Part V Share Capital, its Increase, Maintenance and Reduction
Chapter I General Provisions about Share Capital
117 Public company share capital requirements.
F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
118 The authorised minimum.
F2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
119 Provision for different amounts to be paid on shares.
F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120 Reserve liability of limited company.
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121 Alteration of share capital (limited companies).
F5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
122 Notice to registrar of alteration.
F6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
123 Notice to registrar of increased share capital.
F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
124 Reserve capital of unlimited company.
F8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter II Class Rights
125 Variation of class rights.
1
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
F10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
126 Saving for court’s powers under other provisions.
F11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127 Shareholders’ right to object to variation.
F12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
128Registration of particulars of special rights.
F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
129 Registration of newly created class rights.
F14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F15F15Chapter III Share Premiums
C1130 Application 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 is writing off—
a
the company’s preliminary expenses; or
b
the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company,
or in providing for the premium payable on redemption of debentures of the company.
3
Subject to this, the provisions of this Act relating to the reduction of a company’s share capital apply as if the share premium account were part of its paid up share capital.
4
Sections 131 and 132 below give relief from the requirements of this section, and in those sections references to the issuing company are to the company issuing shares as above mentioned.
131 Merger relief.
1
With the exception made by F36section 132(8) (group reconstruction) this section applies where the issuing company has secured at least a 90 per cent. equity holding in another company in pursuance of an arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be provided—
a
by the issue or transfer to the issuing company of equity shares in the other company, or
b
by the cancellation of any such shares not held by the issuing company.
2
If the equity shares in the issuing company allotted in pursuance of the arrangement in consideration for the acquisition or cancellation of equity shares in the other company are issued at a premium, section 130 does not apply to the premiums on those shares.
3
Where the arrangement also provides for the allotment of any shares in the issuing company on terms that the consideration for those shares is to be provided by the issue or transfer to the issuing company of non-equity shares in the other company or by the cancellation of any such shares in that company not held by the issuing company, relief under subsection (2) extends to any shares in the issuing company allotted on those terms in pursuance of the arrangement.
4
Subject to the next subsection, the issuing company is to be regarded for purposes of this section as having secured at least a 90 per cent. equity holding in another company in pursuance of such an arrangement as is mentioned in subsection (1) if in consequence of an acquisition or cancellation of equity shares in that company (in pursuance of that arrangement) it holds equity shares in that company (whether all or any of those shares were acquired in pursuance of that arrangement, or not) of an aggregate nominal value equal to 90 per cent. or more of the nominal value of that company’s equity share capital F38(excluding any shares in that company held as treasury shares).
5
Where the equity share capital of the other company is divided into different classes of shares, this section does not apply unless the requirements of subsection (1) are satisfied in relation to each of those classes of shares taken separately.
6
Shares held by a company which is the issuing company’s holding company or subsidiary, or a subsidiary of the issuing company’s holding company, or by its or their nominees, are to be regarded for purposes of this section as held by the issuing company.
7
In relation to a company and its shares and capital, the following definitions apply for purposes of this section—
a
“equity shares” means shares comprised in the company’s equity share capital; and
b
“non-equity shares” means shares (of any class) not so comprised;
and “arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned under F39section 899 of the Companies Act 2006 (court sanction for compromise or arrangement with creditors or members) or F37section 110 of the Insolvency Act (liquidator accepting shares etc. as consideration for sale of company property)).
8
The relief allowed by this section does not apply if the issue of shares took place before 4th February 1981.
132 Relief 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 M1Companies (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 M2Companies 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.
133 Provisions 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 section 131 or 132 of this Act, or section 12 of the Consequential Provisions Act, is not included in the company’s share premium account may also be disregarded in determining the amount at which any shares or other consideration provided for the shares issued is to be included in the company’s balance sheet.
C22
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.
C23
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.
134 Provision for extending or restricting relief from s. 130. C3
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.
