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Version Superseded: 26/11/2001

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Status:

Point in time view as at 21/06/2001. This version of this Act contains provisions that are not valid for this point in time.

Changes to legislation:

There are outstanding changes not yet made by the legislation.gov.uk editorial team to Companies Act 1985. Any changes that have already been made by the team appear in the content and are referenced with annotations.

U.K.

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:—

Extent Information

E1Act: for extent see s. 745(1)(2)

E2Act extended (Northern Ireland) (1.1.2007, 20.1.2007, 6.4.2007, 30.9.2007, 1.10.2007, 1.11.2007, 15.12.2007, 6.4.2008 and 1.10.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1284(1), 1300; S.I. 2006/3428, art. 3(2)(e) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2007/1093, art. 2(1)(e); S.I. 2007/2194, arts. 2-5 (with art. 12); S.I. 2007/2607, art. 2(2); S.I. 2007/3495, arts. 3, 5 (with arts. 7, 12); S.I. 2008/1886 arts. 1(3), {2(d)} (with arts. 6, 7); S.I. 2008/2860, art. 3(z) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch., S.I. 2009/1802, art. 18, Sch.))

Modifications etc. (not altering text)

C3Act applied (with modifications) by S.I. 1985/680, regs. 4-6, Sch.

Act applied (with modifications) by S.I. 1986/2142, arts. 1(2), 13(3)(4)(6), Sch. 2

C4Act modified by S.I. 1985/724, regs. 2(3)(4), 6(1)

C11Act applied with modifications by Insolvency Act 1986 (c. 45, SIF 66), s. 221

C17Act modified by British Steel Act 1988 (c. 35, SIF 70) s. 3(3)(b)

C19Act modified by S.I. 1989/638, regs. 8(1), 21

Act modified (27. 12. 1991) by S.I. 1991/2908, art. 2, Sch. paras. 4(2),6

C20Act amended by S.I. 1989/638, regs. 12(1), 21

C27Act applied with modifications by S.I. 1990/2570, regs. 3(1)(4), 16(1)

C28Act amended by S.I. 1990/2570, regs. 8(1), 9

C29Act modified by S.I. 1990/2570, reg. 10(5)

C30 Act excluded by Smith Kline & French Laboratories, Australia, and Menley & James, Australia, Act 1991 (c. i), s. 4(1)(b)

C32Act applied (with modifications) by S.I. 1991/823, reg. 3.

C33Act modified (27.6.1991) by Ports Act 1991 (c. 52, SIF 58), s. 3(4)(b)

C34Act: definitions applied (S.) (27. 11. 1991) by Natural Heritage (Scotland) Act 1991 (c. 28, SIF 46:1), s. 2(1)(e); S.I. 1991/2633, art. 3, Sch.

C35Act: definition of "debentures" applied (E.W.) (1.12.1991) by Statutory Water Companies Act 1991 (c. 58, SIF 130), ss. 13(7), 17(2)

Act applied (except s. 83 and s. 84 in part) (19.6.1995) by S.I. 1995/1537, reg. 20, Sch. 4 Pt. III para. 11

Act applied (21.3.1997) by 1986 c. 53, s. 101(6) (as substituted (21.3.1997) by 1997 c. 32, s. 41)

Act: certain provisions applied (E.W.) (7.10.2001) by S.I. 2001/3352, rule 4.11(5)

C36Act: definition of "company" applied (E.W.) (1.12.1991) by Water Industry Act 1991 (c. 56, SIF 130), ss. 219(1), 223(2) (with ss. 82(3), 186(1), 222(1))

C37Act: definition of "company" applied (E.W.) (1.12.1991) by Statutory Water Companies Act 1991 (c. 58, SIF 130), ss. 9(3), 17(2)

C39Act: definitions of "extraordinary resolution", "registrar of companies" and "special resolution" applied (E.W.) (1.12.1991) by Statutory Water Companies Act 1991 (c. 58, SIF 130), ss. 12(8), 17(2)

C41Act extended (with modifications) (19.12.1993) by S.I. 1993/3245, reg.3

C42Act modified (31.10.1994) by 1994 c. 21, s. 15, Sch. 3 para. 2(4)(b) (with s. 40(7)); S.I. 1994/2552, art. 2, Sch. 1

Act modified (31.10.1994) by 1994 c. 21, s. 67(1), Sch. 9 para. 32 (with s. 40(7)); S.I. 1994/2553, art. 2

Act modified (8.11.1995) by 1995 c. 37, s. 6, Sch. 2 para. 1(5)(b)

Act modified (8.11.1995) by 1995 c. 45, s. 17(1), Sch. 5 Pt. I paras. 1, 8(c)

Act modified (27.7.1999) by 1999 c. 20, s. 5(1), Sch. 2 Pt. II (with s. 15)

Act modified (27.7.1999) by 1999 c. 20, s. 6(2)(b) (with s. 15)

Act modified (temp. from 27.7.1999) by 1999 c. 20, s. 16(1)(4)(b) (with s. 15)

Act modified (6.11.2000) by 2000 c. 26, s. 63(7)(b); S.I. 2000/2957, art. 2(1), Sch. 1 (with transitional provisions in arts. 3-8)

Act modified (16.2.2001) by 2000 c. 27, s. 108, Sch. 7 paras. 8, 9; S.I. 2001/1781, art. 2, Sch. (subject to transitional provisions in arts. 3-10)

Act modified (5.10.2004) by Energy Act 2004 (c. 20), ss. 39, 198(2), Sch. 6 para. 2(4)(c) (with s. 38(2)); S.I. 2004/2575, art. 2(1), Sch. 1

C43Act amended (8.11.1995) by 1995 c. 37, s. 6, Sch. 2 para. 14

C44Act excluded and modified (31.3.1996) by 1995 c. 20, s. 110(1), Sch. 4 para. 3(3)(7) (which amendment was repealed (1.4.1996) by 1995 c. 40, s. 6(1), Sch. 5)

C45Act excluded (3.2.1995) by 1994 c. 37, ss. 66(1), 69(2), Sch. 2 para. 6 (with s. 66(2))

Act excluded (31.3.1996) by 1995 c. 20, s. 110(1), Sch. 4 para. 4(3)(5) (which amendment was repealed (1.4.1996) by 1995 c. 40, s. 6(1), Sch. 5)

Act excluded (in part) (E.W.) (17.6.1996) by 1996 c. ii, s. 4(2)

Act excluded (E.W.) (1.10.1996) by 1996 c. 52, s. 7, Sch. 1 Pt. II para. 15(2) (with s. 51(4)); S.I. 1996/2402, art. 3 (subject to transitional provisions and savings in Sch.)

