

(4)The directors' statutory declaration shall have annexed to it a report addressed to them by their company's auditors stating that—

(a)they have enquired into the state of affairs of the company, and

(b)they are not aware of anything to indicate that the opinion expressed by the directors in the declaration as to any of the matters mentioned in subsection (2) of this section is unreasonable in all the circumstances.

(5)The statutory declaration and auditors' report shall be delivered to the registrar of companies—

(a)together with a copy of any special resolution passed by the company under section 155 and delivered to the registrar in compliance with section 380, or

(b)where no such resolution is required to be passed, within 15 days after the making of the declaration.

(6)If a company fails to comply with subsection (5), 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.

(7)A director of a company who makes a statutory declaration under section 155 without having reasonable grounds for the opinion expressed in it is liable to imprisonment or a fine, or both.

157Special resolution under s. 155

(1)A special resolution required by section 155 to be passed by a company approving the giving of financial assistance must be passed on the date on which the directors of that company make the statutory declaration required by that section in connection with the giving of that assistance, or within the week immediately following that date.

(2)Where such a resolution has been passed, an application may be made to the court for the cancellation of the resolution—

(a)by the holders of not less in the aggregate than 10 per cent, in nominal value of the company's issued share capital or any class of it, or

(b)if the company is not limited by shares, by not less than 10 per cent, of the company's members;

but the application shall not be made by a person who has consented to or voted in favour of the resolution.

(3)Subsections (3) to (10) of section 54 (litigation to cancel resolution under section 53) apply to applications under this section as to applications under section 54.

(4)A special resolution passed by a company is not effective for purposes of section 155—

(a)unless the declaration made in compliance with subsection (6) of that section by the directors of the company, together with the auditors' report annexed to it, is available for inspection by members of the company at the meeting at which the resolution is passed,

(b)if it is cancelled by the court on an application under this section.

158Time for giving financial assistance under s. 155

(1)This section applies as to the time before and after which financial assistance may not be given by a company in pursuance of section 155.

(2)Where a special resolution is required by that section to be passed approving the giving of the assistance, the assistance shall not be given before the expiry of the period of 4 weeks beginning with—

(a)the date on which the special resolution is passed, or

(b)where more than one such resolution is passed, the date on which the last of them is passed,

unless, as respects that resolution (or, if more than one, each of them), every member of the company which passed the resolution who is entitled to vote at general meetings of the company voted in favour of the resolution.

(3)If application for the cancellation of any such resolution is made under section 157, the financial assistance shall not be given before the final determination of the application unless the court otherwise orders.

(4)The assistance shall not be given after the expiry of the period of 8 weeks beginning with—

(a)the date on which the directors of the company proposing to give the assistance made their statutory declaration under section 155, or

(b)where that company is a subsidiary and both its directors and the directors of any of its holding companies made such a declaration, the date on which the earliest of the declarations is made,

unless the court, on an application under section 157, otherwise orders.

CHAPTER VIIRedeemable Shares ; Purchase by a Company of its Own Shares

Redemption and purchase generally

159Power to issue redeemable shares

(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.

160Financing, etc., of redemption

(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 section 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.

161Stamp duty on redemption of shares

(1)For the purposes of section 47 of the [1973 c. 51.] Finance Act 1973, the issue of shares by a company in place of shares redeemed under section 160 constitutes a chargeable transaction if, and only if, the actual value of the shares so issued exceeds the value of the shares redeemed at the date of their redemption.

(2)Where the issue of the shares does constitute a chargeable transaction for those purposes, the amount on which stamp duty on the relevant document relating to that transaction is chargeable under section 47(5) of the Finance Act 1973 is the difference between—

(a)the amount on which that duty would be so chargeable if the shares had not been issued in place of shares redeemed under section 160 ; and

(b)the value of the shares redeemed at the date of their redemption.

(3)Subject to the following subsection, for the purposes of subsections (1) and (2) shares issued by a company—

(a)up to the nominal amount of any shares which the company has redeemed under section 160 ; or

(b)in pursuance of section 160(5) before the redemption of shares which the company is about to redeem under that section,

are to be regarded as issued in place of the shares redeemed or (as the case may be) about to be redeemed.

(4)Shares issued in pursuance of section 160(5) are not to be regarded for purposes of subsections (1) and (2) of this section as issued in place of the shares about to be redeemed, unless those shares are redeemed within one month after the issue of the new shares.

162Power of company to purchase own shares

(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 to 161 apply to the purchase by a company under this section of its own shares as they apply to the redemption of redeemable shares, save that the terms and manner of purchase need not be determined by the articles as required by section 160(3).

(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.

163Definitions of " off-market" and " market " purchase

(1)A purchase by a company of its own shares is " off-market " if the shares either—

(a)are purchased otherwise than on a recognised stock exchange, or

(b)are purchased on a recognised stock exchange but are not subject to a marketing arrangement on that stock exchange.

(2)For this purpose, a company's shares are subject to a marketing arrangement on a recognised stock exchange if either—

(a)they are listed on that stock exchange; or

(b)the company has been afforded facilities for dealings in those shares to take place on that stock exchange without prior permission for individual transactions from the authority governing that stock exchange and without limit as to the time during which those facilities are to be available.

(3)A purchase by a company of its own shares is a " market purchase" if it is a purchase made on a recognised stock exchange, other than a purchase which is an off-market purchase by virtue of subsection (1)(b).

164Authority for off-market purchase

(1)A company may only make an off-market purchase of its own shares in pursuance of a contract approved in advance in accordance with this section or under section 165 below.

(2)The terms of the proposed contract must be authorised by a special resolution of the company before the contract is entered into; and the following subsections apply with respect to that authority and to resolutions conferring it

(3)Subject to the next subsection, the authority may be varied, revoked or from time to time renewed by special resolution of the company.

(4)In the case of a public company, the authority conferred by the resolution must specify a date on which the authority is to expire; and in a resolution conferring or renewing authority that date must not be later than 18 months after that on which the resolution is passed.

(5)A special resolution to confer, vary, revoke or renew authority is not effective if any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution and the resolution would not have been passed if he had not done so.

For this purpose—

(a)a member who holds shares to which the resolution relates is regarded as exercising the voting rights carried by those shares not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll;

(b)notwithstanding anything in the company's articles, any member of the company may demand a poll on that question; and

(c)a vote and a demand for a poll by a person as proxy for a member are the same respectively as a vote and a demand by the member.

(6)Such a resolution is not effective for the purposes of this section unless (if the proposed contract is in writing) a copy of the contract or (if not) a written memorandum of its terms is available for inspection by members of the company both—

(a)at the company's registered office for not less than 15 days ending with the date of the meeting at which the resolution is passed, and

(b)at the meeting itself.

A memorandum of contract terms so made available must include the names of any members holding shares to which the contract relates; and a copy of the contract so made available must have annexed to it a written memorandum specifying any such names which do not appear in the contract itself.

(7)A company may agree to a variation of an existing contract so approved, but only if the variation is authorised by a special resolution of the company before it is agreed to; and subsections (3) to (6) above apply to the authority for a proposed variation as they apply to the authority for a proposed contract, save that a copy of the original contract or (as the case may require) a memorandum of its terms, together with any variations previously made, must also be available for inspection in accordance with subsection (6).

165Authority for contingent purchase contract

(1)A contingent purchase contract is a contract entered into by a company and relating to any of its shares—

(a)which does not amount to a contract to purchase those shares, but

(b)under which the company may (subject to any conditions) become entitled or obliged to purchase those shares.

(2)A company may only make a purchase of its own shares in pursuance of a contingent purchase contract if the contract is approved in advance by a special resolution of the company before the contract is entered into; and subsections (3) to (7) of section 164 apply to the contract and its terms.

166Authority for market purchase

(1)A company shall not make a market purchase of its own shares unless the purchase has first been authorised by the company in general meeting.

(2)That authority—

(a)may be general for that purpose, or limited to the purchase of shares of any particular class or description, and

(b)may be unconditional or subject to conditions.

(3)The authority must—

(a)specify the maximum number of shares authorised to be acquired,

(b)determine both the maximum and the minimum prices which may be paid for the shares, and

(c)specify a date on which it is to expire.

(4)The authority may be varied, revoked or from time to time renewed by the company in general meeting, but this is subject to subsection (3) above; and in a resolution to confer or renew authority, the date on which the authority is to expire must not be later than 18 months after that on which the resolution is passed.

(5)A company may under this section make a purchase of its own shares after the expiry of the time limit imposed to comply with subsection (3)(c), if the contract of purchase was concluded before the authority expired and the terms of the authority permitted the company to make a contract of purchase which would or might be executed wholly or partly after its expiration.

(6)A resolution to confer or vary authority under this section may determine either or both the maximum and minimum prices for purchase by—

(a)specifying a particular sum, or

(b)providing a basis or formula for calculating the amount of the price in question without reference to any person's discretion or opinion.

(7)A resolution of a company conferring, varying, revoking or renewing authority under this section is subject to section 380 (resolution to be sent to registrar of companies within 15 days).

167Assignment or release of company's right to purchase own shares

(1)The rights of a company under a contract approved under section 164 or 165, or under a contract for a purchase authorised under section 166, are not capable of being assigned.

(2)An agreement by a company to release its rights under a contract approved under section 164 or 165 is void unless the terms of the release agreement are approved in advance by a special resolution of the company before the agreement is entered into ; and subsections (3) to (7) of section 164 apply to approval for a proposed release agreement as to authority for a proposed variation of an existing contract.

168Payments apart from purchase price to be made out of distributable profits

(1)A payment made by a company in consideration of—

(a)acquiring any right with respect to the purchase of its own shares in pursuance of a contract approved under section 165, or

(b)the variation of a contract approved under section 164 or 165, or

(c)the release of any of the company's obligations with respect to the purchase of any of its own shares under a contract approved under section 164 or 165 or under a contract for a purchase authorised under section 166,

must be made out of the company's distributable profits.

(2)If the requirements of subsection (1) are not satisfied in relation to a contract—

(a)in a case within paragraph (a) of the subsection, no

purchase by the company of its own shares in pursuance of that contract is lawful under this Chapter,

(b)in a case within paragraph (b), no such purchase following the variation is lawful under this Chapter, and

(c)in a case within paragraph (c), the purported release is void.

169Disclosure by company of purchase of own shares

(1)Within the period of 28 days beginning with the date on which any shares purchased by a company under this Chapter are delivered to it, the company shall deliver to the registrar of companies for registration a return in the prescribed form stating with respect to shares of each class purchased the number and nominal value of those shares and the date on which they were delivered to the company.

(2)In the case of a public company, the return shall also state—

(a)the aggregate amount paid by the company for the shares; and

(b)the maximum and minimum prices paid in respect of shares of each class purchased.

(3)Particulars of shares delivered to the company on different dates and under different contracts may be included in a single return to the registrar; and in such a case the amount required to be stated under subsection (2)(a) is the aggregate amount paid by the company for all the shares to which the return relates.

(4)Where a company enters into a contract approved under section 164 or 165, or a contract for a purchase authorised under section 166, the company shall keep at its registered office—

(a)if the contract is in writing, a copy of it; and

(b)if not, a memorandum of its terms,

from the conclusion of the contract until the end of the period of 10 years beginning with the date on which the purchase of all the shares in pursuance of the contract is completed or (as the case may be) the date on which the contract otherwise determines.

(5)Every copy and memorandum so required to be kept shall, during business hours (subject to such reasonable restrictions as the company may in general meeting impose, provided that not less than 2 hours in each day are allowed for inspection) be open to inspection without charge—

(a)by any member of the company, and

(b)if it is a public company, by any other person.

(6)If default is made in delivering to the registrar any return required by this section, every officer of the company who is in default is liable to a fine and, for continued contravention, to a daily default fine.

(7)If default is made in complying with subsection (4), or if an inspection required under subsection (5) is refused, 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.

(8)In the case of a refusal of an inspection required under subsection (5) of a copy or memorandum, the court may by order compel an immediate inspection of it.

(9)The obligation of a company under subsection (4) to keep a copy of any contract or (as the case may be) a memorandum of its terms applies to any variation of the contract so long as it applies to the contract.

170The capital redemption reserve

(1)Where under this Chapter shares of a company are redeemed or purchased wholly out of the company's profits, the amount by which the company's issued share capital is diminished in accordance with section 160(4) on cancellation of the shares redeemed or purchased shall be transferred to a reserve, called " the capital redemption reserve ".

(2)If the shares are redeemed or purchased wholly or partly out of the proceeds of a fresh issue and the aggregate amount of those proceeds is less than the aggregate nominal value of the shares redeemed or purchased, the amount of the difference shall be transferred to the capital redemption reserve.

(3)But subsection (2) does not apply if the proceeds of the fresh issue are applied by the company in making a redemption or purchase of its own shares in addition to a payment out of capital under section 171.

(4)The provisions of this Act relating to the reduction of a company's share capital apply as if the capital redemption reserve were paid-up share capital of the company, except that the reserve may be applied by the company in paying up its unissued shares to be allotted to members of the company as fully paid bonus shares.

Redemption or purchase of own shares out of capital (private companies only)

171Power of private companies to redeem or purchase own shares out of capital

(1)Subject to the following provisions of this Chapter, a private company limited by shares or limited by guarantee and having a share capital may, if so authorised by its articles, make a payment in respect of the redemption or purchase under section 160 or (as the case may be) section 162, of its own shares otherwise than out of its distributable profits or the proceeds of a fresh issue of shares.

(2)References below in this Chapter to payment out of capital are (subject to subsection (6)) to any payment so made, whether or not it would be regarded apart from this section as a payment out of capital.

(3)The payment which may (if authorised in accordance with the following provisions of this Chapter) be made by a company out of capital in respect of the redemption or purchase of its own shares is such an amount as, taken together with—

(a)any available profits of the company, and

(b)the proceeds of any fresh issue of shares made for the purposes of the redemption or purchase,

is equal to the price of redemption or purchase ; and the payment permissible under this subsection is referred to below in this Chapter as the permissible capital payment for the shares.

(4)Subject to subsection (6), if the permissible capital payment for shares redeemed or purchased is less than their nominal amount, the amount of the difference shall be transferred to the company's capital redemption reserve.

(5)Subject to subsection (6), if the permissible capital payment is greater than the nominal amount of the shares redeemed or purchased—

(a)the amount of any capital redemption reserve, share premium account or fully paid share capital of the company, and

(b)any amount representing unrealised profits of the company for the time being standing to the credit of any reserve maintained by the company in accordance with paragraph 34 of Schedule 4 (revaluation reserve),

may be reduced by a sum not exceeding (or by sums not in the aggregate exceeding) the amount by which the permissible capital payment exceeds the nominal amount of the shares.

(6)Where the proceeds of a fresh issue are applied by a company in making any redemption or purchase of its own shares in addition to a payment out of capital under this section, the references in subsections (4) and (5) to the permissible capital payment are to be read as referring to the aggregate of that payment and those proceeds.

172Availability of profits for purposes of s. 171

(1)The reference in section 171(3)(a) to available profits of the company is to the company's profits which are available for distribution (within the meaning of Part VIII); but the question whether a company has any profits so available and the amount of any such profits are to be determined for purposes of that section in accordance with the following subsections, instead of sections 270 to 275 in that Part.

(2)Subject to the next subsection, that question is to be determined by reference to—

(a)profits, losses, assets and liabilities,

(b)provisions of any of the kinds mentioned in paragraphs 88 and 89 of Schedule 4 (depreciation, diminution in value of assets, retentions to meet liabilities, etc.), and

(c)share capital and reserves (including undistributable reserves),

as stated in the relevant accounts for determining the permissible capital payment for shares.

(3)The relevant accounts for this purpose are such accounts, prepared as at any date within the period for determining the amount of the permissible capital payment, as are necessary to enable a reasonable judgment to be made as to the amounts of any of the items mentioned in subsection (2)(a) to (c) above.

(4)For purposes of determining the amount of the permissible capital payment for shares, the amount of the company's available profits (if any) determined in accordance with subsections (2) and (3) is treated as reduced by the amount of any distributions lawfully made by the company after the date of the relevant accounts and before the end of the period for determining the amount of that payment.

(5)The reference in subsection (4) to distributions lawfully made by the company includes—

(a)financial assistance lawfully given out of distributable profits in a case falling within section 154 or 155,

(b)any payment lawfully made by the company in respect of the purchase by it of any shares in the company (except a payment lawfully made otherwise than out of distributable profits), and

(c)a payment of any description specified in section 168(1) lawfully made by the company.

(6)References in this section to the period for determining the amount of the permissible capital payment for shares are to the period of 3 months ending with the date on which the statutory declaration of the directors purporting to specify the amount of that payment is made in accordance with subsection (3) of the section next following.

173Conditions for payment out of capital

(1)Subject to any order of the court under section 177, a payment out of capital by a private company for the redemption or purchase of its own shares is not lawful unless the requirements of this and the next two sections are satisfied.

(2)The payment out of capital must be approved by a special resolution of the company.

(3)The company's directors must make a statutory declaration specifying the amount of the permissible capital payment for the shares in question and stating that, having made full inquiry into the affairs and prospects of the company, they have formed the opinion—

(a)as regards its initial situation immediately following the date on which the payment out of capital is proposed to be made, that there will be no grounds on which the company could then be found unable to pay its debts, and

(b)as regards its prospects for the year immediately following that date, that, having regard to their intentions with respect to the management of the company's business during that year and to the amount and character of the financial resources which will in their view be available to the company during that year, the company will be able to continue to carry on business as a going concern (and will accordingly be able to pay its debts as they fall due) throughout that year.

(4)In forming their opinion for purposes of subsection (3)(a), the directors shall take into account the same liabilities (including prospective and contingent liabilities) as would be relevant under section 517 (winding up by the court) to the question whether a company is unable to pay its debts.

(5)The directors' statutory declaration must be in the prescribed form and contain such information with respect to the nature of the company's business as may be prescribed, and must in addition have annexed to it a report addressed to the directors by the company's auditors stating that—

(a)they have inquired into the company's state of affairs; and

(b)the amount specified in the declaration as the permissible capital payment for the shares in question is in their view properly determined in accordance with sections 171 and 172; and

(c)they are not aware of anything to indicate that the opinion expressed by the directors in the declaration as to any of the matters mentioned in subsection (3) is unreasonable in all the circumstances.

(6)A director who makes a declaration under this section without having reasonable grounds for the opinion expressed in the declaration is liable to imprisonment or a fine, or both.

174Procedure for special resolution under s. 173

(1)The resolution required by section 173 must be passed on, or within the week immediately following, the date on which the directors make the statutory declaration required by that section; and the payment out of capital must be made no earlier than 5 nor more than 7 weeks after the date of the resolution.

(2)The resolution is ineffective if any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution and the resolution would not have been passed if he had not done so.

(3)For purposes of subsection (2), a member who holds such shares is to be regarded as exercising the voting rights carried by them in voting on the resolution not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll; and, notwithstanding anything in a company's articles, any member of the company may demand a poll on that question.

(4)The resolution is ineffective unless the statutory declaration and auditors' report required by the section are available for inspection by members of the company at the meeting at which the resolution is passed.

(5)For purposes of this section a vote and a demand for a poll by a person as proxy for a member are the same (respectively) as a vote and demand by the member.

175Publicity for proposed payment out of capital

(1)Within the week immediately following the date of the resolution for payment out of capital the company must cause to be published in the Gazette a notice—

(a)stating that the company has approved a payment out of capital for the purpose of acquiring its own shares by redemption or purchase or both (as the case may be);

(b)specifying the amount of the permissible capital payment for the shares in question and the date of the resolution under section 173 ;

(c)stating that the statutory declaration of the directors and the auditors' report required by that section are available for inspection at the company's registered office; and

(d)stating that any creditor of the company may at any time within the 5 weeks immediately following the date of the resolution for payment out of capital apply to the court under section 176 for an order prohibiting the payment.

(2)Within the week immediately following the date of the resolution the company must also either cause a notice to the same effect as that required by subsection (1) to be published in an appropriate national newspaper or give notice in writing to that effect to each of its creditors.

(3)" An appropriate national newspaper" means a newspaper circulating throughout England and Wales (in the case of a company registered in England and Wales), and a newspaper circulating throughout Scotland (in the case of a company registered in Scotland).

(4)References below in this section to the first notice date are to the day on which the company first publishes the notice required by subsection (1) or first publishes or gives the notice required by subsection (2) (whichever is the earlier).

(5)Not later than the first notice date the company must deliver to the registrar of companies a copy of the statutory declaration of the directors and of the auditors report required by section 173.

(6)The statutory declaration and auditors' report—

(a)shall be kept at the company's registered office throughout the period beginning with the first notice date and ending 5 weeks after the date of the resolution for payment out of capital, and

(b)shall during business hours on any day during that period be open to the inspection of any member or creditor of the company without charge.

(7)If an inspection required under subsection (6) is refused, 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.

(8)In the case of refusal of an inspection required under subsection (6) of a declaration or report, the court may by order compel an immediate inspection of that declaration or report.

176Objections by company's members or creditors

(1)Where a private company passes a special resolution approving for purposes of this Chapter any payment out of capital for the redemption or purchase of any of its shares—

(a)any member of the company other than one who consented to or voted in favour of the resolution; and

(b)any creditor of the company,

may within 5 weeks of the date on which the resolution was passed apply to the court for cancellation of the resolution.

(2)The application may be made on behalf of the persons entitled to make it by such one or more of their number as they may appoint in writing for the purpose.

(3)If an application is made, the company shall—

(a)forthwith give notice in the prescribed form of that fact to the registrar of companies; and

(b)within 15 days from the making of any order of the court on the hearing of the application, or such longer period as the court may by order direct, deliver an office copy of the order to the registrar.

(4)A company which fails to comply with subsection (3), and any officer of it who is in default, is liable to a fine and for continued contravention, to a daily default fine.

177Powers of court on application under s. 176

(1)On the hearing of an application under section 176 the court may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the court's satisfaction for the purchase of the interests of dissentient members or for the protection of dissentient creditors (as the case may be); and the court may give such directions and make such orders as it thinks expedient for facilitating or carrying into effect any such arrangement.