F16F16Chapter IV Reduction of Share Capital
Ss. 126-182 repealed (1.10.2009) by Companies Act 2006 (c. 46), ss. 1295, 1300, Sch. 16; S.I. 2008/2860, art. 4, Sch. 1 (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))
135 Special 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”.
136 Application 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 F40—
a
at the date fixed by the court is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the companyF41, and
b
can show that there is a real likelihood that the reduction would result in the company being unable to discharge his debt or claim when it fell due,
is entitled to object to the reduction of capital.
4
The court shall settle a list of creditors entitled to object, and for that purpose—
a
shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims; and
b
may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction of capital.
5
If a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction, the court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating (as the court may direct) the following amount—
a
if the company admits the full amount of the debt or claim or, though not admitting it, is willing to provide for it, then the full amount of the debt or claim;
b
if the company does not admit, and is not willing to provide for, the full amount of the debt or claim, or if the amount is contingent or not ascertained, then an amount fixed by the court after the like enquiry and adjudication as if the company were being wound up by the court.
6
If a proposed reduction of share capital involves either the diminution of any liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, the court may, if having regard to any special circumstances of the case it thinks proper to do so, direct that subsections (3) to (5) of this section shall not apply as regards any class or any classes of creditors.
137 Court 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.
138 Registration 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 either signed by the registrar, or authenticated by his official seal;
b
is conclusive evidence that all the requirements of this Act with respect to the reduction of share capital have been complied with, and that the company’s share capital is as stated in the minute.
5
The minute when registered is deemed to be substituted for the corresponding part of the company’s memorandum, and is valid and alterable as if it had been originally contained therein.
6
The substitution of such a minute for part of the company’s memorandum is deemed an alteration of the memorandum for purposes of section 20.
139 Public 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.
140 Liability 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 F42section 123 of the Insolvency Act) to pay the amount of his debt or claim.
3
Every person who was a member of the company at the date of the registration of the order for reduction and minute is then liable to contribute for the payment of the debt or claim in question an amount not exceeding that which he would have been liable to contribute if the company had commenced to be wound up on the day before that date.
4
If the company is wound up, the court, on the application of the creditor in question and proof of ignorance referred to in subsection (2)(a), may (if it thinks fit) settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up.
5
Nothing in this section affects the rights of the contributories among themselves.
141 Penalty 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.
F17F17Chapter V Maintenance of Capital
Ss. 126-182 repealed (1.10.2009) by Companies Act 2006 (c. 46), ss. 1295, 1300, Sch. 16; S.I. 2008/2860, art. 4, Sch. 1 (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))
142 Duty 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.
143 General 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 F43, subject to subsection (2A), the purported acquisition is void.
F442A
Where a company purchases qualifying shares out of distributable profits under section 162, any contravention by the company of any provision of section 162B(1) or (2) shall not render the acquisition void under subsection (2) above.
3
A company limited by shares may acquire any of its own fully paid shares otherwise than for valuable consideration; and subsection (1) does not apply in relation to—
a
the redemption or purchase of shares in accordance with Chapter VII of this Part,
b
the acquisition of shares in a reduction of capital duly made,
c
the purchase of shares in pursuance of an order of the court under section 5 (alteration of objects), section 54 (litigated objection to resolution for company to be re-registered as private) or F45section 996 of the Companies Act 2006 (relief to members unfairly prejudiced), or
d
the forfeiture of shares, or the acceptance of shares surrendered in lieu, in pursuance of the articles, for failure to pay any sum payable in respect of the shares.
144 Aquisition of shares by company’s nominee.
C41
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.