Act excluded (S.) (1.11.2001) by 2001 asp 10, s. 63, Sch. 7 Pt. II para. 12(3); S.S.I. 2001/336, art. 2(1)(3), Sch. Pt. II (subject to transitional provisions and savings in art. 3)

Act excluded (S.) (17.12.2001) by 2001 asp 13, s. 20, Sch. 6 para. 9(5) (with s. 29); S.S.I. 2001/456, art. 2

Act excluded (E.W.N.I.) (1.9.2001) by 2001 c. 17, s. 38, Sch. 6 para. 11(5) (with ss. 27(3), 39, 78); S.I. 2001/2161, art. 3

Act excluded (24.3.2003) by Proceeds of Crime Act 2002 (c. 29), ss. 426(10)(a), 458(1)(3); S.I. 2003/333, art. 2, Sch. 1 (as amended by S.I. 2003/531)

C46Act extended (6.1.1997) by S.I. 1996/2827, reg. 2(4)

C47Act applied (with modifications) (1.6.1998) by 1998 c. 11, s. 7(3)(9); S.I. 1998/1120, art. 2

C48Act: specified provisions applied (with modifications) (6.4.2001) by S.I. 2001/1090, reg. 4(1), Sch. 2 Pt. 1 (as amended (1.10.2009) by S.I. 2009/1804, reg. 85, Sch. 3 para. 13(3)(5) (as amended by S.I. 2009/1833, reg. 2(2)))

C49Act modified (1.1.2007, 20.1.2007, 6.4.2007, 1.10.2007, 1.11.2007, 15.12.2007, 6.4.2008, 1.10.2008 for certain purposes, otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1168, 1173, 1300; S.I. 2006/3428, arts. 2(2)(f)(g), 3(2)(c)(d) (subject to Sch. 1, and with art. 6, and with transitional provisions and savings in art. 8, Sch. 5) (as amended by S.I. 2007/3495, art. 11, Sch. 5 and S.I. 2008/2860, art. 6); S.I. 2007/1093, arts. 2(2)(g)(h) (with arts. 4, 11(1) and subject to transitional adaptations in Sch. 1) (as amended by S.I. 2008/2194, arts. 2(3)(j)(k)3(2)(d), 4(2)(a), (with saving in art. 12 and with transitional provisions and savings in Sch. 3 and subject to transitional adaptations specified in Sch. 1) (as amended by S.I. 2007/2607, art. 4); S.I. 2007/3495, arts. 3(3)(i)(j), 5(3)(b)(c) (with transitional provisions in arts. 6, 9, Sch. 4 and with savings in arts. 7, 12 and with transitional adaptations in Sch. 1) (as amended by S.I. 2008/1886, Sch. 4 para. 15); S.I. 2008/2860, art. 2(u) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch., S.I. 2009/1941, art. 13, S.I. 2009/2476, art. 2))

C50Act: power to apply conferred (20.1.2007 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1042, 1300; S.I. 2006/3428, art. 3(3) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2008/2860, art. 3(p) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C51Act: power to apply (with modifications) conferred (20.1.2007 for specified purposes and 6.4.2007 otherwise) by Companies Act 2006 (c. 46), ss. 1043(2), 1300; S.I. 2006/3428, art. 3(3), (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2007/1093, art. 2(1)(c)

C52Act excluded (20.1.2007, 6.4.2007, 1.10.2007, 6.4.2008 and 1.10.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1129, 1300 (with s. 1133); S.I. 2006/3428, art. 3(2)(b) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2007/1093, art. 2(2)(c); S.I. 2007/2194, art. 2(1)(l)(3)(h) (with art. 12); S.I. 2007/3495, arts. 3(3)(g), 5(3)(a) (with arts. 7, 12); S.I. 2008/2860, art. 3(s) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C53Act modified (20.1.2007 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 583, 1300; S.I. 2006/3428, art. 3(3) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2008/2860, art. 3(k) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C54Act modified (20.1.2007 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1081(6), 1300; S.I. 2006/3428, art. 3(3) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2008/2860, art. 3(r) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C55Act modified (20.1.2007, 6.4.2007, 1.10.2007, 6.4.2008 and 1.10.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1125(1), 1300 (with s. 1133); S.I. 2006/3428, art. 3(2)(b) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2007/1093, art. 2(2)(c); S.I. 2007/2194, art. 2(1)(l)(3)(h) (with art. 12, Sch. 3 para. 48 and subject to Sch. 1); S.I. 2007/3495, arts. 3(3)(g), 5(3)(a) (with arts. 7, 12); S.I. 2008/2860, art. 3(s) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C56Act modified (20.1.2007, 6.4.2007, 1.10.2007, 6.4.2008 and 1.10.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1131, 1300 (with s. 1133); S.I. 2006/3428, art. 3(2)(b) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2007/1093, art. 2(2)(c); S.I. 2007/2194, art. 2(1)(l)(3)(h) (with art. 12); S.I. 2007/3495, arts. 3(3)(g), 5(3)(a) (with arts. 7, 12); S.I. 2008/2860, art. 3(s) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C57Act restricted (20.1.2007 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1156(2), 1300; S.I. 2006/3428, art. 3(3) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2008/2860, art. 3(t) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C58Act modified (6.4.2007, 1.10.2007, 1.11.2007 and 6.4.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 546, 1300; S.I. 2007/1093, art. 2(2)(a); S.I. 2007/2194, arts. 2(3)(e), 3(2)(b) (with art. 12); S.I. 2007/3495, art. 3(3)(d) (with arts. 7, 12); S.I. 2008/2860, art. 3(k) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C59Act modified (6.4.2007 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 558, 1300 (with s. 559); S.I. 2007/1093, art. 2(2)(b); S.I. 2008/2860, art. 3(k) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C60Act modified (6.4.2007 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1060(3)(4), 1300; S.I. 2006/3428, art. 4(3)(a) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5 (as amended by S.I. 2007/3495, art. 11, Sch. 5)); S.I. 2008/2860, art. 3(r) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C61Act modified (6.4.2007) by Companies Act 2006 (c. 46) {ss. 1170}, 1300; S.I. 2007/1093, art. 2(1)(d) (with arts. 3, 11(1) and with savings in Sch. 6) (as amended by S.I. 2003/2860, art. 6)

C62Act modified (6.4.2007) by The Companies Acts (Unregistered Companies) Regulations 2007 (S.I. 2007/318), regs. {4}, {5} (with reg. 6)

C63Act modified (30.9.2007) by Companies Act 2006 (c. 46) {ss. 1167}, 1300; S.I. 2007/2607, art. 2(1) (with art. 3)

