Registration under the Companies Act 1985
10.The principal purpose of the first seven sections in the Act is to transform CDC to a plc. At the moment, CDC is a “statutory corporation”. This means that it is established as a legal entity by an Act of Parliament. The original Act was the Overseas Resources Development Act 1948, but that has been repealed, and the relevant Act is now the Commonwealth Development Corporation Act 1978 (“the 1978 Act”). Its present constitution is set out in the 1978 Act and regulations made under it.
11.In its first seven sections, the Act brings about CDC’s conversion to its new status by providing for CDC’s registration as a plc under the Companies Act 1985, whereupon CDC exchanges its present constitution under the 1978 Act for a constitution appropriate to a plc. CDC will remain the same legal person but will have been transformed from the status of a statutory corporation to that of a plc.
12.After consulting CDC, the Secretary of State is to determine the day on which CDC is to file documents with the registrar of companies for England and Wales (referred to here as the “registrar”) to enable that official to register CDC as a plc and to grant a certificate to that effect. The documents to be filed will, broadly, enable CDC to have the same attributes, after registration, as any other plc, for example, a constitution (memorandum and articles), a share capital, directors, secretary etc. The Companies Act 1985 and other legislation will apply thereafter to CDC as they do to any other plc (with a few necessary modifications to reflect CDC’s change of status from a statutory corporation).
Section 1: Initial steps
13.Section 1 gives the Secretary of State the power to determine the day on which CDC is to file certain documents with the registrar and lists the steps to be taken by the Secretary of State, in consultation with CDC, prior to the day for the filing of documents with the registrar. The steps include nominating the directors and company secretary, and nominating (with the consent of the Treasury: see section 22(1)(a)) the persons to whom shares are to be initially allotted. The “authorised minimum” referred to in subsection (6) of section 1 is defined in section 118 of the Companies Act 1985 and is currently £50,000. The reason for having this provision is that under EC law all public companies are required to have an allotted share capital of at least this amount.
Section 2: Filing of documents
14.This section places a duty on CDC to deliver to the registrar the documents listed in Schedule 1 on the filing day. The list of documents delivered to the registrar is closely modelled on the filing requirements of the Companies Act 1985 and includes CDC’s memorandum and articles of association which must be approved by the Secretary of State. Section 2 (5) provides for the Companies Act 1985 to apply to the documents delivered to the registrar with a few modifications set out in Part I of Schedule 2. These modifications are necessary to reflect the fact that CDC is not following the usual company formation route: it is being transformed from the status of statutory corporation to the status of plc. The detail of these modifications is discussed in paragraph 68 below.
15.The purpose of section 2 (3) is to make clear that in the unlikely event of CDC being unable to state that it has adequate net assets to make the statement required by paragraph 6 of Schedule 1 (see the more detailed discussion in paragraphs 66 and 67 below), it will be released from its statutory duty to file the documents with the registrar. In this event (or if CDC fails to discharge its duty under section 2 (1) for any other reason) the Secretary of State is able to restart the process on a later date by virtue of section 2(4).
Section 3: Appointing day for registration
16.On the day appointed under this section (“registration day”) CDC’s transformation to a plc will take place. The purposes of this section are, first, to provide a mechanism for ensuring that, before the Secretary of State makes the order appointing a day as registration day, all the documents required to be filed with the registrar have in fact been filed and are in order and, secondly, to allow CDC to prepare for the administrative consequences of registration. Consequently, the Secretary of State is not under a duty to name the appointed day until he has received notification from the registrar that he is satisfied that the documents are in order. If the registrar is not satisfied, the Secretary of State is able to restart the process on a later day by virtue of section 3 (4).
Section 4: Registration
17.This section sets out the details of the process by which CDC is registered by the registrar under the Companies Act 1985 as a plc on the registration day. Subsections (1) and (2) of section 4 are necessary to ensure that the provisions of the Act dovetail with the provisions of the Companies Act 1985. They reflect the fact noted above that CDC is not being formed as a new company under Part I of the Companies Act 1985 but is being transformed from the status of a statutory corporation to the status of a plc. The Act therefore specifies that, notwithstanding this fact, the registrar is under the same duty to register and retain CDC’s memorandum and articles as he would be in relation to a newly formed company by virtue of section 12 of the Companies Act 1985. It is at the moment of registration of those documents that CDC’s conversion to plc status occurs.
18.Subsection (3) describes the contents of the certificate given to CDC by the registrar upon its registration under the Companies Act 1985. The certificate given to CDC is similar but not identical to that given by the registrar under section 13 of the Companies Act 1985. The main difference is that the certificate does not state on it that CDC is incorporated as a new company as is the case under Part I of the Companies Act 1985. Since CDC has already been incorporated as a statutory corporation, the certificate indicates that CDC “remains incorporated.”