145 Exceptions 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.
146 Treatment of shares held by or for public company. C5
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;
F46aa
where shares in the company are surrendered to the company in pursuance of section 102C(1)(b) of the Building Societies Act 1986;
b
where shares in the company are acquired by it (otherwise than by any of the methods mentioned in section 143(3)(a) to (d)) and the company has a beneficial interest in the shares;
c
where the nominee of the company acquires shares in the company from a third person without financial assistance being given directly or indirectly by the company and the company has a beneficial interest in the shares; or
d
where a person acquires shares in the company with financial assistance given to him directly or indirectly by the company for the purpose of or in connection with the acquisition, and the company has a beneficial interest in the shares.
Schedule 2 to this Act has effect for the interpretation of references in this subsection to the company having a beneficial interest in shares.
2
Unless the shares or any interest of the company in them are previously disposed of, the company must, not later than the end of the relevant period from their forfeiture or surrender or, in a case within subsection (1)(b), (c) or (d), their acquisition—
a
cancel them and diminish the amount of the share capital by the nominal value of the shares cancelled, and
b
where the effect of cancelling the shares will be that the nominal value of the company’s allotted share capital is brought below the authorised minimum, apply for re-registration as a private company, stating the effect of the cancellation.
3
For this purpose “the relevant period” is—
a
3 years in the case of shares forfeited or surrendered to the company in lieu of forfeiture, or acquired as mentioned in subsection (1)(b) or (c);
b
one year in the case of shares acquired as mentioned in subsection (1)(d).
4
The company and, in a case within subsection (1)(c) or (d), the company’s nominee or (as the case may be) the other shareholder must not exercise any voting rights in respect of the shares; and any purported exercise of those rights is void.
147 Matters arising out of compliance with s. 146(2). C6
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.F47Chapter 3 of Part 3 of the Companies Act 2006 (resolutions affecting a company's constitution) applies to such a resolution.
3
The application for re-registration required by section 146(2)(b) must be in the prescribed form and be signed by a director or secretary of the company, and must be delivered to the registrar of companies together with a printed copy of the memorandum and articles of the company as altered by the resolution.
4
If the registrar is satisfied that the company may be re-registered under section 146, he shall retain the application and other documents delivered with it and issue the company with a certificate of incorporation appropriate to a company that is not a public company; and—
a
the company by virtue of the issue of the certificate becomes a private company, and the alterations in the memorandum and articles set out in the resolution take effect accordingly, and
b
the certificate is conclusive evidence that the requirements of sections 146 to 148 in respect of re-registration and of matters precedent and incidental to it have been complied with, and that the company is a private company.
148 Further provisions supplementing ss. 146, 147. C7
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.
C8149 Sanctions 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, F48Chapter 1 of Part 20 of the Companies Act 2006 (restriction on public offers) applies to it as if it were a private company such as is mentioned in that section; but, subject to this, the company continues to be treated for the purpose of this Act as a public company until it is so re-registered.
2
If a company when required to do so by section 146(2) (including that subsection as applied by section 148(1)) fails to cancel any shares in accordance with paragraph (a) of that subsection or to make an application for re-registration in accordance with paragraph (b) of it, the company and every officer of it who is in default is liable to a fine and, for continued contravention, to a daily default fine.
150 Charges of public companies on own shares. C9
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).
F18F18Chapter VI Financial Assistance by a Company for Acquisition of its Own Shares
Ss. 126-182 repealed (1.10.2009) by Companies Act 2006 (c. 46), ss. 1295, 1300, Sch. 16; S.I. 2008/2860, art. 4, Sch. 1 (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))
Provisions applying to both public and private companies
151 Financial assistance generally prohibited.
F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
152 Definitions for this Chapter.
F50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
153 Transactions not prohibited by s. 151.
F51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
154 Special 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 F52the nature of which is clearly defined and which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise.
Private companies
155 Relaxation of s. 151 for private companies.
F53. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
156 Statutory declaration under s. 155.
F54. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
157 Special resolution under s. 155.
F55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
158 Time for giving financial assistance under s. 155.
F56. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F19F19Chapter VII Redeemable Shares; Purchase by a Company of its Own Shares
Ss. 126-182 repealed (1.10.2009) by Companies Act 2006 (c. 46), ss. 1295, 1300, Sch. 16; S.I. 2008/2860, art. 4, Sch. 1 (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))
Redemption and purchase generally
159 Power 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.
159AF57 Terms and manner of redemption.