C64Act modified (1.10.2007) by Companies Act 2006 (c. 46), ss. 288(1), 1300 (with s. 281(4)); S.I. 2007/2194, art. 2(1)(f) (with art. 12, Sch. 3 para. 24 and subject to Sch. 1)

C65Act modified (1.10.2007 and 6.4.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 540(1)(4), 1300; S.I. 2007/2194, art. 2(3)(c) (with art. 12); S.I. 2007/3495, art. 3(3)(b) (with arts. 7, 12); S.I. 2008/2860, art. 3(k) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C66Act modified (1.10.2007 and 6.4.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 545, 1300; S.I. 2007/2194, art. 2(3)(d) (with art. 12); S.I. 2007/3495, art. 3(3)(c) (with arts. 7, 12); S.I. 2008/2860, art. 3(k) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C67Act modified (1.10.2007 and 6.4.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 548, 1300; S.I. 2007/2194, art. 2(3)(f) (with art. 12); S.I. 2007/3495, art. 3(3)(e) (with arts. 7, 12); S.I. 2008/2860, art. 3(k) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C68Act modified (1.10.2007 and 6.4.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 629, 1300; S.I. 2007/2194, art. 2(3)(g) (with art. 12); S.I. 2007/3495, art. 3(3)(f) (with arts. 7, 12); S.I. 2008/2860, art. 3(k) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C69Act modified (1.10.2007 and 1.11.2007 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1158, 1300; S.I. 2007/2194, arts. 2(3)(i), 3(2)(b) (with art. 12 and subject to Sch. 1); S.I. 2008/2860, art. 3(u) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C70Act applied (30.11.2007 with application as mentioned in rule 3 of the amending S.I.) by The PPP Administration Order Rules 2007 (S.I. 2007/3141), rule 32(5)

C73Act modified (6.4.2008 for certain purposes and otherwise 1.10.2009) by Companies Act 2006 (c. 46), ss. 1161, 1162, 1171, 1173, 1174, 1300, Schs. 7, 8; S.I. 2007/3495, arts. 3(1)(o)(p)(q) (with arts. 6, 7, 9, 12, Sch. 4, and subject to Sch. 1) (as amended by S.I. 2008/1886, Sch 4 para. 15); S.I. 2008/2860, art. 3(u) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C77Act modified (1.10.2009) by Companies Act 2006 (c. 46), ss. 1163, 1166, 1171, 1174, 1300, Sch. 8; S.I. 2008/2860, art. 3(u) (with arts. 5, 7, 8, Sch. 2) (as amended by S.I. 2009/1802 art. 18, S.I. 2009/1941, art. 13, S.I. 2009/2476, art. 2)

C78Act modified (1.10.2009) by Companies Act 2006 (c. 46), ss. 1(1), 1300; S.I. 2008/2860, art. 3(a) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C79Act restricted (1.10.2009) by Companies Act 2006 (c. 46), ss. 6(2), 1300; S.I. 2008/2860, art. 3(a) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C80Act modified (1.10.2009) by Companies Act 2006 (c. 46), ss. 547, 1300; S.I. 2008/2860, art. 3(k) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C81Act modified (1.10.2009) by Companies Act 2006 (c. 46), ss. 724(5), 1300; S.I. 2008/2860, art. 3(l) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C82Act modified (1.10.2009) by Companies Act 2006 (c. 46), ss. 1044, 1300; S.I. 2008/2860, art. 3(q) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C83Act restricted (1.10.2009) by Companies Act 2006 (c. 46), ss. 1118, 1300; S.I. 2008/2860, art. 3(r) (with arts. 5, 7, 8, Sch. 2 (as amended by S.I. 2009/1802, art. 18, Sch.))

C88Act applied (with modifications) (1.10.2009) by The Unregistered Companies Regulations 2009 (S.I. 2009/2436), regs. 3-5, Sch. 1 para. 21 (with transitional provisions and savings in regs. 7, 9, Sch. 2)

C89Act applied (with modifications) (1.10.2009) by The Companies (Companies Authorised to Register) Regulations 2009 (S.I. 2009/2437), regs. 18-23 (with transitional provisions and savings in reg. 24)

Part IE+W+S Formation and Registration of Companies; Juridical Status and Membership

Chapter IE+W+S Company Formation

Memorandum of associationE+W+S

1 Mode of forming incorporated company.E+W+S

(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.

[F1(3A)Notwithstanding subsection (1), one person may, for a lawful purpose, by subscribing his name to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company being a private company limited by shares or by guarantee.]

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

Textual Amendments

F1S. 1(3A) inserted (15.7.1992) by S.I. 1992/1699, reg. 2, Sch. para.1.

2 Requirements with respect to memorandum.E+W+S

(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)[F2Subject to subsection (6A), the memorandum] must be signed by each subscriber in the presence of at least one witness, who must attest the signature; [F3and that attestation is sufficient in Scotland as well as in England and Wales].

[F4(6A)Where the memorandum is delivered to the registrar otherwise than in legible form and is authenticated by each subscriber in such manner as is directed by the registrar, the requirements in subsection (6) for signature in the presence of at least one witness and for attestation of the signature do not apply.]

(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.

Textual Amendments

F2Words in s. 2(6) substituted (22.12.2000) by S.I. 2000/3373, art. 2(1)(2)

F3Words in s. 2(6) repealed (S.) (1.8.1995) by 1995 c. 7, ss. 14(2), 15(2), Sch. 5 (with ss. 9(3)(5)(7), 13, 14(3))

F4S. 2(6A) inserted (22.12.2000) by S.I. 2000/3373, art. 2(1)(3)

Modifications etc. (not altering text)

C92S. 2(7) excluded (E.W.) (26.7.2002 for E. for certain purposes and 30.9.2003 for E. in so far as not already in force, 1.1.2003 for W. for certain purposes and 30.3.2004 for W. in so far as not already in force) by Commonhold and Leasehold Reform Act 2002 (c. 15), ss. 74(7)(a), 181(1); S.I. 2002/1912, art. 2(c); S.I. 2002/3012, art. 2(c); S.I. 2003/1986, art. 2; S.I. 2004/669, art. 2

S. 2(7) excluded (E.W.) (27.9.2004) by Commonhold and Leasehold Reform Act 2002 (c. 15), ss. 34, 181(1), Sch. 3 para. 4(1)(a) (with s. 63); S.I. 2004/1832, art. 2

3 Forms of memorandum.E+W+S

(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.