(2)Without prejudice to its powers under subsection (1), the court shall make an order on such terms and conditions as it thinks fit either confirming or cancelling the resolution; and, if the court confirms the resolution, it may in particular by order alter or extend any date or period of time specified in the resolution or in any provision in this Chapter which applies to the redemption or purchase of shares to which the resolution refers.

(3)The court's order may, if the court thinks fit, provide for the purchase by the company of the shares of any of its members and for the reduction accordingly of the company's capital, and may make such alterations in the company's memorandum and articles as may be required in consequence of that provision.

(4)If the court's order requires the company not to make any, or any specified, alteration in its memorandum or articles, the company has not then power without leave of the court to make any such alteration in breach of the requirement.

(5)An alteration in the memorandum or articles made by virtue of an order under this section, if not made by resolution of the company, is of the same effect as if duly made by resolution ; and this Act applies accordingly to the memorandum or articles as so altered.

Supplementary

178Effect of company's failure to redeem or purchase

(1)This section has effect where a company has, on or after 15th June 1982,—

(a)issued shares on terms that they are or are liable to be redeemed, or

(b)agreed to purchase any of its own shares.

(2)The company is not liable in damages in respect of any failure on its part to redeem or purchase any of the shares.

(3)Subsection (2) is without prejudice to any right of the holder of the shares other than his right to sue the company for damages in respect of its failure; but the court shall not grant an order for specific performance of the terms of redemption or purchase if the company shows that it is unable to meet the costs of redeeming or purchasing the shares in question out of distributable profits.

(4)If the company is wound up and at the commencement of the winding up any of the shares have not been redeemed or purchased, the terms of redemption or purchase may be enforced against the company ; and when shares are redeemed or purchased under this subsection, they are treated as cancelled.

(5)However, subsection (4) does not apply if—

(a)the terms provided for the redemption or purchase to take place at a date later than that of the commencement of the winding up, or

(b)during the period beginning with the date on which the redemption or purchase was to have taken place and ending with the commencement of the winding up the company could not at any time have lawfully made a distribution equal in value to the price at which the shares were to have been redeemed or purchased.

(6)There shall be paid in priority to any amount which the company is liable under subsection (4) to pay in respect of any shares—

(a)all other debts and liabilities of the company (other than any due to members in their character as such),

(b)if other shares carry rights (whether as to capital or as to income) which are preferred to the rights as to capital attaching to the first-mentioned shares, any amount due in satisfaction of those preferred rights;

but, subject to that, any such amount shall be paid in priority to any amounts due to members in satisfaction of their rights (whether as to capital or income) as members.

(7)Where by virtue of section 66 of the [1914 c. 59.] Bankruptcy Act 1914 (payment of interest on debts) as applied by section 612 (application of bankruptcy rules to insolvent companies in England and Wales) a creditor of a company is entitled to payment of any interest only after payment of all other debts of the company, the company's debts and liabilities for purposes of subsection (6) of this section include the liability to pay that interest.

179Power for Secretary of State to modify this Chapter

(1)The Secretary of State may by regulations made by statutory instrument modify the provisions of this Chapter with respect to any of the following matters—

(a)the authority required for a purchase by a company of its own shares,

(b)the authority required for the release by a company of its rights under a contract for the purchase of its own shares or a contract under which the company may (subject to any conditions) become entitled or obliged to purchase its own shares,

(c)the information to be included in a return delivered by a company to the registrar of companies in accordance with section 169(1),

(d)the matters to be dealt with in the statutory declaration of the directors under section 173 with a view to indicating their opinion of their company's ability to make a proposed payment out of capital with due regard to its financial situation and prospects, and

(e)the contents of the auditors' report required by that section to be annexed to that declaration.

(2)The Secretary of State may also by regulations so made make such provision (including modification of the provisions of this Chapter) as appears to him to be appropriate—

(a)for wholly or partly relieving companies from the requirement of section 171(3)(a) that any available profits must be taken into account in determining the amount of the permissible capital payment for shares under that section, or

(b)for permitting a company's share premium account to be applied, to any extent appearing to the Secretary of State to be appropriate, in providing for the premiums payable on the redemption or purchase by the company of any of its own shares.

(3)Regulations under this section—

(a)may make such further modification of any provisions of this Chapter as appears to the Secretary of State to be reasonably necessary in consequence of any provision made under such regulations by virtue of subsection (1) or (2),

(b)may make different provision for different cases or classes of case, and

(c)may contain such further consequential provisions, and such incidental and supplementary provisions, as the Secretary of State thinks fit.

(4)No regulations shall be made under this section unless a draft of the instrument containing them has been laid before Parliament and approved by resolution of each House.

180Transitional cases arising under this Chapter; and savings

(1)Any preference shares issued by a company before 15th June 1982 which could but for the repeal by the [1981 c. 62.] Companies Act 1981 of section 58 of the [1948 c. 38.] Companies Act 1948 (power to issue redeemable preference shares) have been redeemed under that section are subject to redemption in accordance with the pro visions of this Chapter.

(2)In a case to which sections 159 and 160 apply by virtue of this section, any premium payable on redemption may, notwithstanding the repeal by the 1981 Act of any provision of the 1948 Act, be paid out of the share premium account instead of out of profits, or partly out of that account and partly out of profits (but subject to the provisions of this Chapter so far as payment is out of profits).

(3)Any capital redemption reserve fund established before 15th June 1982 by a company for the purposes of section 58 of the Act of 1948 is to be known as the company's capital redemption reserve and be treated as if it had been established for the purposes of section 170 of this Act; and accordingly, a reference in any enactment or in the articles of any company, or in any other instrument, to a company's capital redemption reserve fund is to be construed as a reference to the company's capital redemption reserve.

181Definitions for Chapter VII

In this Chapter—

(a)"distributable profits", in relation to the making of any payment by a company, means those profits out of which it could lawfully make a distribution (within the meaning given by section 263(2)) equal in value to the payment, and

(b)" permissible capital payment" means the payment permitted by section 171;

and references to payment out of capital are to be construed in accordance with section 171.

CHAPTER VIIIMiscellaneous Provisions about Shares and Debentures

Share and debenture certificates, transfers and warrants

182Nature, transfer and numbering of shares

(1)The shares or other interest of any member in a company—

(a)are personal estate or, in Scotland, moveable property and are not in the nature of real estate or heritage,

(b)are transferable in manner provided by the company's articles, but subject to the [1963 c. 18.] Stock Transfer Act 1963 (which enables securities of certain descriptions to be transferred by a simplified process).

(2)Each share in a company having a share capital shall be distinguished by its appropriate number; except that, if at any time all the issued shares in a company, or all the issued shares in it of a particular class, are fully paid up and rank pari passu for all purposes, none of those shares need thereafter have a distinguishing number so long as it remains fully paid up and ranks pari passu for all purposes with all shares of the same class for the time being issued and fully paid up.

183Transfer and registration

(1)It is not lawful for a company to register a transfer of shares in or debentures of the company unless a proper instrument of transfer has been delivered to it, or the transfer is an exempt transfer within the [1982 c. 41.] Stock Transfer Act 1982.

This applies notwithstanding anything in the company's articles.

(2)Subsection (1) does not prejudice any power of the company to register as shareholder or debenture holder a person to whom the right to any shares in or debentures of the company has been transmitted by operation of law.

(3)A transfer of the share or other interest of a deceased member of a company made by his personal representative, although' the personal representative is not himself a member of the company, is as valid as if he had been such a member at the time of the execution of the instrument of transfer.

(4)On the application of the transferor of any share or interest in a company, the company shall enter in its register of members the name of the transferee in the same manner and subject to the same conditions as if the application for the entry were made by the transferee.

(5)If a company refuses to register a transfer of shares or debentures, the company shall, within 2 months after the date on which the transfer was lodged with it, send to the transferee notice of the refusal.

(6)If default is made in complying with subsection (5), 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.

184Certification of transfers

(1)The certification by a company of any instrument of transfer of any shares in, or debentures of, the company is to be taken as a representation by the company to any person acting on the faith of the certification that there have been produced to the company such documents as on their face show a prima facie title to the shares or debentures in the transferor named in the instrument. However, the certification is not to be taken as a representation that the transferor has any title to the shares or debentures.

(2)Where a person acts on the faith of a false certification by a company made negligently, the company is under the same liability to him as if the certification had been made fraudulently.

(3)For purposes of this section—

(a)an instrument of transfer is deemed certificated if it bears the words " certificate lodged " (or words to the like effect);

(b)the certification of an instrument of transfer is deemed made by a company if—

(i)the person issuing the instrument is a person authorised to issue certificated instruments of transfer on the company's behalf, and

(ii)the certification is signed by a person authorised to certificate transfers on the company's behalf or by an officer or servant either of the company or of a body corporate so authorised;

(c)a certification is deemed signed by a person if—

(i)it purports to be authenticated by his signature or initials (whether handwritten or not), and

(ii)it is not shown that the signature or initials was or were placed there neither by himself nor by a person authorised to use the signature or initials for the purpose of certificating transfers on the company's behalf.

185Duty of company as to issue of certificates

(1)Subject to the following provisions, every company shall—

(a)within 2 months after the allotment of any of its shares, debentures or debenture stock, and

(b)within 2 months after the date on which a transfer of any such shares, debentures or debenture stock is lodged with the company,

complete and have ready for delivery the certificates of all shares, the debentures and the certificates of all debenture stock allotted or transferred (unless the conditions of issue of the shares, debentures or debenture stock otherwise provide).

(2)For this purpose, "transfer" means a transfer duly stamped and otherwise valid, or an exempt transfer within the [1982 c. 41.] Stock Transfer Act 1982, and does not include such a transfer as the company is for any reason entitled to refuse to register and does not register.

(3)Subsection (1) does not apply in the case of a transfer to any person where, by virtue of regulations under section 3 of the [1982 c. 41.] Stock Transfer Act 1982, he is not entitled to a certificate or other document of or evidencing title in respect of the securities transferred; but if in such a case the transferee—

(a)subsequently becomes entitled to such a certificate or other document by virtue of any provision of those regulations, and

(b)gives notice in writing of that fact to the company,

this section has effect as if the reference in subsection (1)(b) to the date of the lodging of the transfer were a reference to the date of the notice.

(4)A company of which shares or debentures are allotted or debenture stock is allotted to a stock exchange nominee, or with which a transfer is lodged for transferring any shares, debentures or debenture stock of the company, to a stock exchange nominee, is not required, in consequence of the allotment or the lodging of the transfer, to comply with subsection (1).

" Stock exchange nominee" means any person whom the Secretary of State designates, by order in a statutory instrument, as a nominee of The Stock Exchange for the purposes of this section.

(5)If default is made in complying with subsection (1), 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.

(6)If a company on which a notice has been served requiring it to make good any default in complying with subsection (1) fails to make good the default within 10 days after service of the notice, the court may, on the application of the person entitled to have the certificates or the debentures delivered to him, exercise the power of the following subsection.

(7)The court may make an order directing the company and any officer of it to make good the default within such time as may be specified in the order; and the order may provide that all costs of and incidental to the application shall be borne by the company or by an officer of it responsible for the default.

186Certificate to be evidence of title

A certificate, under the common seal of the company or the seal kept by the company by virtue of section 40, specifying any shares held by a member, is prima facie evidence of his title to the shares.

187Evidence of grant of probate or confirmation as executor

The production to a company of any document which is by law sufficient evidence of probate of the will, or letters of administration of the estate, or confirmation as executor, of a deceased person having been granted to some person shall be accepted by the company as sufficient evidence of the grant.

This has effect notwithstanding anything in the company's articles.

188Issue and effect of share warrant to bearer

(1)A company limited by shares, if so authorised by its articles, may, with respect to any fully paid-up shares, issue under its common seal a warrant stating that the bearer of the warrant is entitled to the shares specified in it, and may provide (by coupons or otherwise) for the payment of the future dividends on the shares included in the warrant

(2)Such a warrant is termed a " share warrant" and entitles the bearer to the shares specified in it; and the shares may be transferred by delivery of the warrant.

189Offences in connection with share warrants (Scotland)

(1)If in Scotland a person—

(a)with intent to defraud, forges or alters, or offers, utters, disposes of. or puts off, knowing the same to be forged or altered, any share warrant or coupon, or any document purporting to be a share warrant or coupon, issued in pursuance of this Act; or

(b)by means of any such forged or altered share warrant, coupon, or document purporting as aforesaid, demands or endeavours to obtain or receive any share or interest in any company under this Act, or to receive any dividend or money payable in respect thereof, knowing the warrant, coupon, or document to be forged or altered ;

he is on conviction thereof liable to imprisonment or a fine, or both.

(2)If in Scotland a person without lawful authority or excuse (proof whereof lies on him)—

(a)engraves or makes on any plate, wood, stone, or other material, any share warrant or coupon purporting to be—

(i)a share warrant or coupon issued or made by any particular company in pursuance of this Act; or

(ii)a blank share warrant or coupon so issued or made; or

(iii)a part of such a share warrant or coupon; or

(b)uses any such plate, wood, stone, or other material, for the making or printing of any such share warrant or coupon, or of any such blank share warrant or coupon, or any part thereof respectively ; or

(c)knowingly has in his custody or possession any such plate, wood, stone, or other material;

he is on conviction thereof liable to imprisonment or a fine, or both.

Debentures

190Register of debenture holders

(1)A company registered in England and Wales shall not keep in Scotland any register of holders of debentures of the company or any duplicate of any such register or part of any such register which is kept outside Great Britain.

(2)A company registered in Scotland shall not keep in England and Wales any such register or duplicate as above-mentioned.

(3)Neither a register of holders of debentures of a company nor a duplicate of any such register or part of any such register which is kept outside Great Britain shall be kept in England and Wales (in the case of a company registered in England and Wales) or in Scotland (in the case of a company registered in Scotland) elsewhere than—

(a)at the company's registered office; or

(b)at any office of the company at which the work of making it up is done ; or

(c)if the company arranges with some other person for the making up of the register or duplicate to be undertaken on its behalf by that other person, at the office of that other person at which the work is done.

(4)Where a company keeps (in England and Wales or in Scotland, as the case may be) both such a register and such a duplicate, it shall keep them at the same place.

(5)Every company which keeps any such register or duplicate in England and Wales or Scotland shall send to the registrar of companies notice (in the prescribed form) of the place where the register or duplicate is kept and of any change in that place.

(6)But a company is not bound to send notice under subsection (5) where the register or duplicate has, at all times since it came into existence, been kept at the company's registered office.

191Right to inspect register

(1)Every register of holders of debentures of a company shall, except when duly closed (but subject to such reasonable restrictions as the company may impose in general meeting, so that not less than 2 hours in each day shall be allowed for inspection), be open to the inspection—

(a)of the registered holder of any such debentures or any holder of shares in the company without fee; and

(b)of any other person on payment of a fee of 5 pence or such less sum as may be prescribed by the company.

(2)Any such registered holder of debentures or holder of shares, or any other person, may require a copy of the register of the holders of debentures of the company or any part of it, on payment of 10 pence (or such less sum as may be prescribed by the company) for every 100 words, or fractional part of 100 words, required to be copied.

(3)A copy of any trust deed for securing an issue of debentures shall be forwarded to every holder of any such debentures at his request on payment—

(a)in the case of a printed trust deed, of 20 pence (or such less sum as may be prescribed by the company), or

(b)where the trust deed has not been printed, of 10 pence (or such less sum as may be so prescribed), for every 100 words, or fractional part of 100 words, required to be copied.

(4)If inspection is refused, or a copy is refused or not forwarded, 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.

(5)Where a company is in default as above-mentioned, the court may by order compel an immediate inspection of the register or direct that the copies required be sent to the person requiring them.

(6)For purposes of this section, a register is deemed to be duly closed if closed in accordance with provisions contained in the articles or in the debentures or, in the case of debenture stock, in the stock certificates, or in the trust deed or other document securing the debentures or debenture stock, during such period or periods, not exceeding in the whole 30 days in any year, as may be therein specified.

(7)Liability incurred by a company from the making or deletion of an entry in its register of debenture holders, or from a failure to make or delete any such entry, is not enforceable more than 20 years after the date on which the entry was made or deleted or, in the case of any such failure, the failure first occurred.

This is without prejudice to any lesser period of limitation.

192Liability of trustees of debentures

(1)Subject to this section, any provision contained—

(a)in a trust deed for securing an issue of debentures, or

(b)in any contract with the holders of debentures secured by a trust deed,

is void in so far as it would have the effect of exempting a trustee of the deed from, or indemnifying him against, liability for breach of trust where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust deed conferring on him any powers, authorities or discretions.

(2)Subsection (1) does not invalidate—

(a)a release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release ; or

(b)any provision enabling such a release to be given—

(i)on the agreement thereto of a majority of not less than three-fourths in value of the debenture holders present and voting in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose, and

(ii)either with respect to specific acts or omissions or on the trustee dying or ceasing to act.

(3)Subsection (1) does not operate—

(a)to invalidate any provision in force on 1st July 1948 so long as any person then entitled to the benefit of that provision or afterwards given the benefit of that provision under the following subsection remains a trustee of the deed in question ; or

(b)to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.

(4)While any trustee of a trust deed remains entitled to the benefit of a provision saved by subsection (3), the benefit of that provision may be given either—

(a)to all trustees of the deed, present and future; or

(b)to any named trustees or proposed trustees of it,

by a resolution passed by a majority of not less than three-fourths in value of the debenture holders present in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose in accordance with the provisions of the deed or, if the deed makes no provision for summoning meetings, a meeting summoned for the purpose in any manner approved by the court.

193Perpetual debentures

A condition contained in debentures, or in a deed for securing debentures, is not invalid by reason only that the debentures are thereby made irredeemable or redeemable only on the happening of a contingency (however remote), or on the expiration of a period (however long), any rule of equity to the contrary notwithstanding.

This applies to debentures whenever issued, and to deeds whenever executed.

194Power to re-issue redeemed debentures

(1)Where (at any time) a company has redeemed debentures previously issued, then—

(a)unless provision to the contrary, whether express or implied, is contained in the articles or in any contract entered into by the company ; or

(b)unless the company has, by passing a resolution to that effect or by some other act, manifested its intention that the debentures shall be cancelled,

the company has, and is deemed always to have had, power to re-issue the debentures, either by re-issuing the same debentures or by issuing other debentures in their place.

(2)On a re-issue of redeemed debentures, the person entitled to the debentures has, and is deemed always to have had, the same priorities as if the debentures had never been redeemed.

(3)Where a company has (at any time) deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures are not deemed to have been redeemed by reason only of the company's account having ceased to be in debit while the debentures remained so deposited.

(4)The re-issue of a debenture or the issue of another debenture in its place under the power which by this section is given to or deemed to be possessed by a company is to be treated as the issue of a new debenture for purposes of stamp duty : but it is not to be so treated for the purposes of any provision limiting the amount or number of debentures to be issued.

This applies whenever the issue or re-issue was made.

(5)A person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp duty or any penalty in respect of it, unless he had notice (or, but for his negligence, might have discovered) that the debenture was not duly stamped; but in that case the company is liable to pay the proper stamp duty and penalty.

195Contract to subscribe for debentures

A contract with a company to take up and pay for debentures of the company may be enforced by an order for specific performance.

196Payment of debts out of assets subject to floating charge (England and Wales)

(1)The following applies, in the case of a company registered in England and Wales, where either a receiver is appointed on behalf of the holders of any debentures of the company secured by a floating charge, or possession is taken by or on behalf of those debenture-holders of any property comprised in or subject to the charge.

(2)If the company is not at the time in course of being wound up, the debts which in a winding up are, under the relevant provisions of Chapter V of Part XX relating to the preferential payments, to be paid in priority to all other debts shall be paid out of assets coming to the hands of the receiver or other person taking possession, in priority to any claims for principal or interest in respect of the debentures.

(3)In the application of those provisions of Part XX, section 614 and Schedule 19 are to be read as if the provision for payment of accrued holiday remuneration becoming payable on the termination of employment before or by the effect of the winding-up order or resolution were a provision for payment of such remuneration becoming payable on the termination of employment before or by the effect of the appointment of the receiver or possession being taken as mentioned in subsection (1) of this section.

(4)The periods of time mentioned in those provisions of Part XX are to be reckoned from the date of the appointment of the receiver or possession being taken as above mentioned, as the case may be; and in Schedule 19 as it applies for the purposes of this section " the relevant date " means that date.

(5)Payments made under this section shall be recouped as far as may be out of the assets of the company available for payment of general creditors.

197Debentures to bearer (Scotland)

Notwithstanding anything in the statute of the Scots Parliament of 1696, chapter 25, debentures to bearer issued in Scotland are valid and binding according to their terms.

PART VIDisclosure of Interests in Shares

Individual and group acquisitions

198Obligation of disclosure: the cases in which it may arise and " the relevant time "

(1)Where a person either—

(a)to his knowledge acquires an interest in shares comprised in a public company's relevant share capital, or ceases to be interested in shares so comprised (whether or not retaining an interest in other shares so comprised), or

(b)becomes aware that he has acquired an interest in shares so comprised or that he has ceased to be interested in shares so comprised in which he was previously interested,

then in certain circumstances he comes under an obligation (" the obligation of disclosure") to make notification to the company of the interests which he has, or had, in its shares.

(2)In relation to a public company, " relevant share capital " means the company's issued share capital of a class carrying rights to vote in all circumstances at general meetings of the company; and it is hereby declared for the avoidance of doubt that—

(a)where a company's share capital is divided into different classes of shares, references in this Part to a percentage of the nominal value of its relevant share capital are to a percentage of the nominal value of the issued shares comprised in each of the classes taken separately, and

(b)the temporary suspension of voting rights in respect of shares comprised in issued share capital of a company of any such class does not affect the application of this Part in relation to interests in those or any other shares comprised in that class.

(3)Where, otherwise than in circumstances within subsection (1), a person—

(a)is aware at the time when it occurs of any change of circumstances affecting facts relevant to the application of the next following section to an existing interest of his in shares comprised in a company's share capital of any description, or

(b)otherwise becomes aware of any such facts (whether or not arising from any such change of circumstances),

then in certain circumstances he comes under the obligation of disclosure.

(4)The existence of the obligation in a particular case depends (in part) on circumstances obtaining before and after whatever is in that case the relevant time ; and that is—

(a)in a case within subsection (1)(a) or(3)(a), the time of the event or change of circumstances there mentioned, and

(b)in a case within subsection (1)(b) or (3)(b), the time at which the person became aware of the facts in question.