1
Redeemable shares may not be issued unless the following conditions are satisfied as regards the terms and manner of redemption.
2
The date on or by which, or dates between which, the shares are to be or may be redeemed must be specified in the company’s articles or, if the articles so provide, fixed by the directors, and in the latter case the date or dates must be fixed before the shares are issued.
3
Any other circumstances in which the shares are to be or may be redeemed must be specified in the company’s articles.
4
The amount payable on redemption must be specified in, or determined in accordance with, the company’s articles, and in the latter case the articles must not provide for the amount to be determined by reference to any person’s discretion or opinion.
5
Any other terms and conditions of redemption shall be specified in the company’s articles.
6
Nothing in this section shall be construed as requiring a company to provide in its articles for any matter for which provision is made by this Act.
160 Financing 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.
F583
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 F59redeemed under this sectionF59redeemed under this Chapter shall be treated as cancelled on redemption, and the amount of the company’s issued share capital shall be diminished by the nominal value of those shares accordingly; but the redemption of shares by a company is not to be taken as reducing the amount of the company’s authorised share capital.
5
Without prejudice to subsection (4), where a company is about to redeem shares, it has power to issue shares up to the nominal value of the shares to be redeemed as if those shares had never been issued.
161F60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
162 Power 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).
F612
Sections 159 and 160 apply to the purchase by a company under this section of its own shares as they apply to the redemption of redeemable shares.
This is subject to subsections (2A) and (2B).
2A
The terms and manner of a purchase under this section need not be determined by the articles as required by section 160(3).
2B
Where a company makes a purchase of qualifying shares out of distributable profits under this section, section 162A applies to the shares purchased; and accordingly section 160(4) does not apply to those shares.
3
A company may not under this section purchase its shares if as a result of the purchase there would no longer be any member of the company holding shares other than redeemable shares F62or shares held as treasury shares .
F634
For the purposes of this Chapter “qualifying shares” are shares which—
a
are included in the official list in accordance with the provisions of Part 6 of the Financial Services and Markets Act 2000 F64,
b
are traded on the market known as the Alternative Investment Market established under the rules of London Stock Exchange plc,
c
are officially listed in an EEA State, or
d
are traded on a market established in an EEA State which is a regulated market F65which appears on the list drawn up by that State pursuant to Article 47 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments,
and in paragraph (a) “the official list” has the meaning given in section 103(1) of the Financial Services and Markets Act 2000.
162ATreasury shares
1
Where qualifying shares are purchased by a company out of distributable profits in accordance with section 162, the company may—
a
hold the shares (or any of them), or
b
deal with any of them, at any time, in accordance with section 162D.
2
Where shares are held under subsection (1)(a) then, for the purposes of section 352, the company must be entered in the register as the member holding those shares.
3
In this Act, references to a company holding shares as treasury shares are references to the company holding shares which—
a
were (or are treated as having been) purchased by it in circumstances in which this section applies, and
b
have been held by the company continuously since they were so purchased.
162B Treasury shares: maximum holdings
1
Where a company has shares of only one class, the aggregate nominal value of shares held as treasury shares must not at any time exceed 10 per cent. of the nominal value of the issued share capital of the company at that time.
2
Where the share capital of a company is divided into shares of different classes, the aggregate nominal value of the shares of any class held as treasury shares must not at any time exceed 10 per cent. of the nominal value of the issued share capital of the shares in that class at that time.
3
Where subsection (1) or (2) is contravened by a company, the company must dispose of or cancel the excess shares, in accordance with section 162D, before the end of the period of 12 months beginning with the day on which that contravention occurs.
For this purpose “the excess shares” means such number of the shares, held by the company as treasury shares at the time in question, as resulted in the limit being exceeded.