Modifications etc. (not altering text)

C93S. 3 excluded (E.W.) (26.7.2002 for E. for certain purposes and 30.9.2003 for E. in so far as not already in force, 1.1.2003 for W. for certain purposes and 30.3.2004 for W. in so far as not already in force) by Commonhold and Leasehold Reform Act 2002 (c. 15), ss. 74(7)(a), 181(1); S.I. 2002/1912, art. 2(c); S.I. 2002/3012, art. 2(c); S.I. 2003/1986, art. 2; S.I. 2004/669, art. 2

S. 3 excluded (E.W.) (27.9.2004) by Commonhold and Leasehold Reform Act 2002 (c. 15), ss. 34, 181(1), Sch. 3 para. 4(1)(a) (with s. 63); S.I. 2004/1832, art. 2

[F53A Statement of company’s objects: general commercial company.E+W+S

Where the company’s memorandum states that the object of the company is to carry on business as a general commercial company—

(a)the object of the company is to carry on any trade or business whatsoever, and

(b)the company has power to do all such things as are incidental or conducive to the carrying on of any trade or business by it.]

Textual Amendments

[4F6Resolution to alter objects.E+W+S

(1)A company may by special resolution alter its memorandum with respect to the statement of the company’s objects.

(2)If an application is made under the following section, an alteration does not have effect except in so far as it is confirmed by the court.]

Textual Amendments

F6S. 4 substituted (4. 2. 1991) by Companies Act 1989 (c. 40), ss. 110(2), 213(2)

5 Procedure for objecting to alteration.E+W+S

(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.

6 Provisions supplementing ss. 4, 5.E+W+S

(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.

Modifications etc. (not altering text)

C95S. 6(3) extended (E.W.) (1.12.1991) by Statutory Water Companies Act 1991 (c. 58, SIF 130), ss. 12(6), 17(2)

S. 6(3) applied (E.W.) (1.1.1993) by Companies Act 1960 (c. 58), s. 30A(4) (as inserted (1.1.1993) by Charities Act 1992 (c. 41), s.40; S.I. 1992/1900, art. 4, Sch.3).

S. 6(3) extended (E.W.) (1.8.1993) by 1993 c. 10, ss. 64(4), 99(1)

Articles of associationE+W+S

7 Articles prescribing regulations for companies.U.K.

(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)[F7subject to subsection (3A),]be signed by each subscriber of the memorandum in the presence of at least one witness who must attest the signature [F8(which attestation is sufficient in Scotland as well as in England and Wales)].

[F9(3A)Where the articles are delivered to the registrar otherwise than in legible form and are authenticated by each subscriber to the memorandum in such manner as is directed by the registrar, the requirements in subsection (3)(c) for signature in the presence of at least one witness and for attestation of the signature do not apply.]

Textual Amendments

F7Words in s. 7(3)(c) inserted (22.12.2000) by S.I. 2000/3373, art. 3(1)(2)

F8Words in s. 7(3)(c) repealed (S.) (1.8.1995) by 1995 c. 7, ss. 14(2), 15(2), Sch. 5 (with ss. 9(3)(5)(7), 13, 14(3))

F9S. 7(3A) inserted (22.12.2000) by S.I. 2000/3373, art. 3(1)(3)

Modifications etc. (not altering text)

C96S. 7 restricted (8.10.2004) by The European Public Limited-Liability Company Regulations 2004 (S.I. 2004/2326), regs. 85, 88, Sch. 4 para. 1(3) (with para. 11)

8 Tables A, C, D and E.E+W+S

(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.

Modifications etc. (not altering text)

C98S. 8 excluded (E.W.) (26.7.2002 for E. for certain purposes and 30.9.2003 for E. in so far as not already in force, 1.1.2003 for W. for certain purposes and 30.3.2004 for W. in so far as not already in force) by Commonhold and Leasehold Reform Act 2002 (c. 15), ss. 74(7)(b), 181(1); S.I. 2002/1912, art. 2(c); S.I. 2002/3012, art. 2(c); S.I. 2003/1986, art. 2; S.I. 2004/669, art. 2

S. 8 excluded (E.W.) (27.9.2004) by Commonhold and Leasehold Reform Act 2002 (c. 15), ss. 34, 181(1), Sch. 3 para. 4(1)(b) (with s. 63); S.I. 2004/1832, art. 2

[F108A Table G.E+W+S

(1)The Secretary of State may by regulations prescribe aTable G containing articles of association appropriate for a partnership company, that is, a company limited by shares whose shares are intended to be held to a substantial extent by or on behalf of its employees.

(2)A company limited by shares may for its articles adopt the whole or any part of that Table.

(3)If in consequence of regulations under this section Table G 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)Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.]

Textual Amendments

9 Alteration of articles by special resolution.E+W+S

(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 consequencesE+W+S

10 Documents to be sent to registrar.E+W+S

(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.

11 Minimum authorised capital (public companies).E+W+S

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).

12 Duty of registrar.E+W+S

(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)[F11Subject to subsection (3A), 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.

[F12(3A)In place of the statutory declaration referred to in subsection (3), there may be delivered to the registrar of companies using electronic communications a statement made by a person mentioned in paragraph (a) or (b) of subsection (3) that the requirements mentioned in subsection (1) have been complied with; and the registrar may accept such a statement as sufficient evidence of compliance.

F12(3B)Any person who makes a false statement under subsection (3A) which he knows to be false or does not believe to be true is liable to imprisonment or a fine, or both.]

Textual Amendments

F11Words in s. 12(3) substituted (22.12.2000) by S.I. 2000/3373, art. 3(1)(2)

F12S. 12(3A)(3B) inserted (22.12.2000) by S.I. 2000/3373, art. 3(1)(3)

Modifications etc. (not altering text)

C101S. 12(2) modified (27.7.1999) by 1999 c. 20, s. 4(1) (with s. 15)

13 Effect of registration.E+W+S

(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 [F13and the Insolvency 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.

Textual Amendments

Modifications etc. (not altering text)

C102S. 13 excluded (8.10.2004) by The European Public Limited-Liability Company Regulations 2004 (S.I. 2004/2326), regs. 85, 88, Sch. 4 para. 6 (with para. 11)

14 Effect of memorandum and articles.E+W+S

(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 speciality debt.

Modifications etc. (not altering text)

C104S. 14 modified (12.2.1992) by S.I. 1992/225, regs. 1, 119(1).

15 Memorandum and articles of company limited by guarantee. E+W+S

(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.

Modifications etc. (not altering text)

16 Effect of alteration on company’s members.E+W+S

(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.

17 Conditions in memorandum which could have been in articles.E+W+S

(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.

Modifications etc. (not altering text)

18 Amendments of memorandum or articles to be registered. E+W+S

(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.