199Interests to be disclosed

(1)For purposes of the obligation of disclosure, the interests to be taken into account are those in relevant share capital of the company concerned.

(2)A person has a notifiable interest at any time when he is interested in shares comprised in that share capital of an aggregate nominal value equal to or more than the percentage of the nominal value of that share capital which is for the time being the notifiable percentage.

(3)All facts relevant to determining whether a person has a notifiable interest at any time (or the percentage level of his interest) are taken to be what he knows the facts to be at that time.

(4)The obligation of disclosure arises under section 198(1) or (3) where the person has a notifiable interest immediately after the relevant time, but did not have such an interest immediately before that time.

(5)The obligation also arises under section 198(1) where—

(a)the person had a notifiable interest immediately before the relevant time, but does not have such an interest immediately after it, or

(b)he had a notifiable interest immediately before that time, and has such an interest immediately after it, but the percentage levels of his interest immediately before and immediately after that time are not the same.

200" Percentage level" in relation to notifiable interests

(1)Subject to the qualification mentioned below, " percentage level", in section 199(5)(b), means the percentage figure found by expressing the aggregate nominal value of all the shares comprised in the share capital concerned in which the person is interested immediately before or (as the case may be) immediately after the relevant time as a percentage of the nominal value of that share capital and rounding that figure down, if it is not a whole number, to the next whole number.

(2)Where the nominal value of the share capital is greater immediately after the relevant time than it was immediately before, the percentage level of the person's interest immediately before (as well as immediately after) that time is determined by reference to the larger amount.

201The notifiable percentage

(1)The reference in section 199(2) to the notifiable percentage is to 5 per cent, or such other percentage as may be prescribed by regulations under this section.

(2)The Secretary of State may by regulations in a statutory instrument from time to time prescribe the percentage to apply in determining whether a person's interest in a company's shares is notifiable under section 198 ; and different percentages may be prescribed in relation to companies of different classes or descriptions.

No regulations shall be made under this section unless a draft of the instrument containing them has been laid before Parliament and approved by a resolution of each House.

(3)Where in consequence of a reduction in the percentage made by such regulations a person's interest in a company's shares becomes notifiable, he then comes under the obligation of disclosure in respect of it; and the obligation must be performed within the period of 10 days next following the day on which it arises.

202Particulars to be contained in notification

(1)Where notification is required by section 198 with respect to a person's interest (if any) in shares comprised in relevant share capital of a public company, the obligation to make the notification must (except where section 201(3) applies) be performed within the period of 5 days next following the day on which that obligation arises; and the notification must be in writing to the company.

(2)The notification must specify the share capital to which it relates, and must also—

(a)state the number of shares comprised in that share capital in which the person making the notification knows he was interested immediately after the time when the obligation arose, or

(b)in a case where the person no longer has a notifiable interest in shares comprised in that share capital, state that he no longer has that interest.

(3)A notification with respect to a person's interest in a company's relevant share capital (other than one stating that he no longer has a notifiable interest in shares comprised in that share capital) shall include particulars of—

(a)the identity of each registered holder of shares to which the notification relates, and

(b)the number of those shares held by each such registered holder,

so far as known to the person making the notification at the date when the notification is made.

(4)A person who has an interest in shares comprised in a company's relevant share capital, that interest being notifiable, is under obligation to notify the company in writing—

(a)of any particulars in relation to those shares which are specified in subsection (3), and

(b)of any change in those particulars,

of which in either case he becomes aware at any time after any interest notification date and before the first occasion following that date on which he comes under any further obligation of disclosure with respect to his interest in shares comprised in that share capital.

An obligation arising under this subsection must be performed within the period of 5 days next following the day on which it arises.

(5)The reference in subsection (4) to an interest notification date, in relation to a person's interest in shares comprised in a public company's relevant share capital, is to either of the following—

(a)the date of any notification made by him with respect to his interest under this Part, and

(b)where he has failed to make a notification, the date on which the period allowed for making it came to an end.

(6)A person who at any time has an interest in shares which is notifiable is to be regarded under subsection (4) as continuing to have a notifiable interest in them unless and until he comes under obligation to make a notification stating that he no longer has such an interest in those shares.

203Notification of family and corporate interests

(1)For purposes of sections 198 to 202, a person is taken to be interested in any shares in which his spouse or any infant child or step-child of his is interested; and " infant" means, in relation to Scotland, pupil or minor.

(2)For those purposes, a person is taken to be interested in shares if a body corporate is interested in them and—

(a)that body or its directors are accustomed to act in accordance with his directions or instructions, or

(b)he is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of that body corporate.

(3)Where a person is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of a body corporate and that body corporate is entitled to exercise or control the exercise of any of the voting power at general meetings of another body corporate (" the effective voting power ") then, for purposes of subsection (2)(b), the effecttive voting power is taken as exercisable by that person.

(4)For purposes of subsections (2) and (3), a person is entitled to exercise or control the exercise of voting power if—

(a)he has a right (whether subject to conditions or not) the exercise of which would make him so entitled, or

(b)he is under an obligation (whether or not so subject) the fulfilment of which would make him so entitled.

204Agreement to acquire interests in a particular company

(1)In certain circumstances the obligation of disclosure may arise from an agreement between two or more persons which includes provision for the acquisition by any one or more of them of interests in shares of a particular public company (" the target company "), being shares comprised in the relevant share capital of that company.

(2)This section applies to such an agreement if—

(a)the agreement also includes provisions imposing obligations or restrictions on any one or more of the parties to it with respect to their use, retention or disposal of their interests in that company's shares acquired in pursuance of the agreement (whether or not together with any other interests of theirs in the company's shares to which the agreement relates), and

(b)any interest in the company's shares is in fact acquired by any of the parties in pursuance of the agreement;

and in relation to such an agreement references below in this section, and in sections 205 and 206, to the target company are to the company which is the target company for that agreement in accordance with this and the previous subsection.

(3)The reference in subsection (2)(a) to the use of interests in shares in the target company is to the exercise of any rights or of any control or influence arising from those interests (including the right to enter into any agreement for the exercise, or for control of the exercise, of any of those rights by another person).

(4)Once any interest in shares in the target company has been acquired in pursuance of such an agreement as is mentioned above, this section continues to apply to that agreement irrespective of—

(a)whether or not any further acquisitions of interests in the company's shares take place in pursuance of the agreement, and

(b)any change in the persons who are for the time being parties to it, and

(c)any variation of the agreement,

so long as the agreement continues to include provisions of any description mentioned in subsection (2)(a).

References in this subsection to the agreement include any agreement having effect (whether directly or indirectly) in substitution for the original agreement.

(5)In this section, and also in references elsewhere in this Part to an agreement to which this section applies, "agreement " includes any agreement or arrangement; and references in this section to provisions of an agreement—

(a)accordingly include undertakings, expectations or under standings operative under any arrangement, and

(b)(without prejudice to the above) also include any provisions, whether express or implied and whether absolute or not.

(6)However, this section does not apply to an agreement which is not legally binding unless it involves mutuality in the undertakings, expectations or understandings of the parties to it; nor does the section apply to an agreement to underwrite or sub-underwrite any offer of shares in a company, provided the agreement is confined to that purpose and any matters incidental to it.

205Obligation of disclosure arising under s. 204

(1)In the case of an agreement to which section 204 applies, each party to the agreement is taken (for purposes of the obligation of disclosure) to be interested in all shares in the target company in which any other party to it is interested apart from the agreement (whether or not the interest of the other party in question was acquired, or includes any interest which was acquired, in pursuance of the agreement).

(2)For those purposes, and also for those of the next section, an interest of a party to such an agreement in shares in the target company is an interest apart from the agreement if he is interested in those shares otherwise than by virtue of the application of section 204 and this section in relation to the agreement.

(3)Accordingly, any such interest of the person (apart from the agreement) includes for those purposes any interest treated as his under section 203 or by the application of section 204 and this section in relation to any other agreement with respect to shares in the target company to which he is a party.

(4)A notification with respect to his interest in shares in the target company made to that company under this Part by a person who is for the time being a party to an agreement to which section 204 applies shall—

(a)state that the person making the notification is a party to such an agreement,

(b)include the names and (so far as known to him) the addresses of the other parties to the agreement, identifying them as such, and

(c)state whether or not any of the shares to which the notification relates are shares in which he is interested by virtue of section 204 and this section and, if so, the number of those shares.

(5)Where a person makes a notification to a company under this Part in consequence of ceasing to be interested in any shares of that company by virtue of the fact that he or any other person has ceased to be a party to an agreement to which section 204 applies, the notification shall include a statement that he or that other person has ceased to be a party to the agreement (as the case may require) and also (in the latter case) the name and (if known to him) the address of that other.

206Obligation of persons acting together to keep each other informed

(1)A person who is a party to an agreement to which section 204 applies is subject to the requirements of this section at any time when—

(a)the target company is a public company, and he knows it to be so, and

(b)the shares in that company to which the agreement relates consist of or include shares comprised in relevant share capital of the company, and he knows that to be the case; and

(c)he knows the facts which make the agreement one to which section 204 applies.

(2)Such a person is under obligation to notify every other party to the agreement, in writing, of the relevant particulars of his interest (if any) apart from the agreement in shares comprised in relevant share capital of the target company—

(a)on his first becoming subject to the requirements of this section, and

(b)on each occurrence after that time while he is still subject to those requirements of any event or circumstances within section 198 (1) (as it applies to his case otherwise than by reference to interests treated as his under section 205 as applying to that agreement).

(3)The relevant particulars to be notified under subsection (2) are—

(a)the number of shares (if any) comprised in the target company's relevant share capital in which the person giving the notice would be required to state his interest if he were under the obligation of disclosure with respect to that interest (apart from the agreement) immediately after the time when the obligation to give notice under subsection (2) arose, and

(b)the relevant particulars with respect to the registered ownership of those shares, so far as known to him at the date of the notice.

(4)A person who is for the time being subject to the requirements of this section is also under obligation to notify every other party to the agreement, in writing—

(a)of any relevant particulars with respect to the registered ownership of any shares comprised in relevant share capital of the target company in which he is interested apart from the agreement, and

(b)of any change in those particulars,

of which in either case he becomes aware at any time after any interest notification date and before the first occasion following that date on which he becomes subject to any further obligation to give notice under subsection (2) with respect to his interest in shares comprised in that share capital.

(5)The reference in subsection (4) to an interest notification date, in relation to a person's interest in shares comprised in the target company's relevant share capital, is to either of the following—

(a)the date of any notice given by him with respect to his interest under subsection (2), and

(b)where he has failed to give that notice, the date on which the period allowed by this section for giving the notice came to an end.

(6)A person who is a party to an agreement to which section 204 applies is under an obligation to notify each other party to the agreement, in writing, of his current address—

(a)on his first becoming subject to the requirements of this section, and

(b)on any change in his address occurring after that time and while he is still subject to those requirements.

(7)A reference to the relevant particulars with respect to the registered ownership of shares is to such particulars in relation to those shares as are mentioned in section 202(3)(a) or (b).

(8)A person's obligation to give any notice required by this section to any other person must be performed within the period of 5 days next following the day on which that obligation arose.

207Interests in shares by attribution

(1)Where section 198 or 199 refers to a person acquiring an interest in shares or ceasing to be interested in shares, that reference in certain cases includes his becoming or ceasing to be interested in those shares by virtue of another person's interest.

(2)Such is the case where he becomes or ceases to be interested by virtue of section 203 or (as the case may be) section 205 whether—

(a)by virtue of the fact that the person who is interested in the shares becomes or ceases to be a person whose interests (if any) fall by virtue of either section to be treated as his, or

(b)in consequence of the fact that such a person has become or ceased to be interested in the shares, or

(c)in consequence of the fact that he himself becomes or ceases to be a party to an agreement to which section 204 applies to which the person interested in the shares is for the time being a party, or

(d)in consequence of the fact that an agreement to which both he and that person are parties becomes or ceases to be one to which that section applies.

(3)The person is then to be treated as knowing he has acquired an interest in the shares or (as the case may be) that he has ceased to be interested in them, if and when he knows both—

(a)the relevant facts with respect to the other person's interest in the shares, and

(b)the relevant facts by virtue of which he himself has become or ceased to be interested in them in accordance with section 203 or 205.

(4)He has the knowledge referred to in subsection (3)(a) if he knows (whether contemporaneously or not) cither of the subsistence of the other person's interest at any material time or of the fact that the other has become or ceased to be interested in the shares at any such time; and " material time " is any time at which the other's interests (if any) fall or fell to be treated as his under section 203 or 205.

(5)A person is to be regarded as knowing of the subsistence of another's interest in shares or (as the case may be) that another has become or ceased to be interested in shares if he has been notified under section 206 of facts with respect to the other's interest which indicate that he is or has become or ceased to be interested in the shares (whether on his own account or by virtue of a third party's interest in them).

208Interests in shares which are to be notified

(1)This section applies, subject to the section next following, in determining for purposes of sections 198 to 202 whether a person has a notifiable interest in shares.

(2)A reference to an interest in shares is to be read as including an interest of any kind whatsoever in the shares; and accordingly there are to be disregarded any restraints or restrictions to which the exercise of any right attached to the interest is or may be subject.

(3)Where property is held on trust and an interest in shares is comprised in the property, a beneficiary of the trust who apart from this subsection does not have an interest in the shares is to be taken as having such an interest.

(4)A person is taken to have an interest in shares if—

(a)he enters into a contract for their purchase by him (whether for cash or other consideration), or

(b)not being the registered holder, he is entitled to exercise any right conferred by the holding of the shares or is entitled to control the exercise of any such right.

(5)A person is taken to have an interest in shares if, otherwise than by virtue of having an interest under a trust—

(a)he has a right to call for delivery of the shares to himself or to his order, or

(b)he has a right to acquire an interest in shares or is under an obligation to take an interest in shares,

whether in any case the right or obligation is conditional or absolute.

(6)For purposes of subsection (4)(b), a person is entitled to exercise or control the exercise of any right conferred by the holding of shares if he—

(a)has a right (whether subject to conditions or not) the exercise of which would make him so entitled, or

(b)is under an obligation (whether so subject or not) the fulfilment of which would make him so entitled.

(7)Persons having a joint interest are taken each of them to have that interest

(8)It is immaterial that shares in which a person has an interest are unidentifiable.

209Interests to be disregarded

(1)The following interests in shares are disregarded for purposes of sections 198 to 202—

(a)where property is held on trust according to the law of England and Wales and an interest in shares is comprised in that property, an interest in reversion or remainder or of a bare trustee or a custodian trustee, and any discretionary interest;

(b)where property is held on trust according to the law of Scotland and an interest in shares is comprised in that property, an interest in fee or of a simple trustee and any discretionary interest;

(c)an interest which subsists by virtue of an authorised unit trust scheme within the meaning of the [1958 c. 45.] Prevention of Fraud (Investments) Act 1958. a scheme made under section 22 of the [1960 c. 58.] Charities Act 1960, section 11 of the [1961 c. 62.] Trustee Investments Act 1961 or section 1 of the [1965 c. 2.] Administration of Justice Act 1965 or the scheme set out in the Schedule to the [1958 No. 1.] Church Funds Investment Measure 1958;

(d)an interest of the Church of Scotland General Trustees or of the Church of Scotland Trust in shares held by them or of any other person in shares held by those Trustees or that Trust otherwise than as simple trustees;

(e)an interest for the life of himself or another of a person under a settlement in the case of which the property comprised in the settlement consists of or includes shares, and the conditions mentioned in subsection (3) below are satisfied;

(f)an exempt interest held by a recognised jobber;

(g)an exempt security interest;

(h)an interest of the President of the Family Division of the High Court subsisting by virtue of section 9 of the [1925 c. 23.] Administration of Estates Act 1925 ;

(i)an interest of the Accountant General of the Supreme Court in shares held by him;

(j)such interests, or interests of such a class, as may be prescribed for purposes of this paragraph by regulations made by the Secretary of State by statutory instrument.

(2)A person is not by virtue of section 208(4)(b) taken to be interested in shares by reason only that he has been appointed a proxy to vote at a specified meeting of a company or of any class of its members and at any adjournment of that meeting, or has been appointed by a corporation to act as its representative at any meeting of a company or of any class of its members.

(3)The conditions referred to in subsection (1)(e) are, in relation to a settlement—

(a)that it is irrevocable, and

(b)that the settlor (within the meaning of section 444 of the [1970 c. 10.] Income and Corporation Taxes Act 1970) has no interest in any income arising under, or property comprised in, the settlement

(4)A person is a recognised jobber for purposes of subsection (1)(f) if he is a member of The Stock Exchange recognised by the Council of The Stock Exchange as carrying on the business of a jobber; and an interest of such a person in shares is an exempt interest for those purposes if—

(a)he carries on that business in the United Kingdom, and

(b)he holds the interest for the purposes of that business.

(5)An interest in shares is an exempt security interest for purposes of subsection (1)(g) if—

(a)it is held by a person who is—

(i)a recognised bank or licensed institution within the [1979 c. 37.] Banking Act 1979, or an insurance company to which Part II of the [1982 c. 50.] Insurance Companies Act 1982 applies, or

(ii)a trustee savings bank (within the [1981 c. 65.] Trustee Savings Banks Act 1981), or

(iii)a member of The Stock Exchange carrying on business in the United Kingdom as a stockbroker, and

(b)it is held by way of security only for the purposes of a transaction entered into in the ordinary course of his business as such a person,

or if it is held by way of security only either by the Bank of England or by the Post Office for the purposes of a transaction entered into in the ordinary course of that part of the business of the Post Office which consists of the provision of banking services.

210Other provisions about notification under this Part

(1)Where a person authorises another ("the agent") to acquire or dispose of, on his behalf, interests in shares comprised in relevant share capital of a public company, he shall secure that the agent notifies him immediately of acquisitions or disposals effected by the agent which will or may give rise to any obligation of disclosure imposed on him by this Part with respect to his interest in that share capital.

(2)An obligation of disclosure imposed on a person by any provision of sections 198 to 202 is treated as not being fulfilled unless the notice by means of which it purports to be fulfilled identifies him and gives his address and, in a case where he is a director of the company, is expressed to be given in fulfilment of that obligation.

(3)A person who—

(a)fails to fulfil, within the proper period, an obligation of disclosure imposed on him by this Part, or

(b)in purported fulfilment of any such obligation makes to a company a statement which he knows to be false, or recklessly makes to a company a statement which is false, or

(c)fails to fulfil, within the proper period, an obligation to give another person a notice required by section 206, or

(d)fails without reasonable excuse to comply with subsection (1) of this section,

is guilty of an offence and liable to imprisonment or a fine, or both.

(4)It is a defence for a person charged with an offence under subsection (3)(c) to prove that it was not possible for him to give the notice to the other person required by section 206 within the proper period, and either—

(a)that it has not since become possible for him to give the notice so required, or

(b)that he gave the notice as soon after the end of that period as it became possible for him to do so.

(5)Where a person is convicted of an offence under this section (other than an offence relating to his ceasing to be interested in a company's shares), the Secretary of State may by order direct that the shares in relation to which the offence was committed shall, until further order, be subject to the restrictions of Part XV of this Act; and such an order may be made notwithstanding any power in the company's memorandum or articles enabling the company to impose similar restrictions on those shares.

(6)Sections 732 (restriction on prosecutions) and 733(2) and (3) (liability of directors, etc.) apply to offences under this section.

Registration and investigation of share acquisitions and disposals

211Register of interests in shares

(1)Every public company shall keep a register for purposes of sections 198 to 202, and whenever the company receives information from a person in consequence of the fulfilment of an obligation imposed on him by any of those sections, it is under obligation to inscribe in the register, against that person's name, that information and the date of the inscription.

(2)Without prejudice to subsection (1), where a company receives a notification under this Part which includes a statement that the person making the notification, or any other person, has ceased to be a party to an agreement to which section 204 applies, the company is under obligation to record that information against the name of that person in every place where his name appears in the register as a party to that agreement (including any entry relating to him made against another person's name).

(3)An obligation imposed by subsection (1) or (2) must be fulfilled within the period of 3 days next following the day on which it arises.

(4)The company is not, by virtue of anything done for the purposes of this section, affected with notice of, or put upon enquiry as to, the rights of any person in relation to any shares.

(5)The register must be so made up that the entries against the several names entered in it appear in chronological order.

(6)Unless the register is in such form as to constitute in itself an index, the company shall keep an index of the names entered in the register which shall in respect of each name contain a sufficient indication to enable the information entered against it to be readily found; and the company shall, within 10 days after the date on which a name is entered in the register, make any necessary alteration in the index.

(7)If the company ceases to be a public company it shall continue to keep the register and any associated index until the end of the period of 6 years beginning with the day next following that on which it ceases to be such a company.

(8)The register and any associated index—

(a)shall be kept at the place at which the register required to be kept by the company by section 325 (register of directors' interests) is kept, and

(b)subject to the next subsection, shall be available for inspection in accordance with section 219 below.

(9)Neither the register nor any associated index shall be available for inspection in accordance with that section in so far as it contains information with respect to a company for the time being entitled to avail itself of the benefit conferred by paragraph 3 or 10 of Schedule 5 (disclosure of shareholdings not required if it would be harmful to company's business).

(10)If default is made in complying with subsection (1) or (2), or with any of subsections (5) to (7), 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.

(11)Any register kept by a company immediately before 15th June 1982 under section 34 of the [1967 c. 81.] Companies Act 1967 shall continue to be kept by the company under and for the purposes of this section.

212Company investigations

(1)A public company may by notice in writing require a person whom the company knows or has reasonable cause to believe to be or, at any time during the 3 years immediately preceding the date on which the notice is issued, to have been interested in shares comprised in the company's relevant share capital—

(a)to confirm that fact or (as the case may be) to indicate whether or not it is the case, and

(b)where he holds or has during that time held an interest in shares so comprised, to give such further information as may be required in accordance with the following subsection.