162CTreasury shares: voting and other rights
1
This section applies to shares which are held by a company as treasury shares (“the treasury shares”).
2
The company must not exercise any right in respect of the treasury shares, and any purported exercise of such a right is void.
3
The rights to which subsection (2) applies include any right to attend or vote at meetings (including F77meetings summoned under section 896 of the Companies Act 2006).
4
No dividend may be paid, and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) may be made, to the company in respect of the treasury shares.
5
Nothing in this section is to be taken as preventing—
a
an allotment of shares as fully paid bonus shares in respect of the treasury shares, or
b
the payment of any amount payable on the redemption of the treasury shares (if they are redeemable shares).
6
Any shares allotted as fully paid bonus shares in respect of the treasury shares shall be treated for the purposes of this Act as if they were purchased by the company at the time they were allotted, in circumstances in which section 162A(1) applied.
162DTreasury shares: disposal and cancellation
1
Where shares are held as treasury shares, a company may at any time—
a
sell the shares (or any of them) for cash,
b
transfer the shares (or any of them) for the purposes of or pursuant to an employees' share scheme, or
c
cancel the shares (or any of them).
2
For the purposes of subsection (1)(a), “cash”, in relation to a sale of shares by a company, means—
a
cash (including foreign currency) received by the company, or
b
a cheque received by the company in good faith which the directors have no reason for suspecting will not be paid, or
c
a release of a liability of the company for a liquidated sum, or
d
an undertaking to pay cash to the company on or before a date not more than 90 days after the date on which the company agrees to sell the shares.
3
But if the company receives a notice under F78section 979 of the Companies Act 2006(right of offeror to buy out minority shareholders) that a person desires to acquire any of the shares, the company must not, under subsection (1), sell or transfer the shares to which the notice relates except to that person.
4
If under subsection (1) the company cancels shares held as treasury shares, the company must diminish the amount of the issued share capital by the nominal value of the shares cancelled; but the cancellation is not to be taken as reducing the amount of the company’s authorised share capital.
5
The directors may take such steps as are requisite to enable the company to cancel its shares under subsection (1) without complying with sections 135 and 136 (resolution to reduce issued share capital; application to court for approval).
162ETreasury shares: mandatory cancellation
1
If shares held as treasury shares cease to be qualifying shares, the company must forthwith cancel the shares in accordance with section 162D.
2
For the purposes of subsection (1), shares are not to be regarded as ceasing to be qualifying shares by virtue only of—
a
the suspension of their listing in accordance with the applicable rules in the EEA State in which the shares are officially listed, or
b
the suspension of their trading in accordance with—
i
in the case of shares traded on the market known as the Alternative Investment Market, the rules of London Stock Exchange plc, and
ii
in any other case, the rules of the regulated market on which they are traded.
3
For the purposes of this section “regulated market” means a market which F79appears on the list drawn up by an EEA State pursuant to Article 47 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments .
162FTreasury shares: proceeds of sale
1
Where shares held as treasury shares are sold, the proceeds of sale shall be dealt with in accordance with this section.
2
Where the proceeds of sale are equal to or less than the purchase price paid by the company for the shares, the proceeds shall be treated for the purposes of F80Part 23 of the Companies Act 2006 as a realised profit of the company.
3
Where the proceeds of sale exceed the purchase price paid by the company for the shares—
a
that part of the proceeds of sale that is equal to the purchase price paid shall be treated for the purposes of Part 8 as a realised profit of the company, and
b
a sum equal to the excess shall be transferred to the company’s share premium account.
4
The purchase price paid by the company for the shares shall be determined by the application of a weighted average price method.
5
Where the shares were allotted to the company as fully paid bonus shares, the purchase price paid for them shall, for the purposes of subsection (4), be treated as being nil.
162GTreasury shares: penalty for contravention
If a company contravenes any provision of sections 162A to 162F every officer of it who is in default is liable to a fine.