19.Subsection (5) is again modelled on the provisions of the Companies Act 1985 which provide that the certificate is conclusive evidence of certain matters, i.e. that once a certificate is given the matters in relation to which it is conclusive evidence cannot be re-opened. The main difference between this subsection and the equivalent Companies Act provision is that the certificate is to be conclusive evidence of the time of day at which registration occurs. This is necessary because there needs to be certainty about the time at which CDC’s change in status occurs so that CDC can know which constitution it is operating under in the conduct of its affairs at any given time of the day.
Section 5: Effect of registration
20.This section sets out the matters which occur on CDC’s registration under the Companies Act 1985 and makes provision for the consequences of CDC’s transformation. Subsection (1) provides for certain modifications to the Companies Act 1985 to take effect on registration. These are described in more detail in paragraphs 69 to 85 below. Subsection (2) provides for the repeal of CDC’s present constitution (with the exceptions indicated) under the 1978 Act to occur at the time of registration, i.e. the time at which it acquires its new constitution appropriate to a plc, so that on registration CDC effectively “swaps” constitutions.
21.Subsection (3) provides for CDC to be known by the name in its memorandum. The preservation of section 28 in this subsection makes it clear that CDC is nevertheless free, as is any other company registered under the Companies Act 1985, to change its name in accordance with the provisions of that Act.
22.Subsection (4) is modelled on section 13(5) of the Companies Act 1985 and provides for those persons nominated by the Secretary of State under section 1 of the Act to take up their offices on CDC’s registration.
Section 6: Initial Allotment of Shares
23.This section deals with the initial allotment of shares provided for by the Secretary of State in the order made by him under section 1(3). At present CDC is a statutory corporation without a share capital and without shareholders. This section, together with the Secretary of State’s order under section 1(3), provides the mechanism whereby CDC acquires its initial share capital as a plc and its first shareholders. Subsection (1) makes clear that the effect of the Secretary of State’s order under section 1(3) is to give those persons he nominates as allottees the unconditional right to be included in CDC’s register of members, i.e. to acquire the same rights as if those shares had been allotted in accordance with the provisions of the Companies Act 1985. Paragraph 7 of Part II of Schedule 2 then provides that those persons nominated by the Secretary of State are entered in CDC’s register of members on registration, thereby becoming the first members of CDC plc.
24.Subsection (2) specifies how the shares are to be treated. The intention is that the shares should be paid up from CDC’s existing reserves, rather than by a cash payment. Paragraphs (a) and (b) ensure that the Companies Act 1985 consequences applying to shares which are not fully paid up in cash of an amount equal to the shares’ nominal value do not ensue. Paragraph (a) puts beyond doubt the question whether the shares are fully paid up by reason of the movement of funds mentioned above. If a share is not fully paid up, the member of the company concerned is liable to pay the unpaid portion of the shares if a call is made on those shares (section 1 Companies Act 1985). Further, a public limited company cannot have shares paid up as to less than 25% (section 101(1) Companies Act 1985). Paragraph (b) puts beyond doubt the question whether two provisions of the Companies Act 1985 apply to the payment. These provisions are: (1) section 103 which stipulates that certain conditions must be fulfilled where shares in a public company are paid for in non cash consideration; and (2) section 130 which provides that if shares are issued at a premium, i.e. for more than their nominal (or face) value, a company is obliged to open a share premium account to which special rules apply. Paragraph (c) specifies the tax consequences of this initial issue of shares.
25.Subsection (3) disapplies (in relation to the initial allotment of shares only) section 88 of the Companies Act 1985 which places an obligation on a company to deliver details of an allotment of shares to the registrar in the form prescribed by that section. This is unnecessary in the case of CDC’s initial allotment of shares since details of the allotments are contained in the Secretary of State’s order made under section 1(3)(b) which is delivered to the registrar.
Section 7: Repeal of 1978 Act; savings etc.
26.This section deals with certain matters arising from the repeal of the 1978 Act (CDC’s present constitution) and preserves the effect of certain provisions of that Act.
27.Subsection (1) provides that section 1(1) of the 1978 Act, which simply confirms the existence of CDC as a body corporate, is not to be repealed as that body corporate (i.e. legal entity) continues to exist as CDC plc. This continued existence of the body corporate does not, however, affect normal insolvency arrangements applicable to a plc, nor does it affect CDC’s ability to adopt a new name under its memorandum of association.
28.The effect of subsections (2) and (4) is that CDC must produce a report on its activities, together with audited accounts (as required by the 1978 Act), for its last full financial year before registration. CDC’s financial year runs from January to December. Without this provision, depending on the timing, it is possible that section 5(2) might repeal these duties before they were fulfilled for that year.
29.Subsection (3) refers to section 14 of the 1978 Act which places an obligation on CDC to maintain a reserve fund which is subject to a restriction that the fund can only be used for the purposes of CDC, the statutory corporation. That section of the 1978 Act is to be repealed on registration. This provision is intended to remove any doubt that CDC will have the same powers and be subject to the same obligations in respect of its funds as any other plc.