Modifications etc. (not altering text)

C107S. 18 applied with modifications by S.I. 1985/680, regs. 4–6, Sch.

C108S. 18(3) extended (12.2.1992) by S.I. 1992/225, regs. 1, 119(3).

19 Copies of memorandum and articles to be given to members.E+W+S

(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.

20 Issued copy of memorandum to embody alterations.E+W+S

(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.

21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E+W+S

F14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

A company’s membershipE+W+S

22 Definition of “member”.E+W+S

(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.

Modifications etc. (not altering text)

C110S. 22(1) excluded (8.10.2004) by The European Public Limited-Liability Company Regulations 2004 (S.I. 2004/2326), regs. 85, 88, Sch. 4 para.7 (with para. 11)

[F1523 Membership of holding company. E+W+S

(1)Except as mentioned 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)The prohibition does not apply where the subsidiary is concerned only as personal representative or trustee unless, in the latter case, the holding company or a subsidiary of it is beneficially interested under the trust.

For the purpose of ascertaining whether the holding company or a subsidiary is so interested, there shall be disregarded—

(a)any interest held only by way of security for the purposes of a transaction entered into by the holding company or subsidiary in the ordinary course of a business which includes the lending of money;

(b)any such interest as is mentioned in Part I of Schedule 2.

[F16(3)The prohibition does not apply where shares in the holding company are held by the subsidiary in the ordinary course of its business as an intermediary.

For this purpose a person is an intermediary if that person—

(a)

carries on a bona fide business of dealing in securities;

(b)

is a member of an EEA exchange (and satisfies any requirements for recognition as a dealer in securities laid down by that exchange) or is otherwise approved or supervised as a dealer in securities under the laws of an EEA State; and

(c)

does not carry on an excluded business.

(3A)The excluded businesses are the following—

(a)any business which consists wholly or mainly in the making or managing of investments;

(b)any business which consists wholly or mainly in, or is carried on wholly or mainly for the purpose of, providing services to persons who are connected with the person carrying on the business;

(c)any business which consists in insurance business;

(d)any business which consists in managing or acting as trustee in relation to a pension scheme or which is carried on by the manager or trustee of such a scheme in connection with or for the purposes of the scheme;

(e)any business which consists in operating or acting as trustee in relation to a collective investment scheme or is carried on by the operator or trustee of such a scheme in connection with or for the purposes of the scheme.

(3B)For the purposes of subsections (3) and (3A)—

(a)the question whether a person is connected with another shall be determined in accordance with the provisions of section 839 of the Income and Corporation Taxes Act 1988 M1;

(b)'collective investment scheme’ has the meaning given in section 75 of the Financial Services Act 1986 M2;

(c)'EEA exchange’ means a market which appears on the list drawn up by an EEA State pursuant to Article 16 of Council Directive 93/22/EEC on investment services in the securities field M3;

(d)'insurance business’ means long term business or general business as defined in section 1 of the Insurance Companies Act 1982 M4;

(e)'securities’ include investments falling within paragraphs 7, 8 and 9 of Schedule 1 to the Financial Services Act 1986 and, so far as relevant to any of those paragraphs, paragraph 11 of that Schedule;

(f)'trustee’ and 'the operator’ shall, in relation to a collective investment scheme, be construed in accordance with section 75(8) of the Financial Services Act 1986.

(3C)Where—

(a)a subsidiary which is a dealer in securities has purportedly acquired shares in its holding company in contravention of the prohibition in subsection (1); and

(b)a person acting in good faith has agreed, for value and without notice of that contravention, to acquire shares in the holding company from the subsidiary or from someone who has purportedly acquired the shares after their disposal by the subsidiary,

any transfer to that person of the shares mentioned in paragraph (a) shall have the same effect as it would have had if their original acquisition by the subsidiary had not been in contravention of the prohibition.]

(4)Where a body corporate became a holder of shares in a company—

(a)before 1st July 1948, or

(b)on or after that date and before [F1720th October 1997], in circumstances in which this section as it then had effect did not apply,

but at any time [F18on or after [F1720th October 1997]]falls within the prohibition in subsection (1) above in respect of those shares, it may continue to be a member of that company; but for so long as that prohibition would apply, apart from this subsection, it has no right to vote in respect of those shares at meetings of the company or of any class of its members.

(5)Where a body corporate becomes a holder of shares in a company [F18on or after [F17 20th October 1997]]in circumstances in which the prohibition in subsection (1) does not apply, but subsequently falls within that prohibition in respect of those shares, it may continue to be a member of that company; but for so long as that prohibition would apply, apart from this subsection, it has no right to vote in respect of those shares at meetings of the company or of any class of its members.

(6)Where a body corporate is permitted to continue as a member of a company by virtue of subsection (4) or (5), an allotment to it of fully paid shares in the company may be validly made by way of capitalisation of reserves of the company; but for so long as the prohibition in subsection (1) would apply, apart from subsection (4) or (5), it has no right to vote in respect of those shares at meetings of the company or of any class of its members.

(7)The provisions of this section apply to a nominee acting on behalf of a subsidiary as to the subsidiary itself.

(8)In relation to a company other than a company limited by shares, the references in this section to shares shall be construed as references to the interest of its members as such, whatever the form of that interest.]

Textual Amendments

F16S. 23(3)-(3C) substituted (20.10.1997) for s. 23(3) by S.I. 1997/2306, reg. 2

F17Words in s. 23(4)(5) substituted (20.10.1997) by S.I. 1997/2306, reg. 3

F18Substituted by S.I. 1990/1392, art. 8(b) as amended by S.I. 1990/1707, art. 8(2)

Modifications etc. (not altering text)

C112S. 23 modified (subject to the transitional and savings provisions as mentioned in S.I. 1990/1392, art. 6) by Companies Act 1989 (c.40, SIF 27), ss. 144(4), 213(2), Sch. 18 para. 32(2)

C113S. 23 restricted (subject to the transitional and savings provisions as mentioned in S.I. 1990/1392, art. 6) by Companies Act 1989 (c.40, SIF 27), ss. 144(4), 213(2), Sch. 18 para. 32(3)

Marginal Citations

M11988 c. 1; section 839 was amended by section 74 of, and paragraph 20 of Part II of Schedule 17 to, the Finance Act 1995 (c. 4), and modified by S.I. 1988/745.

M21986 c. 60; section 75 was amended by article 6(a) and (b) of S.I. 1990/349 and modified by regulation 55 of, and paragraph 24 of Schedule 9 to, S.I. 1992/3218.

M3O.J. L141, 11.6.93, p. 27.

24 Minimum membership for carrying on business.E+W+S

If a company [F19other than a private company limited by shares or by guarantee,] 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.