(2)A notice under this section may require the person to whom it is addressed—

(a)to give particulars of his own past or present interest in shares comprised in relevant share capital of the company (held by him at any time during the 3-year period mentioned in subsection (1)),

(b)where the interest is a present interest and any other interest in the shares subsists or, in any case, where another interest in the shares subsisted during that 3-year period at any time when his own interest subsisted, to give (so far as lies within his knowledge) such particulars with respect to that other interest as may be required by the notice,

(c)where his interest is a past interest, to give (so far as lies within his knowledge) particulars of the identity of the person who held that interest immediately upon his ceasing to hold it

(3)The particulars referred to in subsection (2)(a) and (b) include particulars of the identity of persons interested in the shares in question and of whether persons interested in the same shares are or were parties to any agreement to which section 204 applies or to any agreement or arrangement relating to the exercise of any rights conferred by the holding of the shares.

(4)A notice under this section shall require any information given in response to the notice to be given in writing within such reasonable time as may be specified in the notice.

(5)Sections 203 to 205 and 208 apply for the purpose of construing references in this section to persons interested in shares and to interests in shares respectively, as they apply in relation to sections 198 to 201 (but with the omission of any reference to section 209).

(6)This section applies in relation to a person who has or previously had, or is or was entitled to acquire, a right to subscribe for shares in a public company which would on issue be comprised in relevant share capital of that company as it applies in relation to a person who is or was interested in shares so comprised; and references above in this section to an interest in shares so comprised and to shares so comprised are to be read accordingly in any such case as including respectively any such right and shares which would on issue be so comprised.

213Registration of interests disclosed under s. 212

(1)Whenever in pursuance of a requirement imposed on a person under section 212 a company receives information to which this section applies relating to shares comprised in its relevant share capital, it is under obligation to enter against the name of the registered holder of those shares, in a separate part of its register of interests in shares—

(a)the fact that the requirement was imposed and the date on which it was imposed, and

(b)any information to which this section applies received in pursuance of the requirement.

(2)This section applies to any information received in pursuance of a requirement imposed by section 212 which relates to the present interests held by any persons in shares comprised in relevant share capital of the company in question.

(3)Subsections (3) to (10) of section 211 apply in relation to any part of the register maintained in accordance with subsection (1) of this section as they apply in relation to the remainder of the register, reading references to subsection (1) of that section to include subsection (1) of this.

(4)In the case of a register kept by a company immediately before 15th June 1982 under section 34 of the [1967 c. 81.] Companies Act 1967, any part of the register so kept for the purposes of section 27 of the [1976 c. 69.] Companies Act 1976 shall continue to be kept by the company under and for the purposes of this section.

214Company investigation on requisition by members

(1)A company may be required to exercise its powers under section 212 on the requisition of members of the company holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up capital of the company as carries at that date the right of voting at general meetings of the company.

(2)The requisition must—

(a)state that the requisitionists are requiring the company to exercise its powers under section 212,

(b)specify the manner in which they require those powers to be exercised, and

(c)give reasonable grounds for requiring the company to exercise those powers in the manner specified,

and must be signed by the requisitionists and deposited at the company's registered office.

(3)The requisition may consist of several documents in like form each signed by one or more requisitionists.

(4)On the deposit of a requisition complying with this section it is the company's duty to exercise its powers under section 212 in the manner specified in the requisition.

(5)If default is made in complying with subsection (4), the company and every officer of it who is in default is liable to a fine.

215Company report to members

(1)On the conclusion of an investigation carried out by a company in pursuance of a requisition under section 214, it is the company's duty to cause a report of the information received in pursuance of that investigation to be prepared, and the report shall be made available at the company's registered office within a reasonable period after the conclusion of that investigation.

(2)Where—

(a)a company undertakes an investigation in pursuance of a requisition under section 214, and

(b)the investigation is not concluded before the end of 3 months beginning with the date immediately following the date of the deposit of the requisition,

it is the duty of the company to cause to be prepared, in respect of that period and each successive period of 3 months ending before the conclusion of the investigation, an interim report of the information received during that period in pursuance of the investigation. Each such report shall be made available at the company's registered office within a reasonable period after the end of the period to which it relates.

(3)The period for making any report prepared under this section available as required by subsection (1) or (2) shall not exceed 15 days.

(4)Such a report shall not include any information with respect to a company entitled to avail itself of the benefit conferred by paragraph 3 or 10 of Schedule 5 (disclosure of shareholdings not required if it would be harmful to company's business); but where any such information is omitted, that fact shall be stated in the report.

(5)The company shall, within 3 days of making any report prepared under this section available at its registered office, notify the requisitionists that the report is so available.

(6)An investigation carried out by a company in pursuance of a requisition under section 214 is regarded for purposes of this section as concluded when the company has made all such inquiries as are necessary or expedient for the purposes of the requisition and in the case of each such inquiry, either a response has been received by the company or the time allowed for a response has elapsed.

(7)A report prepared under this section—

(a)shall be kept at the company's registered office from the day on which it is first available there in accordance with subsection (1) or (2) until the expiration of 6 years beginning with the day next following that day, and

(b)shall be available for inspection in accordance with section 219 below so long as it is so kept

(8)If default is made in complying with subsection (1), (2), (5) or (7)(a), the company and every officer of it who is in default is liable to a fine.

216Penalty for failure to provide information

(1)Where notice is served by a company under section 212 on a person who is or was interested in shares of the company and that person fails to give the company any information required by the notice within the time specified in it, the company may apply to the court for an order directing that the shares in question be subject to the restrictions of Part XV of this Act.

(2)Such an order may be made by the court notwithstanding any power contained in the applicant company's memorandum or articles enabling the company itself to impose similar restrictions on the shares in question.

(3)Subject to the following subsections, a person who fails to comply with a notice under section 212 or who, in purported compliance with such a notice, makes any statement which he knows to be false in a material particular or recklessly makes any statement which is false in a material particular is guilty of an offence and liable to imprisonment or a fine, or both.

Section 733(2) and (3) of this Act (liability of individuals for corporate default) apply to offences under this subsection.

(4)A person is not guilty of an offence by virtue of failing to comply with a notice under section 212 if he proves that the requirement to give the information was frivolous or vexatious.

(5)A person is not obliged to comply with a notice under section 212 if he is for the time being exempted by the Secretary of State from the operation of that section; but the Secretary of State shall not grant any such exemption unless—

(a)he has consulted with the Governor of the Bank of England, and

(b)he (the Secretary of State) is satisfied that, having regard to any undertaking given by the person in question with respect to any interest held or to be held by him in any shares, there are special reasons why that person should not be subject to the obligations imposed by that section.

217Removal of entries from register

(1)A company may remove an entry against a person's name from its register of interests in shares if more than 6 years have elapsed since the date of the entry being made, and either—

(a)that entry recorded the fact that the person in question had ceased to have an interest notifiable under this Part in relevant share capital of the company, or

(b)it has been superseded by a later entry made under section 211 against the same person's name;

and in a case within paragraph (a) the company may also remove that person's name from the register.

(2)If a person in pursuance of an obligation imposed on him by any provision of this Part gives to a company the name and address of another person as being interested in shares in the company, the company shall, within 15 days of the date on which it was given that information, notify the other person that he has been so named and shall include in that notification—

(a)particulars of any entry relating to him made, in consequence of its being given that information, by the company in its register of interests in shares, and

(b)a statement informing him of his right to apply to have the entry removed in accordance with the following provisions of this section.

(3)A person who has been notified by a company in pursuance of subsection (2) that an entry relating to him has been made in the company's register of interests in shares may apply in writing to the company for the removal of that entry from the register; and the company shall remove the entry if satisfied that the information in pursuance of which the entry was made was incorrect.

(4)If a person who is identified in a company's register of interests in shares as being a party to an agreement to which section 204 applies (whether by an entry against his own name or by an entry relating to him made against another person's name as mentioned in subsection (2)(a)) ceases to be a party to that agreement, he may apply in writing to the company for the inclusion of that information in the register; and if the company is satisfied that he has ceased to be a party to the agreement, it shall record that information (if not already recorded) in every place where his name appears as a party to that agreement in the register.

(5)If an application under subsection (3) or (4) is refused (in a case within subsection (4), otherwise than on the ground that the information has already been recorded) the applicant may apply to the court for an order directing the company to remove the entry in question from the register or (as the case may be) to include the information in question in the register; and the court may, if it thinks fit, make such an order.

(6)Where a name is removed from a company's register of interests in shares in pursuance of subsection (1) or (3) or an order under subsection (5), the company shall within 14 days of the date of that removal make any necessary alteration in any associated index.

(7)If default is made in complying with subsection (2) or (6), 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.

218Otherwise, entries not to be removed

(1)Entries in a company's register of interests in shares shall not be deleted except in accordance with section 217.

(2)If an entry is deleted from a company's register of interests in shares in contravention of subsection (1), the company shall restore that entry to the register as soon as is reasonably practicable.

(3)If default is made in complying with subsection (1) or (2), the company and every officer of it who is in default is liable to a fine and, for continued contravention of subsection (2), to a daily default fine.

219Inspection of register and reports

(1)Any register of interests in shares and any report which is required by section 215(7) to be available for inspection in accordance with this section shall, during business hours (subject to such reasonable restrictions as the company may in general meeting impose, but so that not less than 2 hours in each day are allowed for inspection) be open to the inspection of any member of the company or of any other person without charge.

(2)Any such member or other person may require a copy of any such register or report, or any part of it, on payment of 10 pence or such less sum as the company may prescribe, for every 100 words or fractional part of 100 words required to be copied ; and the company shall cause any copy so required by a person to be sent to him before the expiration of the period of 10 days beginning with the day next following that on which the requirement is received by the company.

(3)If an inspection required under this section is refused or a copy so required is not sent within the proper period, 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.

(4)In the case of a refusal of an inspection required under this section of any register or report, the court may by order compel an immediate inspection of it; and in the case of failure to send a copy required under this section, the court may by order direct that the copy required shall be sent to the person requiring it.

(5)The Secretary of State may by regulations made by statutory instrument substitute a sum specified in the regulations for the sum for the time being mentioned in subsection (2).

Supplementary

220Definitions for Part VI

(1)In this Part of this Act—

  • " associated index ", in relation to a register, means the index kept in relation to that register in pursuance of section 211(6),

  • " register of interests in shares " means the register kept in pursuance of section 211 including, except where the context otherwise requires, that part of the register kept in pursuance of section 213, and

  • " relevant share capital " has the meaning given by section 198(2).

(2)Where the period allowed by any provision of this Part for fulfilling an obligation is expressed as a number of days, any day that is a Saturday or Sunday or a bank holiday in any part of Great Britain is to be disregarded in reckoning that period.

PART VIIAccounts and Audit

CHAPTER IProvisions Applying to Companies Generally

Accounting records

221Companies to keep accounting records

(1)Every company shall cause accounting records to be kept in accordance with this section.

(2)The accounting records shall be sufficient to show and explain the company's transactions, and shall be such as to—

(a)disclose with reasonable accuracy, at any time, the financial position of the company at that time, and

(b)enable the directors to ensure that any balance sheet and profit and loss account prepared under this Part comply with the requirements of this Act as to the form and content of company accounts and otherwise.

(3)The accounting records shall in particular contain—

(a)entries from day to day of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure takes place, and

(b)a record of the assets and liabilities of the company.

(4)If the company's business involves dealing in goods, the accounting records shall contain—

(a)statements of stock held by the company at the end of each financial year of the company,

(b)all statements of stocktakings from which any such statement of stock as is mentioned in paragraph (a) has been or is to be prepared, and

(c)except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.

222Where and for how long records to be kept

(1)Subject as follows, a company's accounting records shall be kept at its registered office or such other place as the directors think fit, and shall at all times be open to inspection by the company's officers.

(2)If accounting records are kept at a place outside Great Britain, accounts and returns with respect to the business dealt with in the accounting records so kept shall be sent to, and kept at, a place in Great Britain, and shall at all times be open to such inspection.

(3)The accounts and returns to be sent to Great Britain in accordance with subsection (2) shall be such as to—

(a)disclose with reasonable accuracy the financial position of the business in question at intervals of not more than 6 months, and

(b)enable the directors to ensure that the company's balance sheet and profit and loss account comply with the requirements of this Act as to the form and content of company accounts and otherwise.

(4)Accounting records which a company is required by section 221 to keep shall be preserved by it—

(a)in the case of a private company, for 3 years from the date on which they are made, and

(b)in the case of a public company, for 6 years from that date.

This is subject to any direction with respect to the disposal of records given under winding-up rules under section 663.

223Penalties for non-compliance with ss. 221, 222

(1)If a company fails to comply with any provision of section 221 or 222(1) or (2), every officer of the company who is in default is guilty of an offence unless he shows that he acted honestly and that in the circumstances in which the company's business was carried on the default was excusable.

(2)An officer of a company is guilty of an offence if he fails to take all reasonable steps for securing compliance by the company with section 222(4), or has intentionally caused any default by the company under it

(3)A person guilty of an offence under this section is liable to imprisonment or a fine, or both.

A company's accounting reference periods and financial year

224Accounting reference period and date

(1)A company's accounting reference periods are determined according to its accounting reference date.

(2)A company may give notice in the prescribed form to the registrar of companies specifying a date in the calendar year as being the date on which in each successive calendar year an accounting reference period of the company is to be treated as coming to an end; and the date specified in the notice is then the company's accounting reference date.

(3)However, no such notice has effect unless it is given before the end of 6 months beginning with the date of the company's incorporation ; and, failing such notice, the company's accounting reference date is 31st March.

(4)A company's first accounting reference period is such period ending with its accounting reference date as begins on the date of its incorporation and is a period of more than 6 months and not more than 18 months; and each successive period of 12 months beginning after the end of the first accounting reference period and ending with the accounting reference date is also an accounting reference period of the company.

(5)This section is subject to section 225, under which in certain circumstances a company may alter its accounting reference date and accounting reference periods.

225Alteration of accounting reference period

(1)At any time during a period which is an accounting reference period of a company by virtue of section 224 or 226 the company may give notice in the prescribed form to the registrar of companies specifying a date in the calendar year (" the new accounting reference date ") on which that accounting reference period (" the current accounting reference period ") and each subsequent accounting reference period of the company is to be treated as coming to an end or (as the case may require) as having come to an end.

(2)At any time after the end of a period which was an accounting reference period of a company by virtue of section 224 or 226 the company may give notice in the prescribed form to the registrar of companies specifying a date in the calendar year (" the new accounting reference date") on which that accounting reference period (" the previous accounting reference period ") and each subsequent accounting reference period of the company is to be treated as coming or (as the case may require) as having come to an end.

(3)But a notice under subsection (2)—

(a)has no effect unless the company is a subsidiary or holding company of another company and the new accounting reference date coincides with the accounting reference date of that other company, and

(b)has no effect if the period allowed (under section 242) for laying and delivering accounts in relation to the previous accounting reference period has already expired at the time when the notice is given.

(4)A notice under this section shall state whether the current or previous accounting reference period of the company—

(a)is to be treated as shortened, so as to come to an end or (as the case may require) be treated as having come to an end on the new accounting reference date on the first occasion on which that date falls or fell after the beginning of that accounting reference period, or

(b)is to be treated as extended, so as to come to an end or (as the case may require) be treated as having come to an end on the new accounting reference date on the second occasion on which that date falls or fell after the beginning of that accounting reference period.

(5)A notice which states that the current or previous accounting reference period is to be extended has no effect if the current or previous accounting reference period, as extended in accordance with the notice, would exceed 18 months.

(6)Subject to any direction given by the Secretary of State under the next subsection, a notice which states that the current or previous accounting reference period is to be extended has no effect unless—

(a)no earlier accounting reference period of the company has been extended by virtue of a previous notice given by the company under this section, or

(b)the notice is given not less than 5 years after the date on which any earlier accounting reference period of the company which was so extended came to an end, or

(c)the company is a subsidiary or holding company of another company and the new accounting reference date coincides with the accounting reference date of that other company.

(7)The Secretary of State may, if he thinks fit, direct that subsection (6) shall not apply to a notice already given by a company under this section or (as the case may be) in relation to a notice which may be so given.

226Consequence of giving notice under s. 225

(1)Where a company has given notice with effect in accordance with section 225, and that notice has not been superseded by a subsequent notice by the company which has such effect, the new date specified in the notice is the company's accounting reference date, in substitution for that which, by virtue of section 224 or this section, was its accounting reference date at the time when the notice was given.

(2)Where by virtue of such a notice one date is substituted for another as the accounting reference date of a company—

(a)the current or previous accounting reference period, shortened or extended (as the case may be) in accordance with the notice, and

(b)each successive period of 12 months beginning after the end of that accounting reference period (as so shortened or extended) and ending with the new accounting reference date,

is or (as the case may require) is to be treated as having been an accounting reference period of the company, instead of any period which would be an accounting reference period of the company if the notice had not been given.

(3)Section 225 and this section do not affect any accounting reference period of the company which—

(a)in the case of a notice under section 225(1), is earlier than the current accounting reference period, or

(b)in the case of a notice under section 225(2), is earlier than the previous accounting reference period.

227Directors' duty to prepare annual accounts

(1)In the case of every company, the directors shall in respect of each accounting reference period of the company prepare a profit and loss account for the financial year or, if it is a company not trading for profit, an income and expenditure account.

(2)Where it is the company's first accounting reference period, the financial year begins with the first day of that period and ends with—

(a)the date on which the accounting reference period ends, or

(b)such other date, not more than 7 days before or more than 7 days after the end of that period, as the directors may determine;

and after that the financial year begins with the day after the date to which the last preceding profit and loss account was made up and ends as mentioned in paragraphs (a) and (b) above.

(3)The directors shall prepare a balance sheet as at the last day of the financial year.

(4)In the case of a holding company, the directors shall secure that, except where in their opinion there are good reasons against it, the financial year of each of its subsidiaries coincides with the company's own financial year.

Form and content of company individual and group accounts

228Form and content of individual accounts

(1)A company's accounts prepared under section 227 shall comply with the requirements of Schedule 4 (so far as applicable) with respect to the form and content of the balance sheet and profit and loss account and any additional information to be provided by way of notes to the accounts.

(2)The balance sheet shall give a true and fair view of the state of affairs of the company as at the end of the financial year; and the profit and loss account shall give a true and fair view of the profit or loss of the company for the financial year.

(3)Subsection (2) overrides—

(a)the requirements of Schedule 4, and

(b)all other requirements of this Act as to the matters to be included in a company's accounts or in notes to those accounts;

and accordingly the following two subsections have effect.

(4)If the balance sheet or profit and loss account drawn up in accordance with those requirements would not provide sufficient information to comply with subsection (2), any necessary additional information must be provided in that balance sheet or profit and loss account, or in a note to the accounts.

(5)If, owing to special circumstances in the case of any company, compliance with any such requirement in relation to the balance sheet or profit and loss account would prevent compliance with subsection (2) (even if additional information were provided in accordance with subsection (4)), the directors shall depart from that requirement in preparing the balance sheet or profit and loss account (so far as necessary in order to comply with subsection (2)).

(6)If the directors depart from any such requirement, particulars of the departure, the reasons for it and its effect shall be given in a note to the accounts.

(7)Subsections (1) to (6) do not apply to group accounts prepared under the next section ; and subsections (1) and (2) do not apply to a company's profit and loss account (or require the notes otherwise required in relation to that account) if—

(a)the company has subsidiaries, and

(b)the profit and loss account is framed as a consolidated account dealing with all or any of the company's subsidiaries as well as the company, and—

(i)complies with the requirements of this Act relating to consolidated profit and loss accounts, and

(ii)shows how much of the consolidated profit or loss for the financial year is dealt with in the company's individual accounts.

If group accounts are prepared, and advantage is taken of this subsection, that fact shall be disclosed in a note to the group accounts.

229Group accounts of holding company

(1)If at the end of its financial year a company has subsidiaries, the directors shall, as well as preparing individual accounts for that year, also prepare group accounts, being accounts or statements which deal with the state of affairs and profit or loss of the company and the subsidiaries.

(2)This does not apply if the company is at the end of the financial year the wholly-owned subsidiary of another body corporate incorporated in Great Britain.

(3)Group accounts need not deal with a subsidiary if the company's directors are of opinion that—

(a)it is impracticable, or would be of no real value to the company's members, in view of the insignificant amounts involved, or

(b)it would involve expense or delay out of proportion to the value to members, or

(c)the result would be misleading, or harmful to the business of the company or any of its subsidiaries, or

(d)the business of the holding company and that of the subsidiary are so different that they cannot reasonably be treated as a single undertaking;

and, if the directors are of that opinion about each of the company's subsidiaries, group accounts are not required.

(4)However, the approval of the Secretary of State is required for not dealing in group accounts with a subsidiary on the ground that the result would be harmful or on the ground of difference between the business of the holding company and that of the subsidiary.

(5)A holding company's group accounts shall be consolidated accounts comprising—

(a)a consolidated balance sheet dealing with the state of affairs of the company and all the subsidiaries to be dealt with in group accounts, and

(b)a consolidated profit and loss account dealing with the profit or loss of the company and those subsidiaries.

(6)However, if the directors are of opinion that it is better for the purpose of presenting the same or equivalent information about the state of affairs and profit or loss of the company and those subsidiaries, and of so presenting it that it may be readily appreciated by the company's members, the group accounts may be prepared in other than consolidated form, and in particular may consist—

(a)of more than one set of consolidated accounts dealing respectively with the company and one group of subsidiaries and with other groups of subsidiaries, or

(b)of separate accounts dealing with each of the subsidiaries, or

(c)of statements expanding the information about the subsidiaries in the company's individual accounts,

or of any combination of those forms.

(7)The group accounts may be wholly or partly incorporated in the holding company's individual balance sheet and profit and loss account

230Form and content of group accounts

(1)A holding company's group accounts shall comply with the requirements of Schedule 4 (so far as applicable to group accounts in the form in which those accounts are prepared) with respect to the form and content of those accounts and any additional information to be provided by way of notes to those accounts.

(2)Group accounts (together with any notes to them) shall give a true and fair view of the state of affairs and profit or loss of the company and the subsidiaries dealt with by those accounts as a whole, so far as concerns members of the company.

(3)Subsection (2) overrides—

(a)the requirements of Schedule 4, and

(b)all other requirements of this Act as to the matters to be included in group accounts or in notes to those accounts,

and accordingly the following two subsections have effect.

(4)If group accounts drawn up in accordance with those requirements would not provide sufficient information to comply with subsection (2), any necessary additional information must be provided in, or in a note to, the group accounts.