163 Definitions 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 F66a recognised investment exchange, or
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 F68Part 6 of the Financial Services and Markets Act 2000; or
C10C11b
the company has been afforded facilities for dealings in those shares to take place on F69that investment exchange without prior permission for individual transactions from the authority governing F69that investment 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).
F704
“Recognised investment exchange” means a recognised investment exchange other than an overseas investment exchange.
F705
Expressions used in the definition contained in subsection (4) have the same meaning as in Part 18 of the Financial Services and Markets Act 2000.
164 Authority 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).
165 Authority 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.
166 Authority 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.
F717
Chapter 3 of Part 3 of the Companies Act 2006 (resolutions affecting a company's constitution) applies to a resolution of a company conferring, varying, revoking or renewing authority under this section.
167 Assignment 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.
168 Payments 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.
169 Disclosure 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.
F731A
But in the case of a company which has purchased its own shares in circumstances in which section 162A applies, the requirement to deliver a return under subsection (1) shall apply only where some or all of the shares have been cancelled forthwith after the date of their delivery in accordance with section 162D(1) and in those circumstances the particulars required by that subsection to be stated with respect to the shares purchased shall apply only to such of the shares as have been so cancelled.
1B
Where a company has purchased its own shares in circumstances in which section 162A applies, the company shall within the period of 28 days beginning with the date on which such shares are delivered to it (except where all of the shares have been cancelled forthwith after the date of their delivery in the circumstances referred to in subsection (1A)) deliver to the registrar of companies for registration a return in the prescribed form stating with respect to shares of each class purchased (other than any shares which have been cancelled in the circumstances referred to in subsection (1A)) the number and nominal value of each of those shares which are held as treasury shares and the date on which they were delivered to the company.
2
In the case of a public company, F74any return under subsection (1) or (1B) 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 F75under either subsection (1) or (1B) 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.
C125
Every copy and memorandum so required to be kept shall F72 . . . 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.
169ADisclosure by company of cancellation or disposal of treasury shares
1
Subsection (2) applies in relation to any shares held by a company as treasury shares if—
a
the company is or was required to make a return under section 169(1B) in relation to the shares, and
b
the shares have—
i
been cancelled in accordance with section 162D(1), or
ii
been sold or transferred for the purposes of or pursuant to an employees' share scheme under section 162D(1).
2
Within the period of 28 days beginning with the date on which such shares are cancelled or disposed of, 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 cancelled or disposed of—
a
the number and nominal value of those shares, and
b
the date on which they were cancelled or disposed of.
3
Particulars of shares cancelled or disposed of on different dates may be included in a single return to the registrar.
4
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.
170 The 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 F76, or in accordance with section 162D(4) on cancellation of shares held as treasury shares, shall be transferred to a reserve, called “the capital redemption reserve”.
2
Of 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.
Supplementary
178 Effect 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
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F91
179 Power for Secretary of State to modify this Chapter. C14
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.
180 Transitional 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 M3Companies Act 1981 of section 58 of the M4Companies Act 1948 (power to issue redeemable preference shares) have been redeemed under that section are subject to redemption in accordance with the provisions 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.
181 Definitions 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 F92section 829 of the Companies Act 2006) 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 VIII Miscellaneous Provisions about Shares and Debentures
Debentures
190 Register of debenture holders.
F28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
191 Right to inspect register.
F29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
192 Liability of trustees of debentures.
F30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
193 Perpetual debentures.
F31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
194 Power to re-issue redeemed debentures.
F32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
195 Contract to subscribe for debentures.
F33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
196 Payment of debts out of assets subject to floating charge (England and Wales).
F34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
197 Debentures to bearer (Scotland).
F35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ss. 126-182 repealed (1.10.2009) by Companies Act 2006 (c. 46), ss. 1295, 1300, Sch. 16; S.I. 2008/2860, art. 4, Sch. 1 (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))