Textual Amendments

F19Words in s. 24 inserted (15.7.1992) by S.I. 1992/1699, reg. 2, Sch. para.2.

Modifications etc. (not altering text)

C114S. 24 modified (12.2.1992) by S.I. 1992/225, reg. 61(7).

S. 24 amended (15.7.1992) by S.I. 1992/1699, reg.3.

S. 24 applied (with modifications) (6.4.2001) by S.I. 2001/1090, reg. 4, Sch. 2 Pt. I

Chapter IIE+W+S Company Names

25 Name as stated in memorandum.E+W+S

(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.

Modifications etc. (not altering text)

26 Prohibition on registration of certain names.E+W+S

(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;

[F20(bb)which includes, at any place in the name, the expression “investment company with variable capital” or its Welsh equivalent (“cwmni buddsoddi â chyfalaf newidiol”);]

[F21(bbb)which includes, at any place in the name, the expression “limited liability partnership” or its Welsh equivalent (“partneriaeth atebolrwydd cyfyngedig”);]

(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 M5Local Government Act 1972 or the M6Local 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”), F22. . .

  • “public limited company” or its Welsh equivalent (“cwmni cyfyngedig cyhoeddus”); [F23and

  • “investment company with variable capital” or its Welsh equivalent (“cwmni buddsoddi â chyfalaf newidiol”);]

(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.

Textual Amendments

F22Word in s. 26(3)(b) omitted (6.1.1997) by virtue of S.I. 1996/2827, reg. 75, Sch. 8 Pt. I para. 4(b)

Modifications etc. (not altering text)

C116S. 26(1)(c) extended (with modifications) by S.I. 1989/638, regs. 10(2), 18, 21, Sch. 4 para. 1

C117S. 26(1)(d)(e) extended (with modifications) by S.I. 1989/638, regs. 18, 21, Sch. 4 para. 1

C118S. 26(2) restricted (10.5.2001) by 1999 c. 19, s. 2; S.I. 2001/258, art. 2

C119S. 26(2)(3) extended (with modifications) by S.I. 1989/638, regs. 18, 21, Sch. 4 para. 1

C120S. 26(2)(a) excluded (19.7.1995) by 1995 c. 24, s. 6

C121S. 26(3) applied (with modifications) (E.W.) (1.9.1992) by Charities Act 1992 (c. 41), s. 4(7)(9); S.I. 1992/1900, art. 2(1), Sch. 1.

S. 26(3) applied (E.W.) (1.8.1993) by 1993 c. 10, ss. 6(7), 99(1)

Marginal Citations

27 Alternatives of statutory designations.E+W+S

(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.”.

28 Change of name.E+W+S

(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.

29 Regulations about names.E+W+S

(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 [F24under section 12(3) or statement under section 12(3A) (as the case may be)],

(b)in the case of a company seeking to be registered under section 680, the persons making the statutory declaration [F25under section 686(2) or statement under section 686(2A) (as the case may be)], 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 [F26or statement], 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.

Textual Amendments

F24Words in s. 29(2)(a) substituted (22.12.2000) by S.I. 2000/3373, art. 31(1)(a)

F25Words in s. 29(2)(b) substituted (22.12.2000) by S.I. 2000/3373, art. 31(1)(b)

F26Words in s. 29(3)(a) inserted (22.12.2000) by S.I. 2000/3373, art. 31(1)(c)

Modifications etc. (not altering text)

C126S. 29(1)(a) extended (with modifications) by S.I. 1989/638, regs. 18, 21, Sch. 4 para. 3

30 Exemption from requirement of “limited” as part of the name.E+W+S

(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 M7Companies 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)[F27Subject to subsection (5A), 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 F28. . ..

(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.

[F29(5A)In place of the statutory declaration referred to in subsection (4), there may be delivered to the registrar of companies using electronic communications a statement made by a person falling within the applicable paragraph of subsection (5) stating that the company complies with the requirements of subsection (3); and the registrar may accept such a statement as sufficient evidence of the matters stated in it.

F29(5B)The registrar may refuse to register a company by a name which does not include the word “limited” unless a statutory declaration under subsection (4) or statement under subsection (5A) has been delivered to him.

F29(5C)Any person who makes a false statement under subsection (5A) which he knows to be false or does not believe to be true is liable to imprisonment or a fine, or both.]

(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.

Textual Amendments

F27Words in s. 30(4) substituted (22.12.2000) by S.I. 2000/3373, art. 5(1)(2)(a)

F28Words in s. 30(4) omitted (22.12.2000) by virtue of S.I. 2000/3373, art. 5(1)(2)(b)

Modifications etc. (not altering text)

C128S. 30(7) restricted (E.W.) (1.1.1993) by Charities Act 1960 (c. 58), s. 30BB (as inserted (1.1.1993) by Charities Act 1992 (c. 41), s. 42; S.I. 1992/1900, art. 4, Sch. 3).

S. 30(7) excluded (E.W.) (1.8.1993) by 1993 c. 10, ss. 67, 99(1)

Marginal Citations

31 Provisions applying to company exempt under s. 30. E+W+S

(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.

32 Power to require company to abandon misleading name.E+W+S

(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.

Modifications etc. (not altering text)

C131S. 32 restricted (19.7.1995) by 1995 c. 24, s. 6

33 Prohibition on trading under misleading name.E+W+S

(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 daily default fine.

34 Penalty for improper use of “limited” or “cyfyngedig”.E+W+S

If any person trades or carries on business under a name or title of which “limited” of “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.

Modifications etc. (not altering text)

C132S. 34 modified (8.10.2004) by The European Public Limited-Liability Company Regulations 2004 (S.I. 2004/2326), regs. 85, 88, Sch. 4 para.8 (with para. 11)

Valid from 01/07/2005

34APenalty for improper use of “community interest company” etc.E+W+S

(1)A company which is not a community interest company is guilty of an offence if it carries on any trade, profession or business under a name which includes any of the expressions specified in subsection (3).

(2)A person other than a company is guilty of an offence if it carries on any trade, profession or business under a name which includes any of those expressions (or any contraction of them) as its last part.

(3)The expressions are—

(a)“community interest company” or its Welsh equivalent (“cwmni buddiant cymunedol”), and

(b)“community interest public limited company” or its Welsh equivalent (“cwmni buddiant cymunedol cyhoeddus cyfyngedig”).

(4)Subsections (1) and (2) do not apply—

(a)to a person who was carrying on a trade, profession or business under the name in question at any time during the period beginning with 1st September 2003 and ending with 4th December 2003, or

(b)if the name in question was on 4th December 2003 a registered trade mark or Community trade mark (within the meaning of the Trade Marks Act 1994 (c. 26)), to a person who was on that date a proprietor or licensee of that trade mark.