(5)If, owing to special circumstances in the case of any company, compliance with any such requirement in relation to its group accounts would prevent those accounts from complying with subsection (2) (even if additional information were provided in accordance with subsection (4)), the directors shall depart from that requirement in preparing the group accounts (so far as necessary to comply with subsection (2)).

(6)If the directors depart from any such requirement, particulars of that departure, the reason for it and its effect shall be given in a note to the group accounts.

(7)If the financial year of a subsidiary does not coincide with that of the holding company, the group accounts shall (unless the Secretary of State, on the application or with the consent of the holding company's directors, otherwise directs) deal with the subsidiary's state of affairs as at the end of its relevant financial year, that is—

(a)if its financial year ends with that of the holding company, that financial year, and

(b)if not, the subsidiary's financial year ending last before the end of the financial year of the holding company dealt with in the group accounts,

and with the subsidiary's profit or loss for its relevant financial year.

(8)The Secretary of State may, on the application or with the consent of a company's directors, modify the requirements of Schedule 4 as they have effect in relation to that company by virtue of subsection (1), for the purpose of adapting them to the company's circumstances; and references above in this section to the requirements of Schedule 4 are then to be read in relation to that company as references to those requirements as modified.

231Additional disclosure required in notes to accounts

(1)Schedule 5 has effect with respect to additional matters which must be disclosed in company accounts for a financial year; and in that Schedule, where a thing is required to be stated or shown, or information is required to be given, it means that the thing is to be stated or shown, or the information is to be given, in a note to those accounts.

(2)In Schedule 5—

(a)Parts I and II are concerned, respectively, with the disclosure of particulars of the company's subsidiaries and of its other shareholdings,

(b)Part III is concerned with the disclosure of financial information relating to subsidiaries,

(c)Part IV requires a company which is itself a subsidiary to disclose its ultimate holding company,

(d)Part V is concerned with the emoluments of directors (including emoluments waived), pensions of directors and past directors and compensation for loss of office to directors and past directors, and

(e)Part VI is concerned with disclosure of the number of the company's employees who are remunerated at higher rates.

(3)Whenever it is stated in Schedule 5 that this subsection applies to certain particulars or information, it means that the particulars or information shall be annexed to the annual return first made by the company after copies of its accounts have been laid before it in general meeting; and if a company fails to satisfy an obligation thus imposed, 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.

(4)It is the duty of any director of a company to give notice to the company of such matters relating to himself as may be necessary for purposes of Part V of Schedule 5 ; and this applies to persons who are or have at any time in the preceding 5 years been officers, as it applies to directors.

A person who makes default in complying with this subsection is liable to a fine.

232Loans in favour of directors and connected persons

(1)A holding company's group accounts for a financial year shall comply with Part I of Schedule 6 (so far as applicable) as regards the disclosure of transactions, arrangements and agreements there mentioned (loans, quasi-loans and other dealings in favour of directors).

(2)In the case of a company other than a holding company, its individual accounts shall comply with Part I of Schedule 6 (so far as applicable) as regards disclosure of those matters.

(3)Particulars which are required by Part I of Schedule 6 to be contained in any accounts shall be given by way of notes to the accounts, and are required in respect of shadow directors as well as directors.

(4)Where by virtue of section 229(2) or (3) a company does not prepare group accounts for a financial year, subsection (1) of this section requires disclosure of such matters in its individual accounts as would have been disclosed in group accounts.

(5)The requirements of this section apply with such exceptions as are mentioned in Part I of Schedule 6 (including in particular exceptions for and in respect of recognised banks).

233Loans etc. to company's officers; statement of amounts outstanding

(1)A holding company's group accounts for a financial year shall comply with Part II of Schedule 6 (so far as applicable) as regards transactions, arrangements and agreements made by the company or a subsidiary of it for persons who at any time during that financial year were officers of the company (but not directors).

(2)In the case of a company other than a holding company, its individual accounts shall comply with Part II of Schedule 6 (so far as applicable) as regards those matters.

(3)Subsections (1) and (2) do not apply in relation to any transaction, arrangement or agreement made by a recognised bank for any of its officers or for any of the officers of its holding company.

(4)Particulars required by Part II of Schedule 6 to be contained in any accounts shall be given by way of notes to the accounts.

(5)Where by virtue of section 229(2) or (3) a company does not prepare group accounts for a financial year, subsection (1) of this section requires such matters to be stated in its individual accounts as would have been stated in group accounts.

234Recognised banks: disclosure of dealings with and for directors

(1)The group accounts of a company which is, or is the holding company of, a recognised bank, and the individual accounts of any other company which is a recognised bank, shall comply with Part III of Schedule 6 (so far as applicable) as regards transactions, arrangements and agreements made by the company preparing the accounts (if it is a recognised bank) and, in the case of a holding company, by any of its subsidiaries which is a recognised bank, for persons who at any time during the financial year were directors of the company or connected with a director of it.

(2)Particulars required by Part III of Schedule 6 to be contained in any accounts shall be given by way of notes to those accounts, and are required in respect of shadow directors as well as directors.

(3)Where by virtue of section 229(2) or (3) a company does not prepare group accounts for a financial year, subsection (1) of this section requires such matters to be stated in its individual accounts as would have been stated in group accounts.

Directors' and auditors' reports

235Directors' report

(1)In the case of every company there shall for each financial year be prepared a report by the directors—

(a)containing a fair review of the development of the business of the company and its subsidiaries during the financial year and of their position at the end of it, and

(b)stating the amount (if any) which they recommend should be paid as dividend and the amount (if any) which they propose to carry to reserves.

(2)The directors' report shall state the names of the persons who. at any time during the financial year, were directors of the company, and the principal activities of the company and its subsidiaries in the course of the year and any significant change in those activities in the year.

(3)The report shall also state the matters, and give the particulars, required by Part I of Schedule 7 (changes in asset values, directors' shareholdings and other interests, contributions for political and charitable purposes, etc.).

(4)Part II of Schedule 7 applies as regards the matters to be stated in the directors' report in the circumstances there specified (company acquiring its own shares or a permitted charge on them).

(5)Parts III, IV and V of Schedule 7 apply respectively as regards the matters to be stated in the directors' report relative to the employment, training and advancement of disabled persons ; the health, safety and welfare at work of the company's employees; and the involvement of employees in the affairs, policy and performance of the company.

(6)If the company's individual accounts are accompanied by group accounts which are special category, the directors' report shall, in addition to complying with Schedule 7, also comply with paragraphs 2 to 6 of Schedule 10 (turnover and profitability : size of labour force and wages paid).

(7)In respect of any failure to comply with the requirements of this Act as to the matters to be stated, and the particulars to be given, in the directors' report, every person who was a director of the company immediately before the end of the relevant period (meaning whatever is under section 242 the period for laying and delivering accounts) is guilty of an offence and liable to a fine.

In proceedings for an offence under this subsection, it is a defence for the person to prove that he took all reasonable steps for securing compliance with the requirements in question.

236Auditors' report

(1)A company's auditors shall make a report to its members on the accounts examined by them, and on every balance sheet and profit and loss account, and on all group accounts, copies of which are to be laid before the company in general meeting during the auditors' tenure of office.

(2)The auditors' report shall state—

(a)whether in the auditors' opinion the balance sheet and profit and loss account and (if it is a holding company submitting group accounts) the group accounts have been properly prepared in accordance with this Act; and

(b)without prejudice to the foregoing, whether in their opinion a true and fair view is given—

(i)in the balance sheet, of the state of the company's affairs at the end of the financial year.

(ii)in the profit and loss account (if not framed as a consolidated account), of the company's profit or loss for the financial year, and

(iii)in the case of group accounts, of the state of affairs and profit or loss of the company and its subsidiaries dealt with by those accounts, so far as concerns members of the company.

237Auditors' duties and powers

(1)It is the duty of the company's auditors, in preparing their report, to carry out such investigations as will enable them to form an opinion as to the following matters—

(a)whether proper accounting records have been kept by the company and proper returns adequate for their audit have been received from branches not visited by them,

(b)whether the company's balance sheet and (if not consolidated) its profit and loss account are in agreement with the accounting records and returns.

(2)If the auditors are of opinion that proper accounting records have not been kept, or that proper returns adequate for their audit have not been received from branches not visited by them, or if the balance sheet and (if not consolidated) the profit and loss account are not in agreement with the accounting records and returns, the auditors shall state that fact in their report.

(3)Every auditor of a company has a right of access at all times to the company's books, accounts and vouchers, and is entitled to require from the company's officers such information and explanations as he thinks necessary for the performance of the auditor's duties.

(4)If the auditors fail to obtain all the information and explanations which, to the best of their knowledge and belief, are necessary for the purposes of their audit, they shall state that fact in their report.

(5)If the requirements of Parts V and VI of Schedule 5 and Parts I to III of Schedule 6 are not complied with in the accounts, it is the auditors' duty to include in their report, so far as they are reasonably able to do so, a statement giving the required particulars.

(6)It is the auditors' duty to consider whether the information given in the directors' report for the financial year for which the accounts are prepared is consistent with those accounts; and if they are of opinion that it is not, they shall state that fact in their report.

Procedure on completion of accounts

238Signing of balance sheet; documents to be annexed

(1)A company's balance sheet, and every copy of it which is laid before the company in general meeting or delivered to the registrar of companies, shall be signed on behalf of the board by two of the directors of the company or, if there is only one director, by that one.

(2)If a copy of the balance sheet—

(a)is laid before the company or delivered to the registrar without being signed as required by this section, or

(b)not being a copy so laid or delivered, is issued, circulated or published in a case where the balance sheet has not been signed as so required or where (the balance sheet having been so signed) the copy does not include a copy of the signatures or signature, as the case may be,

the company and every officer of it who is in default is liable to a fine.

(3)A company's profit and loss account and, so far as not incorporated in its individual balance sheet or profit and loss account, any group accounts of a holding company shall be annexed to the balance sheet, and the auditors' report shall be attached to it.

(4)Any accounts so annexed shall be approved by the board of directors before the balance sheet is signed on their behalf.

239Documents to be included in company's accounts

For the purposes of this Part, a company's accounts for a financial year are to be taken as comprising the following documents—

(a)the company's profit and loss account and balance sheet,

(b)the directors' report,

(c)the auditors' report, and

(d)where the company has subsidiaries and section 229 applies, the company's group accounts.

240Persons entitled to receive accounts as of right

(1)In the case of every company, a copy of the company's accounts for the financial year shall, not less than 21 days before the date of the meeting at which they are to be laid in accordance with the next section, be sent to each of the following persons—

(a)every member of the company (whether or not entitled to receive notice of general meetings),

(b)every holder of the company's debentures (whether or not so entitled), and

(c)all persons other than members and debenture holders, being persons so entitled.

(2)In the case of a company not having a share capital, subsection (1) does not require a copy of the accounts to be sent to a member of the company who is not en tided to receive notices of general meetings of the company, or to a holder of the company's debentures who is not so entitled.

(3)Subsection (1) does not require copies of the accounts to be sent—

(a)to a member of the company or a debenture holder, being in either case a person who is not entitled to receive notices of general meetings, and of whose address the company is unaware, or

(b)to more than one of the joint holders of any shares or debentures none of whom are entitled to receive such notices, or

(c)in the case of joint holders of shares or debentures some of whom are, and some not, entitled to receive such notices, to those who are not so entitled.

(4)If copies of the accounts are sent less than 21 days before the date of the meeting, they are, notwithstanding that fact, deemed to have been duly sent if it is so agreed by all the members entitled to attend and vote at the meeting.

(5)If default is made in complying with subsection (1), the company and every officer of it who is in default is liable to a fine.

241Directors' duty to lay and deliver accounts

(1)In respect of each financial year of a company the directors shall lay before the company in general meeting copies of the accounts of the company for that year.

(2)The auditors' report shall be read before the company in general meeting, and be open to the inspection of any member of the company.

(3)In respect of each financial year the directors—

(a)shall deliver to the registrar of companies a copy of the accounts for the year, and

(b)if any document comprised in the accounts is in a language other than English, shall annex to the copy of that document delivered a translation of it into English, certified in the prescribed manner to be a correct translation.

(4)In the case of an unlimited company, the directors are not required by subsection (3) to deliver a copy of the accounts if—

(a)at no time during the accounting reference period has the company been, to its knowledge, the subsidiary of a company that was then limited and at no such time, to its knowledge, have there been held or been exercisable, by or on behalf of two or more companies that were then limited, shares or powers which, if they had been held or been exercisable by one of them, would have made the company its subsidiary, and

(b)at no such time has the company been the holding company of a company which was then limited, and

(c)at no such time has the company been carrying on business as the promoter of a trading stamp scheme within the [1964 c. 71.] Trading Stamps Act 1964.

References here to a company that was limited at a particular time are to a body corporate (under whatever law incorporated) the liability of whose members was at that time limited.

242Period allowed for laying and delivery

(1)The period allowed for laying and delivering a company's accounts for a financial year is as follows in this section, being determined by reference to the end of the relevant accounting reference period (that is, the accounting reference period in respect of which the financial year of the company is ascertained).

(2)Subject to the following subsections, the period allowed is—

(a)for a private company, 10 months after the end of the relevant accounting reference period, and

(b)for a public company, 7 months after the end of that period.

(3)If a company carries on business, or has interests, outside the United Kingdom, the Channel Islands and the Isle of Man and in respect of a financial year the directors (before the end of the period allowed by subsection (2)) give to the registrar of companies notice in the prescribed form—

(a)stating that the company so carries on business or has such interests, and

(b)claiming an extension of the period so allowed by a further 3 months,

the period allowed in relation to that financial year is then so extended.

(4)Where a company's first accounting reference period—

(a)begins on the date of its incorporation, and

(b)is a period of more than 12 months,

the period otherwise allowed for laying and delivering accounts is reduced by the number of days by which the relevant accounting reference period is longer than 12 months.

However, the period allowed is not by this provision reduced to less than 3 months after the end of that accounting reference period.

(5)Where a company's relevant accounting reference period has been shortened under section 226 (in consequence of notice by the company under section 225), the period allowed for laying and delivering accounts is—

(a)the period allowed in accordance with subsections (2) to (4) above, or

(b)the period of 3 months beginning with the date of the notice under section 225,

whichever of those periods last expires.

(6)If for any special reason the Secretary of State thinks fit to do so, he may by notice in writing to a company extend, by such further period as may be specified in the notice, the period otherwise allowed for laying and delivering accounts for any financial year of the company.

243Penalty for non-compliance with s. 241

(1)If for a financial year of a company any of the requirements of section 241(1) or (3) is not complied with before the end of the period allowed for laying and delivering accounts, every person who immediately before the end of that period was a director of the company is, in respect of each of those subsections which is not so complied with, guilty of an offence and liable to a fine and. for continued contravention, to a daily default fine.

(2)If a person is charged with that offence in respect of any of the requirements of section 241(1) or (3), it is a defence for him to prove that he took all reasonable steps for securing that those requirements would be complied with before the end of the period allowed for laying and delivering accounts.

(3)If in respect of the company's financial year any of the requirements of section 241(3) is not complied with before the end of the period allowed for laying and delivering accounts, the company is liable to a penalty, recoverable in civil proceedings by the Secretary of State.

(4)The amount of the penalty is determined by reference to the length of the period between the end of the accounting reference period and the earliest day by which all those requirements have been complied with, and is—

(a)£20 where the period Ls not more than one month,

(b)£50 where the period is more than 1 month but not more than 3 months,

(c)£100 where the period is more than 3 months but not more than 6 months,

(d)£200 where the period is more than 6 months but not more than 12 months, and

(e)£450 where the period is more than 12 months.

(5)In proceedings under this section with respect to a requirement to lay a copy of a document before a company in general meeting, or to deliver a copy of a document to the registrar of companies, it is not a defence to prove that the document in question was not in fact prepared as required by this Part.

(6)Subsections (3) and (4) of this section do not come into force unless and until made to do so by an order of the Secretary of State in a statutory instrument.

244Default order in case of non-compliance

(1)If—

(a)in respect of a company's financial year any of the requirements of section 241(3) has not been complied with before the end of the period allowed for laying and delivering accounts, and

(b)the directors of the company fail to make good the default within 14 days after the service of a notice on them requiring compliance,

the court may, on application by any member or creditor of the company, or by the registrar of companies, make an order directing the directors (or any of them) to make good the default within such time as may be specified in the order.

(2)The court's order may provide that all costs of and incidental to the application shall be borne by the directors.

(3)Nothing in this section prejudices section 243.

245Penalty for laying or delivering defective accounts

(1)If any accounts of a company of which a copy is laid before the company in general meeting or delivered to the registrar of companies do not comply with the requirements of this Act as to the matters to be included in, or in a note to, those accounts, every person who at the time when the copy is so laid or delivered is a director of the company is guilty of an offence and, in respect of each offence, liable to a fine.

This subsection does not apply to a company's group accounts.

(2)If any group accounts of which a copy is laid before a company in general meeting or delivered to the registrar of companies do not comply with section 229(5) to (7) or section 230, and with the other requirements of this Act as to the matters to be included in or in a note to those accounts, every person who at the time when the copy was so laid or delivered was a director of the company is guilty of an offence and liable to a fine.

(3)In proceedings against a person for an offence under this section, it is a defence for him to prove that he took all reasonable steps for securing compliance with the requirements in question.

246Shareholders' right to obtain copies of accounts

(1)Any member of a company, whether or not he is entitled to have sent to him copies of the company's accounts, and any holder of the company's debentures (whether or not so entitled) is entitled to be furnished (on demand and without charge) with a copy of its last accounts.

(2)If, when a person makes a demand for a document with which he is entitled by this section to be furnished, default is made in complying with the demand within 7 days after its making, 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 (unless it is proved that the person has already made a demand for, and been furnished with, a copy of the document).

Modified accounts

247Entitlement to deliver accounts in modified form

(1)In certain cases a company's directors may, in accordance with Part I of Schedule 8, deliver modified accounts in respect of a financial year; and whether they may do so depends on the company qualifying, in particular financial years, as small or medium-sized.

(2)Modified accounts for a financial year may not be delivered in the case of a company which is, or was at any time in that year—

(a)a public company,

(b)a special category company (Chapter II of this Part), or

(c)subject to the next-but-one subsection, a member of a group which is ineligible for this purpose.

(3)" Group " here means a holding company and its subsidiaries together; and a group is ineligible if any of its members is—

(a)a public company or a special category company, or

(b)a body corporate (other than a company) which has power under its constitution to offer its snares or debentures to the public and may lawfully exercise that power, or

(c)a body corporate (other than a company) which is either a recognised bank or licensed institution within the [1979 c. 37.] Banking Act 1979 or an insurance company to which Part II of the [1982 c. 50.] Insurance Companies Act 1982 applies.

(4)Notwithstanding subsection (2)(c), modified accounts for a financial year may be delivered if the company is exempt under section 252 (dormant companies) from the obligation to appoint auditors and either—

(a)was so exempt throughout that year, or

(b)became so exempt by virtue of a special resolution under that section passed during that year.

(5)For purposes of sections 247 to 250 and Schedule 8, " deliver " means deliver to the registrar of companies under this Chapter; and for purposes of subsection (3)(b), " shares " and " debentures " have the same meaning as when used in relation to a company.

248Qualification of company as small or medium-sized

(1)A company qualifies as small in a financial year if for that year two or more of the following conditions are satisfied—

(a)the amount of its turnover for the year is not more than £1.4 million;

(b)its balance sheet total is not more than £700.000;

(c)the average number of persons employed by the company in the year (determined on a weekly basis) does not exceed 50.

(2)A company qualifies as medium-sized in a financial year if for that year two or more of the following conditions are satisfied—

(a)the amount of its turnover for the year is not more than £5.75 million;

(b)its balance sheet total is not more than £2.8 million;

(c)the average number of persons employed by the company in the year (determined on a weekly basis) does not exceed 250.

(3)In subsections (1) and (2), "balance sheet total" means, in relation to a company's financial year—

(a)where in the company's accounts Format I of the balance sheet formats set out in Part I of Schedule 4 is adopted, the aggregate of the amounts shown in the balance sheet under the headings corresponding to items A to D in that Format, and

(b)where Format 2 is adopted, the aggregate of the amounts shown under the general heading " Assets ".

(4)The average number of persons employed as mentioned in subsections (1)(c) and (2)(c) is determined by applying the method of calculation prescribed by paragraph 56(2) and (3) of Schedule 4 for determining the number required by sub-paragraph (1)(a) of that paragraph to be stated in a note to the company's accounts.

(5)In applying subsections (1) and (2) to a period which is a company's financial year but not in fact a year, the maximum figures for turnover in paragraph (a) of each subsection are to be proportionately adjusted.

249Modified individual accounts

(1)This section specifies the cases in which a company's directors may (subject to section 250, where the company has subsidiaries) deliver individual accounts modified as for a small or a medium-sized company; and Part I of Schedule 8 applies with respect to the deliver)' of accounts so modified.

(2)In respect of the company's first financial year the directors may—

(a)deliver accounts modified as for a small company, if in that year it qualifies as small,

(b)deliver accounts modified as for a medium-sized company, if in that year it qualifies as medium-sized.

(3)The next three subsections are concerned only with a company's financial year subsequent to the first.

(4)The directors may in respect of a financial year—

(a)deliver accounts modified as for a small company if in that year the company qualifies as small and it also so qualified in the preceding year,

(b)deliver accounts modified as for a medium-sized company if in that year the company qualifies as medium-sized and it also so qualified in the preceding year.

(5)The directors may in respect of a financial year—

(a)deliver accounts modified as for a small company (al though not qualifying in that year as small), if in the preceding year it so qualified and the directors were entitled to deliver accounts so modified in respect of that year, and

(b)deliver accounts modified as for a medium-sized company (although not qualifying in that year as medium-sized), if in the preceding year it so qualified and the directors were entitled to deliver accounts so modified in respect of that year.

(6)The directors may in respect of a financial year—

(a)deliver accounts modified as for a small company, if in that year the company qualifies as small and the directors were entitled under subsection (5)(a) to deliver accounts so modified for the preceding year (although the company did not in that year qualify as small), and

(b)deliver accounts modified as for a medium-sized company if in that year the company qualifies as medium-sized and the directors were entitled under subsection (5)(b) to deliver accounts so modified for the preceding year (although the company did not in that year qualify as medium-sized).

250Modified accounts of holding company

(1)This section applies to a company (" the holding company ") where in respect of a financial year section 229 requires the preparation of group accounts for the company and its subsidiaries.

(2)The directors of the holding company may not under section 249—

(a)deliver accounts modified as for a small company, un less the group (meaning the holding company and its subsidiaries together) is in that year a small group,

(b)deliver accounts modified as for a medium-sized company, unless in that year the group is medium-sized ;

and the group is small or medium-sized if it would so qualify under section 248 (applying that section as directed by subsections (3) and (4) below), if it were all one company.

(3)The figures to be taken into account in determining whether the group is small or medium-sized (or neither) are the group account figures, that is—

(a)where the group accounts are prepared as consolidated accounts, the figures for turnover, balance sheet total and numbers employed which are shown in those accounts, and

(b)where not, the corresponding figures given in the group accounts, with such adjustment as would have been made if the accounts had been prepared in consolidated form,

aggregated in either case with the relevant figures for the subsidiaries (if any) omitted from the group accounts (excepting those for any subsidiary omitted under section 229(3)(a) on the ground of impracticability).

(4)In the case of each subsidiary omitted from the group accounts, the figures relevant as regards turnover, balance sheet total and numbers employed are those which are included in the accounts of that subsidiary prepared in respect of its relevant financial year (with such adjustment as would have been made if those figures had been included in group accounts prepared in consolidated form).

(5)For the purposes of subsection (4), the relevant financial year of the subsidiary is—

(a)if its financial year ends with that of the holding company to which the group accounts relate, that financial year, and

(b)if not, the subsidiary's financial year ending last before the end of the financial year of the holding company.

(6)If the directors are entitled to deliver modified accounts (whether as for a small or a medium-sized company), they may also deliver modified group accounts; and this means that the group accounts—

(a)if consolidated, may be in accordance with Part II of Schedule 8 (while otherwise comprising or corresponding with group accounts prepared under section 229). and

(b)if not consolidated, may be such as (together with any notes) give the same or equivalent information as required by paragraph (a) above;

and Part III of the Schedule applies to modified group accounts, whether consolidated or not.

251Power of Secretary of State to modify ss. 247-250 and Sch. 8

(1)The Secretary of State may by regulations in a statutory instrument modify the provisions of sections 247(1) to (3), 248 to 250 and Schedule 8 ; and those provisions then apply as modified by regulations for the time being in force.

(2)Regulations under this section reducing the classes of companies which have the benefit of those provisions, or rendering the requirements of those provisions more onerous, shall not be made unless a draft of the instrument containing the regulations has been laid before Parliament and approved by a resolution of each House.

(3)Otherwise, a statutory instrument containing such regulations is subject to annulment in pursuance of a resolution of either House.

Dormant companies

252Company resolution not to appoint auditors

(1)In certain circumstances a company may, with a view to the subsequent laying and delivery of unaudited accounts, pass a special resolution making itself exempt from the obligation to appoint auditors as otherwise required by section 384.

(2)Such a resolution may be passed at a general meeting of the company at which its accounts for a financial year are laid as required by section 241 (if it is not a year for which the directors are required to lay group accounts); but the following conditions must be satisfied—

(a)the directors must be entitled under section 249 to deliver, in respect of that financial year, accounts modified as for a small company (or would be so entitled but for the company being, or having at any time in the financial year been, a member of an ineligible group within section 247 (3)), and

(b)the company must have been dormant since the end of the financial year.

(3)A company may by such a resolution make itself exempt from the obligation to appoint auditors if the resolution is passed at some time before the first general meeting of the company at which accounts are laid as required by section 241, provided that the company has been dormant from the time of its formation until the resolution is passed.

(4)A company may not under subsection (3) pass such a resolution if it is a public company or a special category company.

(5)For purposes of this and the next section, a company is " dormant" during any period in which no transaction occurs which is for the company a significant accounting transaction; and—

(a)this means a transaction which is required by section 221 to be entered in the company's accounting records (disregarding any which arises from the taking of shares in the company by a subscriber to the memorandum in pursuance of an undertaking of his hi the memorandum), and

(b)a company which has been dormant for any period ceases to be so on the occurrence of any such transaction.

(6)A company which has under this section made itself exempt from the obligation to appoint auditors loses that exemption if—

(a)it ceases to be dormant, or

(b)it would no longer qualify (for any other reason) to exclude that obligation by passing a resolution under this section.

(7)Where the exemption is lost, the directors may, at any time before the next meeting of the company at which accounts are to be laid, appoint an auditor or auditors, to hold office until the conclusion of that meeting; and if they fail to exercise that power, the company in general meeting may exercise it

253Laying and delivery of unaudited accounts

(1)The following applies in respect of a company's accounts for a financial year if the company is exempt under section 252 from the obligation to appoint auditors and either—

(a)was so exempt throughout that year, or

(b)became so exempt by virtue of a special resolution passed during that year, and retained the exemption until the end of that year.

(2)A report by the company's auditors need not be included (as otherwise required by preceding provisions of this Chapter) with the accounts laid before the company in general meeting and delivered to the registrar of companies.

(3)If the auditors' report is omitted from the accounts so delivered, then—

(a)the balance sheet shall contain a statement by the directors (in a position immediately above their signatures to the balance sheet) that the company was dormant throughout the financial year, and

(b)if the accounts delivered to the registrar are modified as permitted by sections 247 to 249—

(i)the modified balance sheet need not contain the statement otherwise required by paragraph 9 of Schedule 8, and

(ii)the modified accounts need not include the special report of the auditors otherwise required by paragraph 10 of that Schedule.

Publication of accounts

254Publication of full company accounts

(1)This section applies to the publication by a company of full individual or group accounts, that is to say the accounts required by section 241 to be laid before the company in general meeting and delivered to the registrar of companies (including the directors' report, unless dispensed with under paragraph 3 of Schedule 8).

(2)If a company publishes individual accounts (modified or other) for a financial year, it shall publish with them the relevant auditors' report.

(3)If a company required by section 229 to prepare group accounts for a financial year publishes individual accounts for that year, it shall also publish with them its group accounts (which may be modified accounts, but only if the individual accounts are modified).

(4)If a company publishes group accounts (modified or other), otherwise than together with its individual accounts, it shall publish with them the relevant auditors' report.

(5)References above to the relevant auditors' report are to the auditors' report under section 236 or, in the case of modified accounts (individual or group), the auditors' special report under paragraph 10 of Schedule 8.

(6)A company which contravenes any provision of this section, and any officer of it who is in default, is liable to a fine.

255Publication of abridged accounts

(1)This section applies to the publication by a company of abridged accounts, that is to say any balance sheet or profit and loss account relating to a financial year of the company or purporting to deal with any such financial year, otherwise than as part of full accounts (individual or group) to which section 254 applies.

(2)The reference above to a balance sheet or profit and loss account, in relation to accounts published by a holding company, includes an account in any form purporting to be a balance sheet or profit and loss account for the group consisting of the holding company and its subsidiaries.

(3)If the company publishes abridged accounts, it shall publish with those accounts a statement indicating—

(a)that the accounts are not full accounts,

(b)whether full individual or full group accounts (according as the abridged accounts deal solely with the company's own affairs or with the affairs of the company and any subsidiaries) have been delivered to the registrar of companies or, in the case of an unlimited company exempt under section 241(4) from the requirement to deliver accounts, that the company is so exempt,

(c)whether the company's auditors have made a report under section 236 on the company's accounts for any financial year with which the abridged accounts purport to deal, and

(d)whether any report so made was unqualified (meaning that it was a report, without qualification, to the effect that in the opinion of the person making it the company's accounts had been properly prepared).

(4)Where a company publishes abridged accounts, it shall not publish with those accounts any such report of the auditors as is mentioned in subsection (3)(c).

(5)A company which contravenes any provision of this section, and any officer of it who is in default, is liable to a fine.

Supplementary

256Power of Secretary of State to alter accounting requirements

(1)The Secretary of State may by regulations in a statutory instrument—

(a)add to the classes of documents—

(i)to be comprised in a company's accounts for a financial year to be laid before the company in general meeting as required by section 241, or

(ii)to be delivered to the registrar of companies under that section,

and make provision as to the matters to be included in any document to be added to either class;

(b)modify the requirements of this Act as to the matters to be stated in a document of any such class;

(c)reduce the classes of documents to be delivered to the registrar of companies under section 241.

(2)In particular, the Secretary of State may by such regulations alter or add to the requirements of Schedule 4 and Schedule 9 (special category companies); and any reference in this Act to a provision of it then refers to that provision as it has effect subject to regulations in force under this section.

(3)Where regulations made under subsection (1)(a) add to either class of documents there mentioned documents dealing with the state of affairs and profit or loss of a company and other bodies, the regulations may also—

(a)extend the provisions of this Act relating to group ac counts (or such of those provisions as may be specified) to such documents,

(b)exempt that company from the requirement to prepare group accounts in respect of any period for which it has prepared such a document.

(4)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.

(5)Regulations under subsection (1)(a), or extending the classes of company to which any requirement mentioned in subsection (1)(b) applies or rendering those requirements more onerous, shall not be made unless a draft of the instrument containing them has been laid before Parliament and approved by a resolution of each House.

(6)Otherwise, a statutory instrument containing such regulations is subject to annulment in pursuance of a resolution of either House.

CHAPTER IIAccounts of Banking, Shipping and Insurance Companies

257Special category companies and their accounts

(1)For purposes of this Act, " special category companies" are banking companies, shipping companies and insurance companies; and—

(a)" banking company" means a company which is a recognised bank for the purposes of the [1979 c. 37.] Banking Act 1979 or is a licensed institution within that Act;

(b)" insurance company " means an insurance company to which Part II of the [1982 c. 50.] Insurance Companies Act 1982 applies; and

(c)" shipping company " means a company which, or a subsidiary of which, owns ships or includes among its activities the management or operation of ships and which satisfies the Secretary of State that it ought in the national interest to be treated under this Part of this Act as a shipping company.

(2)Except as otherwise provided below, Chapter I of this Part applies to a special category company and its accounts as it applies to, and to the accounts of, any other company.

(3)The individual accounts of a special category company, and the group accounts of a holding company which is, or has as its subsidiary, a special category company, may be prepared under this Chapter and not under Chapter I, and contain a statement that they are so prepared ; and a reference in this Act to a company's accounts (individual or group) being " special category " is to their being so prepared and containing that statement.

(4)Subject as follows, a reference in any enactment or other document to section 228 or 230 of this Act or to Schedule 4 is, in relation to special category accounts, to be read as a reference to section 258 or 259 or Schedule 9 (as the case may require); but this is subject to any contrary context

258Special category individual accounts

(1)Where a company's individual accounts are special category, section 228 and Schedule 4 do not apply, but—

(a)the balance sheet shall give a true and fair view of the state of affairs of the company as at the end of the financial year, and

(b)the profit and loss account shall give a true and fair view of the company's profit or loss for the financial year.

(2)The balance sheet and profit and loss account shall comply with the requirements of Schedule 9, so far as applicable.

(3)Except as expressly provided by this section or Part III of Schedule 9, the requirements of subsection (2) and that Schedule are without prejudice to the general requirements of subsection (1) or to any other requirements of this Act.

(4)The Secretary of State may, on the application or with the consent of the company's directors, modify in relation to that company any of the requirements of this Chapter as to the matters to be stated in a company's balance sheet or profit and loss account (except the requirements of subsection (1) above), for the purpose of adapting them to the circumstances of the company.

(5)So much of subsections (1) and (2) as relates to the profit and loss account does not apply if—

(a)the company has subsidiaries, and

(b)the profit and loss account is framed as a consolidated account dealing with all or any of the company's subsidiaries as well as the company and—

(i)complies with the requirements of this Act relating to consolidated profit and loss accounts (as those requirements apply in the case of special category companies), and

(ii)shows how much of the consolidated profit or loss for the financial year is dealt with in the company's accounts.

259Special category group accounts

(1)Where a holding company's group accounts are special category, those accounts shall give a true and fair view of the state of affairs and profit or loss of the company and the subsidiaries dealt with by those accounts as a whole, so far as concerns members of the company.

(2)Where the financial year of a subsidiary does not coincide with that of the holding company, the group accounts shall (unless the Secretary of State on the application or with the consent of the holding company's directors otherwise directs) deal with the subsidiary's state of affairs as at the end of its relevant financial year, that is—

(a)if its financial year ends with that of the holding company, that financial year, and

(b)if not, the subsidiary's financial year ending last before the end of the financial year of the holding company dealt with in the group accounts,

and with the subsidiary's profit or loss for its relevant financial year.

(3)Without prejudice to subsection (1), the group accounts, if prepared as consolidated accounts, shall comply with the requirements of Schedule 9 (so far as applicable), and if not so prepared shall give the same or equivalent information.

(4)However, the Secretary of State may, on the application or with the consent of the holding company's directors, modify the requirements of Schedule 9 in relation to that company for the purpose of adapting them to the company's circumstances.

260Notes to special category accounts

(1)In Schedule 5 (matters to be dealt with in notes to accounts)—

(a)paragraph 8 in Part II (disclosure of shareholdings in other bodies corporate, not being subsidiaries), and

(b)Part III (financial information about subsidiaries),

do not apply in the case of special category accounts.

(2)Where an item is given in a note to special category accounts, to comply with Part V or VI of Schedule 5 (directors' emoluments, pensions etc.; emoluments of higher-paid employees), the corresponding amount for the immediately preceding financial year shall be included in the note.

(3)If a person, being a director of a company preparing special category accounts, fails to take all reasonable steps to secure compliance with subsection (2), he is in respect of each offence liable to a fine; but in proceedings against a person for that offence it is a defence to prove that he had reasonable ground to believe, and did believe, that a competent and reliable person was charged with the duty of seeing that subsection (2) was complied with and was in a position to discharge that duty.

261Directors' report

(1)Where a company's individual accounts are special category, the following applies with respect to the directors' report accompanying the accounts.

(2)Paragraphs (a) and (b) of section 235(1) do not apply as regards the contents of the report; but the report shall deal with the company's state of affairs, the amount (if any) which the directors recommend should be paid as dividend, and the amount (if any) which they propose to carry to reserves (within the meaning of Schedule 9).

(3)Information which is otherwise required to be given in the accounts, and allowed to be given in a statement annexed, may be given in the directors' report instead of in the accounts. If any information is so given, the report is treated as forming part of the accounts for the purposes of audit, except that the auditors shall report on it only so far as it gives that information.

(4)Where advantage is taken of subsection (3) to show an item in the directors' report instead of in the accounts, the report shall also show the corresponding amount for (or, as the case may require, as at the end of) the immediately preceding financial year of that item, except where the amount would not have had to be shown had the item been shown in the accounts.

(5)Schedule 7 applies to the directors' report only in respect of the matters to be stated, and the information to be given, under paragraphs 1 to 5 (but excluding paragraph 2(3)) and 9, 10 and 11 ; and paragraph 1 of the Schedule does not apply if the company has the benefit of any provision of Part III of Schedule 9.

(6)The report shall, in addition to complying with those paragraphs of Schedule 7, also comply with Schedule 10. where and so far as applicable (disclosure of recent share and debenture issues; turnover and profitability ; size of labour force and wages paid; and other general matters); but in that Schedule, paragraphs 2 to 4 and 6 do not apply to a directors' report attached to any accounts unless the documents required to be comprised in those accounts include group accounts which are special category.

(7)Section 237(6) does not apply.

262Auditors' report

(1)The following applies where a company is entitled to avail itself, and has availed itself, of the benefit of any of the provisions of Part III of Schedule 9

(2)In that case section 236(2) does not apply ; and the auditors' report shall state whether in their opinion the company's balance sheet and profit and loss account and (if it is a holding company submitting group accounts) the group accounts have been properly prepared in accordance with this Act.

PART VIIIDistribution of Profits and Assets

Limits of company's power of distribution

263Certain distributions prohibited

(1)A company shall not make a distribution except out of profits available for the purpose.

(2)In this Part, " distribution " means every description of distribution of a company's assets to its members, whether in cash or otherwise, except distribution by way of—

(a)an issue of shares as fully or partly paid bonus shares,

(b)the redemption or purchase of any of the company's own shares out of capital (including the proceeds of any fresh issue of shares) or out of unrealised profits in accordance with Chapter VII of Part V,

(c)the reduction of share capital by extinguishing or reducing the liability of any of the members on any of the company's shares in respect of share capital not paid up, or by paying off paid up share capital, and

(d)a distribution of assets to members of the company on its winding up.

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

This is subject to the provision made by sections 265 and 266 for investment and other companies.

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

(5)Where the directors of a company are, after making all reasonable enquiries, unable to determine whether a particular profit made before 22nd December 1980 is realised or unrealised, they may treat the profit as realised; and where after making such enquiries they are unable to determine whether a particular loss so made is realised or unrealised, they may treat the loss as unrealised.

264Restriction on distribution of assets

(1)A public company may only make a distribution at any time—

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

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

This is subject to the provision made by sections 265 and 266 for investment and other companies.

(2)In subsection (1), " net assets " means the aggregate of the company's assets less the aggregate of its liabilities (" liabilities " to include any provision for liabilities or charges within paragraph 89 of Schedule 4).

(3)A company's undistributable reserves are—

(a)the share premium account,

(b)the capital redemption reserve,

(c)the amount by which the company's accumulated, un realised profits, so far as not previously utilised by capitalisation of a description to which this paragraph applies, exceed its accumulated, unrealised losses (so far as not previously written off in a reduction or reorganisation of capital duly made), and

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

and paragraph (c) applies to every description of capitalisation except a transfer of profits of the company to its capital redemption reserve on or after 22nd December 1980.

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

265Other distributions by investment companies

(1)Subject to the following provisions of this section, an investment company (defined in section 266) may also make a distribution at any time out of its accumulated, realised revenue profits, so far as not previously utilised by distribution or capitalisation, less its accumulated revenue losses (whether realised or unrealised), so far as not previously written off in a reduction or reorganisation of capital duly made—

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

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

(2)In subsection (1)(a), "liabilities" includes any provision for liabilities or charges (within the meaning of paragraph 89 of Schedule 4).

(3)The company shall not include any uncalled share capital as an asset in any accounts relevant for purposes of this section.

(4)An investment company may not make a distribution by virtue of subsection (1) unless—

(a)its shares are listed on a recognised stock exchange, and

(b)during the relevant period it has not—

(i)distributed any of its capital profits, or

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

(5)The " relevant period " under subsection (4) is the period beginning with—

(a)the first day of the accounting reference period immediately preceding that in which the proposed distribution is to be made, or

(b)where the distribution is to be made in the company's first accounting reference period, the first day of that period,

and ending with the date of the distribution.

(6)An investment company may not make a distribution by virtue of subsection (1) unless the company gave to the registrar of companies the requisite notice (that is, notice under section 266(1)) of the company's intention to carry on business as an investment company—

(a)before the beginning of the relevant period under subsection (4), or

(b)in the case of a company incorporated on or after 22nd December 1980, as soon as may have been reasonably practicable after the date of its incorporation.

266Meaning of " investment company "

(1)In section 265 "investment company" means a public company which has given notice in the prescribed form (which has not been revoked) to the registrar of companies of its intention to carry on business as an investment company, and has since the date of that notice complied with the requirements specified below.

(2)Those requirements are—

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

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

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

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

(3)Notice to the registrar of companies under subsection (1) may be revoked at any time by the company on giving notice in the prescribed form to the registrar that it no longer wishes to be an investment company within the meaning of this section; and, on giving such notice, the company ceases to be such a company.

(4)Section 359(2) and (3) of the [1970 c. 10.] Income and Corporation Taxes Act 1970 and section 93(6)(b) of the [1972 c. 41.] Finance Act 1972 apply for purposes of subsection (2)(b) as for those of section 359(1)(b) of the Act first mentioned.

267Extension of ss. 265, 266 to other companies

(1)The Secretary of State may by regulations in a statutory instrument extend the provisions of sections 265 and 266 (with or without modifications) to companies whose principal business consists of investing their funds in securities, land or other assets with the aim of spreading investment risk and giving their members the benefit of the results of the management of the assets.

(2)Regulations under this section—

(a)may make different provision for different classes of companies and may contain such transitional and supplemental provisions as the Secretary of State considers necessary, and

(b)shall not be made unless a draft of the statutory instrument containing them has been laid before Parliament and approved by a resolution of each House.

268Realised profits of insurance company with long term business

(1)Where an insurance company to which Part II of the [1982 c. 50.] Insurance Companies Act 1982 applies carries on long term business—

(a)any amount properly transferred to the profit and loss account of the company from a surplus in the fund or funds maintained by it in respect of that business, and

(b)any deficit in that fund or those funds,

are to be (respectively) treated, for purposes of this Part, as a realised profit and a realised loss ; and. subject to this, any profit or loss arising in that business is to be left out of account for those purposes.

(2)In subsection (1)—

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

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

(3)In this section—

(a)" actuarial investigation" means an investigation to which section 18 of the Insurance Companies Act 1982 (periodic actuarial investigation of company with long term business) applies or which is made in pursuance of a requirement imposed by section 42 of that Act (actuarial investigation required by Secretary of State); and

(b)"long term business" has the same meaning as in that Act.

269Treatment of development costs

(1)Subject as follows, where development costs are shown as an asset in a company's accounts, any amount shown in respect of those costs is to be treated—

(a)under section 263, as a realised loss, and

(b)under section 265, as a realised revenue loss.

(2)This does not apply to any part of that amount representing an unrealised profit made on revaluation of those costs ; nor does it apply if—

(a)there are special circumstances in the company's case justifying the directors in deciding that the amount there mentioned is not to be treated as required by subsection (1), and

(b)the note to the accounts required by paragraph 20 of Schedule 4 (reasons for showing development costs as an asset) states that the amount is not to be so treated and explains the circumstances relied upon to justify the decision of the directors to that effect.

Relevant accounts

270Distribution to be justified by reference to company's accounts

(1)This section and sections 271 to 276 below are for determining the question whether a distribution may be made by a company without contravening sections 263, 264 or 265.