(5)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 daily default fine.

Chapter IIIE+W+S A Company’s Capacity; Formalities of Carrying on Business

[F3035 A company’s capacity not limited by its memorandum.E+W+S

(1)The validity of an act done by a company shall not be called into question on the ground of lack of capacity by reason of anything in the company’s memorandum.

(2)A member of a company may bring proceedings to restrain the doing of an act which but for subsection (1) would be beyond the company’s capacity; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.

(3)It remains the duty of the directors to observe any limitations on their powers flowing from the company’s memorandum; and action by the directors which but for subsection (1) would be beyond the company’s capacity may only be ratified by the company by special resolution.

A resolution ratifying such action shall not affect any liability incurred by the directors or any other person; relief from any such liability must be agreed to separately by special resolution.

(4)The operation of this section is restricted by [F31section 65(1) of the Charities Act 1993]] and section 112(3) of the M8Companies Act 1989 in relation to companies which are charities; and section 322A below (invalidity of certain transactions to which directors or their associates are parties) has effect notwithstanding this section.

Textual Amendments

F30Ss. 35, 35A, 35B substituted (4. 2. 1991) for s. 35 (subject to the transitional and savings provisions in S.I. 1990/2569, art. 7) by Companies Act 1989 (c. 40), ss. 108(1), 213(2)

F31Words in s. 35(4) substituted (1.8.1993) by 1993 c. 10, ss. 98(1), 99(1), Sch. 6 para. 20(2)

Modifications etc. (not altering text)

C133S. 35 excluded by Charities Act 1960 (c. 58, SIF 19), s. 30B(1) as substituted (4. 2. 1991) (with transitional and savings provisions in S.I. 1990/2569, art. 7) by Companies Act 1989 (c. 40, SIF 27), ss. 111(1), 213

S. 35 excluded by S.I. 1990/2569, art. 7(1)

S. 35 excluded (S) (4. 2. 1991) by Companies Act 1989 (c. 40, SIF 27), ss. 112(3), 213(2)

C134S. 35 applied with modifications by S.I. 1985/680, regs. 4-6, Sch. as amended (4. 2. 1991) by S.I. 1990/2571, reg. 2(a)(b)

S. 35 excluded (E.W.) (1.8.1993) by 1993 c. 10, ss. 65(1), 99(1)

C135S. 35(3) modified by Charities Act 1960 (c. 58, SIF 19), s. 30(B)(4) as substituted (4. 2. 1991) (subject to the transitional and savings provisions in S.I. 1990/2569, art. 7), by Companies Act 1989 (c. 40, SIF 27), ss. 111(1), 213(2)

S. 35(3) restricted (E.W.) (1.8.1993) by 1993 c. 10, ss. 65(4), 99(1)

Marginal Citations

[F3235A Power of directors to bind the company.E+W+S

(1)In favour of a person dealing with a company in good faith, the power of the board of directors to bind the company, or authorise others to do so, shall be deemed to be free of any limitation under the company’s constitution.

(2)For this purpose—

(a)a person “deals with” a company if he is a party to any transaction or other act to which the company is a party;

(b)a person shall not be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the company’s constitution; and

(c)a person shall be presumed to have acted in good faith unless the contrary is proved.

(3)The references above to limitations on the directors’ powers under the company’s constitution include limitations deriving—

(a)from a resolution of the company in general meeting or a meeting of any class of shareholders, or

(b)from any agreement between the members of the company or of any class of shareholders.

(4)Subsection (1) does not affect any right of a member of the company to bring proceedings to restrain the doing of an act which is beyond the powers of the directors; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.

(5)Nor does that subsection affect any liability incurred by the directors, or any other person, by reason of the directors’ exceeding their powers.

(6)The operation of this section is restricted by [F33section 65(1) of the Charities Act 1993] and section 112(3) of the Companies Act 1989 in relation to companies which are charities; and section 322A below (invalidity of certain transactions to which directors or their associates are parties) has effect notwithstanding this section.]

Textual Amendments

F32Ss. 35, 35A, 35B substituted (4.2.1991) for s. 35 (subject to the transitional and savings provisions in S.I. 1990/2569, art. 7) by Companies Act 1989 (c. 40, SIF 27), ss. 108(1), 213(2)

F33Words in s. 35A(6) substituted (1.8.1993) by 1993 c. 10, ss. 98(1), 99(1), Sch. 6 para. 20(2)

Modifications etc. (not altering text)

C136S. 35A excluded by Charities Act 1960 (c. 58, SIF 19), s. 30B(1) as substituted (4.2.1991) (subject to the transitional and savings provisions in S.I. 1990/2569, art. 7) by Companies Act 1989 (c.40, SIF 27), ss. 111(1), 213(2)

C139S. 35A applied with modifications by S.I. 1985/680, arts. 4–6, Sch. as amended (4.2.1991) by S.I. 1990/2571, reg. 2(a)(b)

S. 35A excluded (E.W.) (1.8.1993) by 1993 c. 10, ss. 65(1), 99(1)

[F3435B No duty to enquire as to capacity of company or authority of directors. E+W+S

A party to a transaction with a company is not bound to enquire as to whether it is permitted by the company’s memorandum or as to any limitation on the powers of the board of directors to bind the company or authorise others to do so.]

Textual Amendments

F34Ss. 35, 35A, 35B substituted (4.2.1991) for s. 35 (subject to the transitional and savings provisions in S.I. 1990/2569, art. 7) by Companies Act 1989 (c. 40, SIF 27), ss. 108(1), 213(2)

Modifications etc. (not altering text)

C140S. 35B applied with modifications by S.I. 1985/680, arts. 4–6, Sch. as amended (4.2.1991) by S.I. 1990/2571, reg. 2(a)(b)

S. 35B applied (with modifications) by S.S.I. 2001/128, reg. 3, Sch. 1

[F3536 Company contracts: England and Wales. E+W+S

Under the law of England and Wales a contract may be made—

(a)by a company, by writing under its common seal, or

(b)on behalf of a company, by any person acting under its authority, express or implied;

and any formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company.]

Textual Amendments

Modifications etc. (not altering text)

C141S. 36: power to apply conferred by Companies Act 1989 (c. 40, SIF 27), ss. 130(6), 213(2)

C142Ss. 36-36C applied (with modifications) (16.5.1994) by S.I. 1994/950, regs. 2-6

S. 36 applied (with modifications) (6.4.2001) by S.I. 2001/1090, reg. 4, Sch. 2 Pt. I

[F3636A Execution of documents: England and Wales. E+W+S

(1)Under the law of England and Wales the following provisions have effect with respect to the execution of documents by a company.