(2)The amount of a distribution which may be made is determined by reference to the following items as stated in the company's accounts—

(a)profits, losses, assets and liabilities,

(b)provisions of any of the kinds mentioned in paragraphs 88 and 89 of Schedule 4 (depreciation, diminution in value of assets, retentions to meet liabilities, etc.), and

(c)share capital and reserves (including undistributable reserves).

(3)Except in a case falling within the next subsection, the company's accounts which are relevant for this purpose are its last annual accounts, that is to say those prepared under Part VII which were laid in respect of the last preceding accounting reference period in respect of which accounts so prepared were laid; and for this purpose accounts are laid if section 241 (1) has been complied with in relation to them.

(4)In the following two cases—

(a)where the distribution would be found to contravene the relevant section if reference were made only to the company's last annual accounts, or

(b)where the distribution is proposed to be declared during the company's first accounting reference period, or before any accounts are laid in respect of that period,

the accounts relevant under this section (called " interim accounts" in the first case, and "initial accounts" in the second) are those necessary to enable a reasonable judgment to be made as to the amounts of the items mentioned in subsection (2) above.

(5)The relevant section is treated as contravened in the case of a distribution unless the statutory requirements about the relevant accounts (that is, the requirements of this and the following three sections, as and where applicable) are complied with in relation to that distribution.

271Requirements for last annual accounts

(1)If the company's last annual accounts constitute the only accounts relevant under section 270, the statutory requirements in respect of them are as follows.

(2)The accounts must have been properly prepared in accordance with this Act, or have been so prepared subject only to matters which are not material for determining, by reference to items mentioned in section 270(2), whether the distribution would contravene the relevant section ; and, without prejudice to the foregoing—

(a)so much of the accounts as consists of a balance sheet must give a true and fair view of the state of the company's affairs as at the balance sheet date, and

(b)so much of the accounts as consists of a profit and loss account must give a true and fair view of the company's profit or loss for the period in respect of which the accounts were prepared.

(3)The auditors must have made their report on the accounts under section 236; and the following subsection applies if the report is a qualified report, that is to say, it is not a report without qualification to the effect that in the auditors' opinion the accounts have been properly prepared in accordance with this Act.

(4)The auditors must in that case also have stated in writing (either at the time of their report or subsequently) whether, in their opinion, the matter in respect of which their report is qualified is material for determining, by reference to items mentioned in section 270(2), whether the distribution would contravene the relevant section ; and a copy of the statement must have been laid before the company in general meeting.

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

272Requirements for interim accounts

(1)The following are the statutory requirements in respect of interim accounts prepared for a proposed distribution by a public company.

(2)The accounts must have been properly prepared, or have been so prepared subject only to matters which are not material for determining, by reference to items mentioned in section 270(2), whether the proposed distribution would contravene the relevant section.

(3)" Properly prepared " means that the accounts must comply with section 228 (applying that section and Schedule 4 with such modifications as are necessary because the accounts are prepared otherwise than in respect of an accounting reference period) and any balance sheet comprised in the accounts must have been signed in accordance with section 238 ; and, without prejudice to the foregoing—

(a)so much of the accounts as consists of a balance sheet must give a true and fair view of the state of the company's affairs as at the balance sheet date, and

(b)so much of the accounts as consists of a profit and loss account must give a true and fair view of the company's profit or loss for the period in respect of which the accounts were prepared.

(4)A copy of the accounts must have been delivered to the registrar of companies.

(5)If the accounts are in a language other than English and section 241(3)(b) (translation) does not apply, a translation into English of the accounts, certified in the prescribed manner to be a correct translation, must also have been delivered to the registrar.

273Requirements for initial accounts

(1)The following are the statutory requirements in respect of initial accounts prepared for a proposed distribution by a public company.

(2)The accounts must have been properly prepared, or they must have been so prepared subject only to matters which are not material for determining, by reference to items mentioned in section 270(2), whether the proposed distribution would contravene the relevant section.

(3)Section 272(3) applies as respects the meaning of " properly prepared ".

(4)The company's auditors must have made a report stating whether, in their opinion, the accounts have been properly prepared : and the following subsection applies if their report is a qualified report, that is to say it is not a report without qualification to the effect that in the auditors' opinion the accounts have been so prepared.

(5)The auditors must in that case also have stated in writing whether, in their opinion, the matter in respect of which their report is qualified is material for determining, by reference to items mentioned in section 270(2), whether the distribution would contravene the relevant section.

(6)A copy of the accounts, of the auditors' report under subsection (4) and of the auditors' statement (if any) under subsection (5) must have been delivered to the registrar of companies.

(7)If the accounts are. or the auditors' report under subsection (4) or their statement (if any) under subsection (5) is. in a language other than English and section 241(3)(b) (translation) does not apply, a translation into English of the accounts, the report or the statement (as the case may be), certified in the prescribed manner to be a correct translation, must also have been delivered to the registrar.

274Method of applying s. 270 to successive distributions

(1)For the purpose of determining by reference to particular accounts whether a proposed distribution may be made by a company, section 270 has effect, in a case where one or more distributions have already been made in pursuance of determinations made by reference to those same accounts, as if the amount of the proposed distribution was increased by the amount of the distributions so made.

(2)Subsection (1) of this section applies (if it would not otherwise do so) to—

(a)financial assistance lawfully given by a public company out of its distributable profits in a case where the assistance is required to be so given by section 154.

(b)financial assistance lawfully given by a private company out of its distributable profits in a case where the assistance is required to be so given by section 155(2).

(c)financial assistance given by a company in contravention of section 151. in a case where the giving of that assistance reduces the company's net assets or increases its net liabilities,

(d)a payment made by a company in respect of the purchase by it of shares in the company (except a payment lawfully made otherwise than out of distributable profits), and

(e)a payment of any description specified in section 168 (company's purchase of right to acquire its own shares, etc.),

being financial assistance given or payment made since the relevant accounts were prepared, as if any such financial assistance or payment were a distribution already made in pursuance of a determination made by reference to those accounts.

(3)In this section the following definitions apply—

  • " financial assistance " means the same as in Chapter VI of Part V;

  • "net assets" has the meaning given by section 154(2)(a); and

  • " net liabilities ", in relation to the giving of financial assistance by a company, means the amount by which the aggregate amount of the company's liabilities (within the meaning of section 154(2)(b)) exceeds the aggregate amount of its assets, taking the amount of the assets and liabilities to be as stated in the company's accounting records immediately before the financial assistance is given.

(4)Subsections (2) and (3) of this section are deemed to be included in Chapter VII of Part V for purposes of the Secretary of State's power to make regulations under section 179.

275Treatment of assets in the relevant accounts

(1)For purposes of sections 263 and 264, a provision of any kind mentioned in paragraphs 88 and 89 of Schedule 4, other than one in respect of a diminution in value of a fixed asset appearing on a revaluation of all the fixed assets of the company, or of all of its fixed assets other than goodwill, is treated as a realised loss.

(2)If, on the revaluation of a fixed asset, an unrealised profit is shown to have been made and, on or after the revaluation, a sum is written off or retained for depreciation of that asset over a period, then an amount equal to the amount by which that sum exceeds the sum which would have been so written off or retained for the depreciation of that asset over that period, if that profit had not been made, is treated for purposes of sections 263 and 264 as a realised profit made over that period.

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

(4)Subject to subsection (6), any consideration by the directors of the value at a particular time of a fixed asset is treated as a revaluation of the asset for the purposes of determining whether any such revaluation of the company's fixed assets as is required for purposes of the exception from subsection (1) has taken place at that time.

(5)But where any such assets which have not actually been revalued are treated as revalued for those purposes under subsection (4), that exception applies only if the directors are satisfied that their aggregate value at the time in question is not less than the aggregate amount at which they are for the time being stated in the company's accounts.

(6)Where section 271(2). 272(2) or 273(2) applies to the relevant accounts, subsections (4) and (5) above do not apply for the purpose of determining whether a revaluation of the company's fixed assets affecting the amount of the relevant items (that is. the items mentioned in section 270(2)) as stated in those accounts has taken place, unless it is stated in a note to the accounts—

(a)that the directors have considered the value at any time of any fixed assets of the company, without actually revaluing those assets,

(b)that they are satisfied that the aggregate value of those assets at the time in question is or was not less than the aggregate amount at which they are or were for the time being stated in the company's accounts, and

(c)that the relevant items in question are accordingly stated in the relevant accounts on the basis that a revaluation of the company's fixed assets which by virtue of subsections (4) and (5) included the assets in question took place at that time.

276Distributions in kind

Where a company makes a distribution of or including a non-cash asset, and any part of the amount at which that asset is stated in the accounts relevant for the purposes of the distribution in accordance with sections 270 to 275 represents an unrealised profit, that profit is to be treated as a realised profit—

(a)for the purpose of determining the lawfulness of the distribution in accordance with this Part (whether before or after the distribution takes place), and

(b)for the purpose of the application of paragraphs 12(a) and 34(4)(b) of Schedule 4 (only realised profits to be included in or transferred to the profit and loss account) in relation to anything done with a view to or in connection with the making of that distribution.

Supplementary

277Consequences of unlawful distribution

(1)Where a distribution, or part of one, made by a company to one of its members is made in contravention of this Part and, at the time of the distribution, he knows or has reasonable grounds for believing that it is so made, he is liable to repay it (or that part of it, as the case may be) to the company or (in the case of a distribution made otherwise than in cash) to pay the company a sum equal to the value of the distribution (or part) at that time.

(2)The above is without prejudice to any obligation imposed apart from this section on a member of a company to repay a distribution unlawfully made to him; but this section does not apply in relation to—

(a)financial assistance given by a company in contravention of section 151, or

(b)any payment made by a company in respect of the redemption or purchase by the company of shares in itself.

(3)Subsection (2) of this section is deemed included in Chapter VII of Part V for purposes of the Secretary of State's power to make regulations under section 179.

278Saving for provision in articles operative before Act of 1980

Where immediately before 22nd December 1980 a company was authorised by a provision of its articles to apply its unrealised profits in paying up in full or in part unissued shares to be allotted to members of tie company as fully or partly paid bonus shares, that provision continues (subject to any alteration of the articles) as authority for those profits to be so applied after that date.

279Distributions by special category companies

Where a company's accounts relevant for the purposes of this Part are special category, sections 265 to 275 apply with the modifications shown in Schedule 11.

280Definitions for Part VIII

(1)The following has effect for the interpretation of this Part.

(2)" Capitalisation", in relation to a company's profits, means any of the following operations (whenever carried out)—

(a)applying the profits in wholly or partly paying up un issued shares in the company to be allotted to members of the company as fully or partly paid bonus shares, or

(b)transferring the profits to capital redemption reserve.

(3)References to profits and losses of any description are (respectively) to profits and losses of that description made at any time and, except where the context otherwise requires, are (respectively) to revenue and capital profits and revenue and capital losses.

281Saving for other restraints on distribution

The provisions of this Part are without prejudice to any enactment or rule of law, or any provision of a company's memorandum or articles, restricting the sums out of which, or the cases in which, a distribution may be made.

PART IXA Company's Management ; Directors and Secretaries ; their Qualifications, Duties and Responsibilities

Officers and registered office

282Directors

(1)Every company registered on or after 1st November 1929 (other than a private company) shall have at least two directors.

(2)Every company registered before that date (other than a private company) shall have at least one director.

(3)Every private company shall have at least one director.

283Secretary

(1)Every company shall have a secretary.

(2)A sole director shall not also be secretary.

(3)Anything required or authorised to be done by or to the secretary may, if the office is vacant or there is for any other reason no secretary capable of acting, be done by or to any assistant or deputy secretary or, if there is no assistant or deputy secretary capable of acting, by or to any officer of the company authorised generally or specially in that behalf by the directors.

(4)No company shall—

(a)have as secretary to the company a corporation the sole director of which is a sole director of the company;

(b)have as sole director of the company a corporation the sole director of which is secretary to the company.

284Acts done by person in dual capacity

A provision requiring or authorising a thing to be done by or to a director and the secretary is not satisfied by its being done by or to the same person acting both as director and as, or in place of, the secretary.

285Validity of acts of directors

The acts of a director or manager are valid notwithstanding any defect that may afterwards be discovered in his appointment or qualification; and this provision is not excluded by section 292(2) (void resolution to appoint).

286Qualifications of company secretaries

(1)It is the duty of the directors of a public company to take all reasonable steps to secure that the secretary (or each joint secretary) of the company is a person who appears to them to have the requisite knowledge and experience to discharge the functions of secretary of the company and who—

(a)on 22nd December 1980 held the office of secretary or assistant or deputy secretary of the company; or

(b)for at least 3 of the 5 years immediately preceding his appointment as secretary held the office of secretary of a company other than a private company ; or

(c)is a member of any of the bodies specified in the following subsection; or

(d)is a barrister, advocate or solicitor called or admitted in any part of the United Kingdom ; or

(e)is a person who, by virtue of his holding or having held any other position or his being a member of any other body, appears to the directors to be capable of discharging those functions.

(2)The bodies referred to in subsection (1)(c) are—

(a)the Institute of Chartered Accountants in England and Wales;

(b)the Institute of Chartered Accountants of Scotland ;

(c)the Chartered Association of Certified Accountants;

(d)the Institute of Chartered Accountants in Ireland;

(e)the Institute of Chartered Secretaries and Administrators;

(f)the Institute of Cost and Management Accountants;

(g)the Chartered Institute of Public Finance and Accountancy.

287Registered office

(1)A company shall at all times have a registered office to which all communications and notices may be addressed.

(2)Notice (in the prescribed form) of any change in the situation of a company's registered office shall be given within 14 days of the change to the registrar of companies, who shall record the new situation.

(3)If default is made in complying with subsection (1) or (2), 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.

288Register of directors and secretaries

(1)Every company shall keep at its registered office a register of its directors and secretaries; and the register shall, with respect to the particulars to be contained in it of those persons, comply with sections 289 and 290 below.

(2)The company shall, within the period of 14 days from the occurrence of—

(a)any change among its directors or in its secretary, or

(b)any change in the particulars contained in the register,

send to the registrar of companies a notification in the prescribed form of the change and of the date on which it occurred ; and a notification of a person having become a director or secretary, or one of joint secretaries, of the company shall contain a consent, signed by that person, to act in the relevant capacity.

(3)The register shall during business hours (subject to such reasonable restrictions as the company may by its articles or in general meeting impose, so that not less than 2 hours in each day be allowed for inspection) be open to the inspection of any member of the company without charge and of any other person on payment of 5 pence or such less sum as the company may prescribe, for each inspection.

(4)If an inspection required under this section is refused, or if default is made in complying with subsection (1) or (2), 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.

(5)In the case of a refusal of inspection of the register, the court may by order compel an immediate inspection of it

(6)For purposes of this and the next section, a shadow director of a company is deemed a director and officer of it

289Particulars of directors to be registered under s. 288

(1)Subject to the provisions of this section, the register kept by a company under section 288 shall contain the following particulars with respect to each director—

(a)in the case of an individual—

(i)his present Christian name and surname,

(ii)any former Christian name or surname,

(iii)his usual residential address,

(iv)his nationality,

(v)his business occupation (if any),

(vi)particulars of any other directorships held by him or which have been held by him, and

(vii)in the case of a company subject to section 293 (age-limit), the date of his birth ;

(b)in the case of a corporation, its corporate name and registered or principal office.

(2)In subsection (1)—

(a)" Christian name " includes a forename,

(b)" surname ", in the case of a peer or a person usually known by a tide different from his surname, means that title, and

(c)the reference to a former Christian name or surname does not include—

(i)in the case of a peer or a person usually known by a British title different from his surname, the name by which he was known previous to the adoption of or succession to the tide, or

(ii)in the case of any person, a former Christian name or surname where that name or surname was changed or disused before the person bearing the name attained the age of 18, or has been changed or disused for a period of not less than 20 years, or

(iii)in the case of a married woman, the name or surname by which she was known previous to the marriage.

(3)It is not necessary for the register to contain on any day particulars of a directorship—

(a)which has not been held by a director at any time during the 5 years preceding that day,

(b)which is held by a director in a company which—

(i)is dormant or grouped with the company keeping the register, and

(ii)if he also held that directorship for any period during those 5 years, was for the whole of that period either dormant or so grouped,

(c)which was held by a director for any period during those 5 years in a company which for the whole of that period was either dormant or grouped with the company keeping the register.

(4)For purposes of subsection (3), " company " includes any body corporate incorporated in Great Britain; and—

(a)section 252(5) applies as regards whether and when a company is or has been dormant, and

(b)a company is to be regarded as being, or having been, grouped with another at any time if at that time it is or was a company of which the other is or was a wholly-owned subsidiary, or if it is or was a wholly-owned subsidiary of the other or of another company of which that other is or was a wholly-owned subsidiary.

290Particulars of secretaries to be registered under s. 288

(1)The register to be kept by a company under section 288 shall contain the following particulars with respect to the secretary or, where there are joint secretaries, with respect to each of them—

(a)in the case of an individual, his present Christian name and surname, any former Christian name or surname and his usual residential address, and

(b)in the case of a corporation or a Scottish firm, its corporate or firm name and registered or principal office.

(2)Where all the partners in a firm are joint secretaries, the name and principal office of the firm may be stated instead of the particulars specified above.

(3)Section 289(2) applies as regards the meaning of " Christian name ", " surname " and " former Christian name or surname ".

Provisions governing appointment of directors

291Share qualification of directors

(1)It is the duty of every director who is by the company's articles required to hold a specified share qualification, and who is not already qualified, to obtain his qualification within 2 months after his appointment, or such shorter time as may be fixed by the articles.

(2)For the purpose of any provision of the articles requiring a director or manager to hold any specified share qualification, the bearer of a share warrant is not deemed the holder of the shares specified in the warrant.

(3)The office of director of a company is vacated if the director does not within 2 months from the date of his appointment (or within such shorter time as may be fixed by the articles) obtain his qualification, or if after the expiration of that period or shorter time he ceases at any time to hold his qualification.

(4)A person vacating office under this section is incapable of being reappointed to be a director of the company until he has obtained his qualification.

(5)If after the expiration of that period or shorter time any unqualified person acts as a director of the company, he is liable to a fine and, for continued contravention, to a daily default fine.

292Appointment of directors to be voted on individually

(1)At a general meeting of a public company, a motion for the appointment of two or more persons as directors of the company by a single resolution shall not be made, unless a resolution that it shall be so made has first been agreed to by the meeting without any vote being given against it.

(2)A resolution moved in contravention of this section is void, whether or not its being so moved was objected to at the time; but where a resolution so moved is passed, no provision for the automatic reappointment of retiring directors in default of another appointment applies.

(3)For purposes of this section, a motion for approving a person's appointment, or for nominating a person for appointment, is to be treated as a motion for his appointment.

(4)Nothing in this section applies to a resolution altering the company's articles.

293Age limit for directors

(1)A company is subject to this section if—

(a)it is a public company, or

(b)being a private company, it is a subsidiary of a public company or of a body corporate registered under the law relating to companies for the time being in force in Northern Ireland as a public company.

(2)No person is capable of being appointed a director of a company which is subject to this section if at the time of his appointment he has attained the age of 70.

(3)A director of such a company shall vacate his office at the conclusion of the annual general meeting commencing next after he attains the age of 70; but acts done by a person as director are valid notwithstanding that it is afterwards discovered that his appointment had terminated under this subsection.

(4)Where a person retires under subsection (3), no provision for the automatic reappointment of retiring directors in default of another appointment applies; and if at the meeting at which he retires the vacancy is not filled, it may be filled as a casual vacancy.

(5)Nothing in subsections (2) to (4) prevents the appointment of a director at any age, or requires a director to retire at any time, if his appointment is or was made or approved by the company in general meeting ; but special notice is required of a resolution appointing or approving the appointment of a director for it to have effect under this subsection, and the notice of the resolution given to the company, and by the company to its members, must state, or have stated, the age of the person to whom it relates.

(6)A person reappointed director on retiring under subsection (3), or appointed in place of a director so retiring, is to be treated, for the purpose of determining the time at which he or any other director is to retire, as if he had become director on the day on which the retiring director was last appointed before his retirement.

Subject to this, the retirement of a director out of turn under subsection (3) is to be disregarded in determining when any other directors are to retire.

(7)In the case of a company first registered after the beginning of 1947, this section has effect subject to the provisions of the company's articles; and in the case of a company first registered before the beginning of that year—

(a)this section has effect subject to any alterations of the company's articles made after the beginning of that year; and

(b)if at the beginning of that year the company's articles contained provision for retirement of directors under an age limit, or for preventing or restricting appointments of directors over a given age, this section does not apply to directors to whom that provision applies.

294Duty of director to disclose his age

(1)A person who is appointed or to his knowledge proposed to be appointed director of a company subject to section 293 at a time when he has attained any retiring age applicable to him under that section or under the company's articles shall give notice of his age to the company.

(2)For purposes of this section, a company is deemed subject to section 293 notwithstanding that all or any of the section's provisions are excluded or modified by the company's articles.

(3)Subsection (1) does not apply in relation to a person's reappointment on the termination of a previous appointment as director of the company.

(4)A person who—

(a)fails to give notice of his age as required by this section ; or

(b)acts as director under any appointment which is invalid or has terminated by reason of his age,

is liable to a fine and, for continued contravention, to a daily default fine.

(5)For purposes of subsection (4), a person who has acted as director under an appointment which is invalid or has terminated is deemed to have continued so to act throughout the period from the invalid appointment or the date on which the appointment terminated (as the case may be), until the last day on which he is shown to have acted thereunder.

Disqualification

295Disqualification orders: introductory

(1)In the circumstances specified in sections 296 to 300, a court may make against a person a disqualification order, that is to say an order that he shall not, without leave of the court—

(a)be a director of a company, or

(b)be a liquidator of a company, or

(c)be a receiver or manager of a company's property, or

(d)in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company,

for a specified period beginning with the date of the order.

(2)The maximum period to be so specified is—

(a)in the case of an order made under section 297 or made by a court of summary jurisdiction, 5 years, and

(b)in any other case, 15 years.

(3)In this section and sections 296 to 300, "company" includes any company which may be wound up under Part XXI.

(4)A disqualification order may be made on grounds which are or include matters other than criminal convictions, notwithstanding that the person in respect of whom it is to be made may be criminally liable in respect of those matters.

(5)In sections 296 to 299, any reference to provisions, or to a particular provision, of this Act or the Consequential Provisions Act includes the corresponding provision or provisions of the former Companies Acts.

(6)Parts I and II of Schedule 12 have effect with regard to the procedure for obtaining a disqualification order, and to applications for leave under such an order; and Part III of that Schedule has effect—

(a)in connection with certain transitional cases arising under sections 93 and 94 of the [1981 c. 62.] Companies Act 1981, so as to limit the power to make a disqualification order, or to restrict the duration of an order, by reference to events occurring or things done before those sections came into force, and

(b)to preserve orders made under section 28 of the [1976 c. 69.] Companies Act 1976 (repealed by the Act of 1981).

(7)If a person acts in contravention of a disqualification order, he is in respect of each offence liable to imprisonment or a fine, or both.

296Disqualification on conviction of indictable offence

(1)The court may make a disqualification order against a person where he is convicted of an indictable offence (whether on indictment or summarily) in connection with the promotion, formation, management or liquidation of a company, or with the receivership or management of a company's property.

(2)" The court" for this purpose means—

(a)any court having jurisdiction to wind up the company in relation to which the offence was committed, or

(b)the court by or before which the person is convicted of the offence, or

(c)In the case of a summary conviction in England and Wales, any other magistrates' court acting for the same petty sessions area;

and for purposes of this section the definition of " indictable offence " in Schedule 1 to the [1978 c. 30.] Interpretation Act 1978 applies in relation to Scotland as it does in relation to England and Wales.

297Disqualification for persistent default under Companies Acts

(1)The court may make a disqualification order against a person where it appears to it that he has been persistently in default in relation to provisions of this Act or the Consequential Provisions Act requiring any return, account or other document to be filed with, delivered or sent, or notice of any matter to be given, to the registrar of companies.

(2)On an application to the court for an order to be made under this section, the fact that a person has been persistently in default in relation to such provisions as are mentioned above may (without prejudice to its proof in any other manner) be conclusively proved by showing that in the 5 years ending with the date of the application he has been adjudged guilty (whether or not on the same occasion) of three or more defaults in relation to those provisions.

(3)A person is treated under subsection (2) as being adjudged guilty of a default in relation to any such provision if—

(a)he is convicted (whether on indictment or summarily) of an offence consisting in a contravention of or failure to comply with that provision (whether on his own part or on the part of any company), or

(b)a default order is made against him, that is to say an order under—

(i)section 244 (order requiring delivery of company accounts), or

(ii)section 499 (enforcement of receiver's or manager's duty to make returns), or

(iii)section 636 (corresponding provision for liquidator in winding-up), or

(iv)section 713 (enforcement of company's duty to make returns),

in respect of any such contravention of or failure to comply with that provision (whether on his own part or on the part of any company).

(4)In this section " the court" means any court having jurisdiction to wind up any of the companies in relation to which the offence or other default has been or is alleged to have been committed.

298Disqualification for fraud etc. in winding up

(1)The court may make a disqualification order against a person if, in the course of the winding up of a company, it appears that he—

(a)has been guilty of an offence for which he is liable (whether he has been convicted or not) under section 458 (fraudulent trading), or

(b)has otherwise been guilty, while an officer or liquidator of the company or receiver or manager of its property, of any fraud in relation to the company or of any breach of his duty as such officer, liquidator, receiver or manager.

(2)In this section " the court" means the same as in section 297 ; and " officer " includes a shadow director.

299Disqualification on summary conviction

(1)An offence counting for the purposes of this section is one of which a person is convicted (either on indictment or summarily) in consequence of a contravention of, or failure to comply with, any provision of this Act or the Consequential Provisions Act requiring a return, account or other document to be filed with, delivered or sent, or notice of any matter to be given, to the registrar of companies (whether the contravention or failure is on the person's own part or on the part of any company).

(2)Where a person is convicted of a summary offence counting for those purposes, the court by which he is convicted (or, in England and Wales, any other magistrates' court acting for the same petty sessions area) may make a disqualification order against him if the circumstances specified in the next subsection are present

(3)Those circumstances are that during the 5 years ending with the date of the conviction, the person has had made against him, or has been convicted of, in total not less than 3 default orders and offences counting for the purposes of this section; and those offences may include that of which he is convicted as mentioned in subsection (2) and any other offence of which he is convicted on the same occasion.

(4)For the purposes of this section—

(a)the definition of " summary offence" in Schedule 1 to the [1978 c. 30.] Interpretation Act 1978 applies for Scotland as for England and Wales, and

(b)" default order" means the same as in section 297(3)(b).

300Disqualification by reference to association with insolvent companies

(1)The court may make a disqualification order against a person where, on an application under this section, it appears to it that he—

(a)is or has been a director of a company which has at any time gone into liquidation (whether while he was a director or subsequently) and was insolvent at that time, and

(b)is or has been a director of another such company which has gone into liquidation within 5 years of the date on which the first-mentioned company went into liquidation,

and that his conduct as director of any of those companies makes him unfit to be concerned in the management of a company.

(2)In the case of a person who is or has been a director of a company which has gone into liquidation as above-mentioned and is being wound up by the court, " the court" in subsection (1) means the court by which the company is being wound up; and in any other case it means the High Court or, in Scotland, the Court of Session.

(3)The Secretary of State may require the liquidator or former liquidator of a company—

(a)to furnish him with such information with respect to the company's affairs, and

(b)to produce and permit inspection of such books or documents of or relevant to the company,

as the Secretary of State may reasonably require for the purpose of determining whether to make an application under this section in respect of a person who is or has been a director of that company; and if a person makes default in complying with such a requirement, the court may, on the Secretary of State's application, make an order requiring that person to make good the default within such time as may be specified.

(4)For purposes of this section, a shadow director of a company is deemed a director of it; and a company goes into liquidation—

(a)if it is wound up by the court, on the date of the winding up order, and

(b)in any other case, on the date of the passing of the resolution for voluntary winding up.

301Register of disqualification orders

(1)The Secretary of State may make regulations requiring officers of courts to furnish him with such particulars as the regulations may specify of cases in which—

(a)a disqualification order is made under any of sections 296 to 300, or

(b)any action is taken by a court in consequence of which such an order is varied or ceases to be in force, or

(c)leave is granted by a court for a person subject to such an order to do any thing which otherwise the order prohibits him from doing ;

and the regulations may specify the time within which, and the form and manner in which, such particulars are to be furnished.

(2)The Secretary of State shall, from the particulars so furnished, continue to maintain the register of orders, and of cases in which leave has been granted as mentioned in subsection (1)(c), which was set up by him under section 29 of the [1976 c. 69.] Companies Act 1976.

(3)When an order of which entry is made in the register ceases to be in force, the Secretary of State shall delete the entry from the register and all particulars relating to it which have been furnished to him under this section.

(4)The register shall be open to inspection on payment of such fee as may be specified by the Secretary of State in regulations.

(5)Regulations under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

302Provision against undischarged bankrupt acting as director etc.

(1)If any person being an undischarged bankrupt acts as director or liquidator of, or directly or indirectly takes part in or is concerned in the promotion, formation or management of, a company except with the leave of the court, he is liable to imprisonment or a fine, or both.

(2)" The court" for this purpose is the court by which the person was adjudged bankrupt or, in Scotland, sequestration of his estates was awarded.

(3)In England and Wales, the leave of the court shall not be given unless notice of intention to apply for it has been served on the official receiver in bankruptcy; and it is the latter's duty, if he is of opinion that it is contrary to the public interest that the application should be granted, to attend on the hearing of the application and oppose it

(4)In this section " company " includes an unregistered company and a company incorporated outside Great Britain which has an established place of business in Great Britain.

Removal of directors

303Resolution to remove director

(1)A company may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its articles or in any agreement between it and him.

(2)Special notice is required of a resolution to remove a director under this section or to appoint somebody instead of a director so removed at the meeting at which he is removed.

(3)A vacancy created by the removal of a director under this section, if not filled at the meeting at which he is removed, may be filled as a casual vacancy.

(4)A person appointed director in place of a person removed under this section is treated, for the purpose of determining the time at which he or any other director is to retire, as if he had become director on the day on which the person in whose place he is appointed was last appointed a director.

(5)This section is not to be taken as depriving a person removed under it of compensation or damages payable to him in respect of the termination of his appointment as director or of any appointment terminating with that as director, or as derogating from any power to remove a director which may exist apart from this section.

304Director's right to protest removal

(1)On receipt of notice of an intended resolution to remove a director under section 303, the company shall forthwith send a copy of the notice to the director concerned; and he (whether or not a member of the company) is entitled to be heard on the resolution at the meeting.

(2)Where notice is given of an intended resolution to remove a director under that section, and the director concerned makes with respect to it representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so—

(a)in any notice of the resolution given to members of the company state the fact of the representations having been made; and

(b)send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company).

(3)If a copy of the representations is not sent as required by subsection (2) because received too late or because of the company's default, the director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting.

(4)But copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the court is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter.

(5)The court may order the company's costs on an application under this section to be paid in whole or in part by the director, notwithstanding that he is not a party to the application.

Other provisions about directors and officers

305Directors' names on company correspondence, etc.

(1)A company to which this section applies shall not state, in any form, the name of any of its directors (otherwise than in the text or as a signatory) on any business letter on which the company's name appears unless it states on the letter in legible characters the Christian name (or its initials) and surname of every director of the company who is an individual and the corporate name of every corporate director.

(2)This section applies to—

(a)every company registered under this Act or under the former Companies Acts (except a company registered before 23rd November 1916); and

(b)every company incorporated outside Great Britain which has an established place of business within Great Britain, unless it had established such a place of business before that date.

(3)If a company makes default in complying with this section, every officer of the company who is in default is liable for each offence to a fine; and for this purpose, where a corporation is an officer of the company, any officer of the corporation is deemed an officer of the company.

(4)For purposes of this section—

(a)" director " includes shadow director, and " officer " is to be construed accordingly ;

(b)" Christian name " includes a forename;

(c)" initials " includes a recognised abbreviation of a Christian name; and

(d)in the case of a peer or a person usually known by a title different from his surname, " surname" means that tide.

306Limited company may have directors with unlimited liability

(1)In the case of a limited company the liability of the directors or managers, or of the managing director, may, if so provided by the memorandum, be unlimited.

(2)In the case of a limited company in which the liability of a director or manager is unlimited, the directors and any managers of the company and the member who proposes any person for election or appointment to the office of director or manager, shall add to that proposal a statement that the liability of the person holding that office will be unlimited.

(3)Before the person accepts the office or acts in it, notice in writing that his liability will be unlimited shall be given to him by the following or one of the following persons, namely—

(a)the promoters of the company,

(b)the directors of the company,

(c)any managers of the company,

(d)the company secretary.

(4)If a director, manager or proposer makes default in adding such a statement, or if a promoter, director, manager or secretary makes default in giving the notice required by subsection (3), then—

(a)he is liable to a fine, and

(b)he is also liable for any damage which the person so elected or appointed may sustain from the default;

but the liability of the person elected or appointed is not affected by the default.

307Special resolution making liability of directors unlimited

(1)A limited company, if so authorised by its articles, may by special resolution alter its memorandum so as to render unlimited the liability of its directors or managers, or of any managing director.

(2)When such a special resolution is passed, its provisions are as valid as if they had been originally contained in the memorandum.

308Assignment of office by directors

If provision is made by a company's articles, or by any agreement entered into between any person and the company, for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of that provision is (notwithstanding anything to the contrary contained in the provision) of no effect unless and until it is approved by a special resolution of the company.

309Directors to have regard to interests of employees

(1)The matters to which the directors of a company are to have regard in the performance of their functions include the interests of the company's employees in general, as well as the interests of its members.

(2)Accordingly, the duty imposed by this section on the directors is owed by them to the company (and the company alone) and is enforceable in the same way as any other fiduciary duty owed to a company by its directors.

(3)This section applies to shadow directors as it does to directors.

310Provisions exempting officers and auditors from liability

(1)This section applies to any provision, whether contained in a company's articles or in any contract with the company or otherwise, for exempting any officer of the company or any person (whether an officer or not) employed by the company as auditor from, or indemnifying him against, any liability which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company.

(2)Except as provided by the following subsection, any such provision is void.

(3)A company may, in pursuance of such a provision, indemnify any such officer or auditor against any liability incurred by him in defending any proceedings (whether civil or criminal) in which judgment is given in his favour or he is acquitted, or in connection with any application under section 144(3) or (4) (acquisition of shares by innocent nominee) or section 727 (director in default, but not dishonest or unreasonable), in which relief is granted to him by the court.

PART XEnforcement of Fair Dealing by Directors

Restrictions on directors taking financial advantage

311Prohibition on tax-free payments to directors

(1)It is not lawful for a company to pay a director remuneration (whether as director or otherwise) free of income tax, or otherwise calculated by reference to or varying with the amount of his income tax, or to or with any rate of income tax.

(2)Any provision contained in a company's articles, or in any contract, or in any resolution of a company or a company's directors, for payment to a director of remuneration as above mentioned has effect as if it provided for payment, as a gross sum subject to income tax, of the net sum for which it actually provides.

312Payment to director for loss of office, etc.

It is not lawful for a company to make to a director of the company any payment by way of compensation for loss of office, or as consideration for or in connection with his retirement from office, without particulars of the proposed payment (including its amount) being disclosed to members of tile company and the proposal being approved by the company.

313Company approval for property transfer

(1)It is not lawful, in connection with the transfer of the whole or any part of the undertaking or property of a company, for any payment to be made to a director of the company by way of compensation for loss of office, or as consideration for or in connection with his retirement from office, unless particulars of the proposed payment (including its amount) have been disclosed to members of the company and the proposal approved by the company.

(2)Where a payment unlawful under this section is made to a director, the amount received is deemed to be received by him in trust for the company.

314Director's duty of disclosure on takeover, etc.

(1)This section applies where, in connection with the transfer to any persons of all or any of the shares in a company, being a transfer resulting from—

(a)an offer made to the general body of shareholders; or

(b)an offer made by or on behalf of some other body corporate with a view to the company becoming its subsidiary or a subsidiary of its holding company; or

(c)an offer made by or on behalf of an individual with a view to his obtaining the right to exercise or control the exercise of not less than one-third of the voting power at any general meeting of the company; or

(d)any other offer which is conditional on acceptance to a given extent,

a payment is to be made to a director of the company by way of compensation for loss of office, or as consideration for or in connection with his retirement from office.

(2)It is in those circumstances the director's duty to take all reasonable steps to secure that particulars of the proposed payment (including its amount) are included in or sent with any notice of the offer made for their shares which is given to any shareholders.

(3)If—

(a)the director fails to take those steps, or

(b)any person who has been properly required by the director to include those particulars in or send them with the notice required by subsection (2) fails to do so,

he is liable to a fine.

315Consequences of non-compliance with s. 314

(1)If in the case of any such payment to a director as is mentioned in section 314(1)—

(a)his duty under that section is not complied with, or

(b)the making of the proposed payment is not, before the transfer of any shares in pursuance of the offer, approved by a meeting (summoned for the purpose) of the holders of the shares to which the offer relates and of other holders of shares of the same class as any of those shares,

any sum received by the director on account of the payment is deemed to have been received by him in trust for persons who have sold their shares as a result of the offer made; and the expenses incurred by him in distributing that sum amongst those persons shall be borne by him and not retained out of that sum.

(2)Where—

(a)the shareholders referred to in subsection (1)(b) are not all the members of the company, and

(b)no provision is made by the articles for summoning or regulating the meeting referred to in that paragraph,

the provisions of this Act and of the company's articles relating to general meetings of the company apply (for that purpose) to the meeting either without modification or with such modifications as the Secretary of State on the application of any person concerned may direct for the purpose of adapting them to the circumstances of the meeting.

(3)If at a meeting summoned for the purpose of approving any payment as required by subsection (1)(b) a quorum is not present and, after the meeting has been adjourned to a later date, a quorum is again not present, the payment is deemed for the purposes of that subsection to have been approved.

316Provisions supplementing ss. 312-315

(1)Where in proceedings for the recovery of any payment as having, by virtue of section 313(2) or 315(1), been received by any person in trust, it is shown that—

(a)the payment was made in pursuance of any arrangement entered into as part of the agreement for the transfer in question, or within one year before or two years after that agreement or the offer leading to it; and

(b)the company or any person to whom the transfer was made was privy to that arrangement,

the payment is deemed, except in so far as the contrary is shown, to be one to which the provisions mentioned above in this subsection apply.

(2)If in connection with any such transfer as is mentioned in any of sections 313 to 315—

(a)the price to be paid to a director of the company whose office is to be abolished or who is to retire from office for any shares in the company held by him is in excess of the price which could at the time have been obtained by other holders of the like shares; or

(b)any valuable consideration is given to any such director,

the excess or the money value of the consideration (as the case may be) is deemed for the purposes of that section to have been a payment made to him by way of compensation for loss of office or as consideration for or in connection with his retirement from office.

(3)References in sections 312 to 315 to payments made to a director by way of compensation for loss of office or as consideration for or in connection with his retirement from office, do not include any bona fide payment by way of damages for breach of contract or by way of pension in respect of past services.

" Pension" here includes any superannuation allowance, superannuation gratuity or similar payment.

(4)Nothing in sections 313 to 315 prejudices the operation of any rule of law requiring disclosure to be made with respect to such payments as are there mentioned, or with respect to any other like payments made or to be made to a company's directors.

317Directors to disclose interest in contracts

(1)It is the duty of a director of a company who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company to declare the nature of his interest at a meeting of the directors of the company.

(2)In the case of a proposed contract, the declaration shall be made—

(a)at the meeting of the directors at which the question of entering into the contract is first taken into consideration ; or

(b)if the director was not at the date of that meeting interested in the proposed contract, at the next meeting of the directors held after he became so interested ;

and, in a case where the director becomes interested in a contract after it is made, the declaration shall be made at the first meeting of the directors held after he becomes so interested.

(3)For purposes of this section, a general notice given to the directors of a company by a director to the effect that—

(a)he is a member of a specified company or firm and is to be regarded as interested in any contract which may, after the date of the notice, be made with that company or firm; or

(b)he is to be regarded as interested in any contract which may after the date of the notice be made with a specified person who is connected with him (within the meaning of section 346 below),

is deemed a sufficient declaration of interest in relation to any such contract.

(4)However, no such notice is of effect unless either it is given at a meeting of the directors or the director takes reasonable steps to secure that it is brought up and read at the next meeting of the directors after it is given.

(5)A reference in this section to a contract includes any transaction or arrangement (whether or not constituting a contract) made or entered into on or after 22nd December 1980.

(6)For purposes of this section, a transaction or arrangement of a kind described in section 330 (prohibition of loans, quasi-loans etc. to directors) made by a company for a director of the company or a person connected with such a director is treated (if it would not otherwise be so treated, and whether or not it is prohibited by that section) as a transaction or arrangement in which that director is interested.

(7)A director who fails to comply with this section is liable to a fine.

(8)This section applies to a shadow director as it applies to a director, except that a shadow director shall declare his interest, not at a meeting of the directors, but by a notice in writing to the directors which is either—

(a)a specific notice given before the date of the meeting at which, if he had been a director, the declaration would be required by subsection (2) to be made ; or

(b)a notice which under subsection (3) falls to be treated as a sufficient declaration of that interest (or would fall to be so treated apart from subsection (4)).

(9)Nothing in this section prejudices the operation of any rule of law restricting directors of a company from having an interest in contracts with the company.

318Directors' service contracts to be open to inspection

(1)Subject to the following provisions, every company shall keep at an appropriate place—

(a)in the case of each director whose contract of service with the company is in writing, a copy of that contract ;

(b)in the case of each director whose contract of service with the company is not in writing, a written memorandum setting out its terms; and

(c)in the case of each director who is employed under a contract of service with a subsidiary of the company, a copy of that contract or, if it is not in writing, a written memorandum setting out its terms.

(2)All copies and memoranda kept by a company in pursuance of subsection (1) shall be kept at the same place.

(3)The following are appropriate places for the purposes of subsection (1)—

(a)the company's registered office;

(b)the place where its register of members is kept (if other than its registered office);

(c)its principal place of business, provided that is situated in that part of Great Britain in which the company is registered.

(4)Every company shall send notice in the prescribed form to the registrar of companies of the place where copies and memoranda are kept in compliance with subsection (1), and of any change in that place, save in a case in which they have at all times been kept at the company's registered office.

(5)Subsection (1) does not apply to a director's contract of service with the company or with a subsidiary of it if that contract required him to work wholly or mainly outside the United Kingdom; but the company shall keep a memorandum—

(a)in the case of a contract of service with the company, giving the director's name and setting out the provisions of the contract relating to its duration ;

(b)in the case of a contract of service with a subsidiary, giving the director's name and the name and place of incorporation of the subsidiary, and setting out the provisions of the contract relating to its duration,

at the same place as copies and memoranda are kept by the company in pursuance of subsection (1).

(6)A shadow director is treated for purposes of this section as a director.

(7)Every copy and memorandum required by subsection (1) or (5) to be kept shall, during business hours (subject to such reasonable restrictions as the company may in general meeting impose, so that not less than 2 hours in each day be allowed for inspection), be open to inspection of any member of the company without charge.

(8)If—

(a)default is made in complying with subsection (1) or (5), or

(b)an inspection required under subsection (7) is refused, or

(c)default is made for 14 days in complying with subsection (4),

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.

(9)In the case of a refusal of an inspection required under subsection (7) of a copy or memorandum, the court may by order compel an immediate inspection of it.

(10)Subsections (1) and (5) apply to a variation of a director's contract of service as they apply to the contract.

(11)This section does not require that there be kept a copy of, or memorandum setting out the terms of, a contract (or its variation) at a time when the unexpired portion of the term for which the contract is to be in force is less than 12 months, or at a time at which the contract can, within the next ensuing 12 months, be terminated by the company without payment of compensation.

319Director's contract of employment for more than 5 years

(1)This section applies in respect of any term of an agreement whereby a director's employment with the company of which he is a director or, where he is the director of a holding company, his employment within the group is to continue, or may be continued, otherwise than at the instance of the company (whether under the original agreement or under a new agreement entered into in pursuance of it), for a period of more than 5 years during which the employment—