(2)A document is executed by a company by the affixing of its common seal.

(3)A company need not have a common seal, however, and the following subsections apply whether it does or not.

(4)A document signed by a director and the secretary of a company, or by two directors of a company, and expressed (in whatever form of words) to be executed by the company has the same effect as if executed under the common seal of the company.

(5)A document executed by a company which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed.

(6)In favour of a purchaser a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company, and, where it makes it clear on its face that it is intended by the person or persons making it to be a deed, to have been delivered upon its being executed.

A “purchaser” means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.]

Textual Amendments

Modifications etc. (not altering text)

C143S. 36A: power to apply conferred by Companies Act 1989 (c. 40, SIF 27), ss. 130(6), 213(2)

C144S. 36A applied with modifications by S.I. 1985/680, arts. 4–6, Sch. as amended by S.I. 1990/1394, reg. 2

C145S. 36A applied (with modifications) (6.4.2001) by S.I. 2001/1090, reg. 4, Sch. 2 Pt. I

C146Ss. 36-36C applied (with modifications) (16.5.1994) by S.I. 1994/950, regs. 2-6

Valid from 15/09/2005

36AAExecution of deeds: England and WalesE+W

(1)A document is validly executed by a company as a deed for the purposes of section 1(2)(b) of the Law of Property (Miscellaneous Provisions) Act 1989, if and only if—

(a)it is duly executed by the company, and

(b)it is delivered as a deed.

(2)A document shall be presumed to be delivered for the purposes of subsection (1)(b) upon its being executed, unless a contrary intention is proved.

[F3736B Execution of documents by companies.E+W+S

(1)Notwithstanding the provisions of any enactment, a company need not have a company seal.

(2)For the purposes of any enactment—

(a)providing for a document to be executed by a company by affixing its common seal; or

(b)referring (in whatever terms) to a document so executed,

a document signed or subscribed by or on behalf of the company in accordance with the provisions of the Requirements of Writing (Scotland) Act 1995 shall have effect as if so executed.

(3)In this section “enactment” includes an enactment contained in a statutory instrument.]

Textual Amendments

F37S. 36B substituted (S.) (1.8.1995) by 1995 c. 7, ss. 14(1), 15(2), Sch. 4 para. 51 (with ss. 9(3)(5)(7), 13, 14(3))

Modifications etc. (not altering text)

C148S. 36B applied (with modifications) (S.) (6.4.2001) by S.S.I. 2001/128, reg. 3, Sch. 1

[F3836C Pre-incorporation contracts, deeds and obligations. E+W+S

(1)A contract which purports to be made by or on behalf of a company at a time when the company has not been formed has effect, subject to any agreement to the contrary, as one made with the person purporting to act for the company or as agent for it, and he is personally liable on the contract accordingly.

(2)Subsection (1) applies—

(a)to the making of a deed under the law of England and Wales, and

(b)to the undertaking of an obligation under the law of Scotland,

as it applies to the making of a contract.]

Textual Amendments

Modifications etc. (not altering text)

C150S. 36C: power to apply conferred by Companies Act 1989 (c. 40, SIF 27), ss. 130(6), 213(2)

C151S. 36C applied with modifications by S.I. 1985/680, arts. 4–6, Sch. (as amended by S.I. 1990/1394, reg. 2)

C152Ss. 36-36C applied (with modifications) (16.5.1994) by S.I. 1994/950, regs. 2-6

S. 36C applied (with modifications) (6.4.2001) by S.I. 2001/1090, reg. 4, Sch. 2 Pt. I

37 Bills of exchange and promissory notes.E+W+S

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.

Modifications etc. (not altering text)

C153S. 37 applied (with modifications) (6.4.2001) by S.I. 2001/1090, reg. 4, Sch. 2 Pt. I

38 Execution of deeds abroad.E+W+S

(1)A company may . . . F39, 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.

[F40(2)A deed executed by such an attorney on behalf of the company has the same effect as if it were executed under the company’s common seal.]

[F41(3)This section does not extend to Scotland.]

39 Power of company to have official seal for use abroad.E+W+S

(1)A company [F42which has a common seal] 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 [F43its common seal], with the addition on its face of the name of every territory, district or place where it is to be used.

[F44(2)The official seal when duly affixed to a document has the same effect as the company’s common seal.]

[F45(2A)Subsection (2) does not extend to Scotland.]

(3)A company having an official seal for use in any such territory, district or place may, by writing under its common seal [F46or as respects Scotland by writing subscribed in accordance with the Requirements of Writing (Scotland) Act 1995] . . . F47, 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.

[F4840 Official seal for share certificates, etc. E+W+S

(1)A company [F49which has a common seal] 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 [F50its common seal] with the addition on its face of the word “Securities”. [F51The official seal when duly affixed to a document has the same effect as the company’s common seal.]]

[F52(2)Nothing in this section shall affect the right of a company registered in Scotland to subscribe such securities and documents in accordance with the Requirements of Writing (Scotland) Act 1995.]

Textual Amendments

F48S. 40 renumbered as s. 40(1) (1.8.1995) by 1995 c. 7, ss. 14(1), 15(2), Sch. 4 para. 54 (with ss. 9(3)(5)(7), 13, 14(3))

Modifications etc. (not altering text)

C156S. 40 applied with modifications by S.I. 1985/680, regs. 4–6, Sch.

41 Authentication of documents.E+W+S

A document or proceeding requiring authentication by a company [F53is sufficiently authenticated for the purposes of the law of England and Wales by the signature of a director, secretary or other authorised officer of the company.]

Textual Amendments

Modifications etc. (not altering text)

C157S. 41 applied (with modifications) (6.4.2001) by S.I. 2001/1090, reg. 4, Sch. 2 Pt. I

42 Events affecting a company’s status. E+W+S

(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.

Modifications etc. (not altering text)

C158S. 42 applied with modifications by S.I. 1985/680, regs. 4–6, Sch.

C159S. 42 applied (with modifications) by S.I. 2001/1090, reg. 4, Sch. 2 Pt. I

Part IIE+W+S Re-registration as a means of altering a company’s status

Private company becoming publicE+W+S

43 Re-registration of private company as public.E+W+S

(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 next 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)[F54Subject to subsection (3A),]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.

[F55(3A)In place of the statutory declaration referred to in paragraph (e) of subsection (3), there may be delivered to the registrar of companies using electronic communications a statement made by a director or secretary of the company as to the matters set out in sub-paragraphs (i) and (ii) of that paragraph.

F55(3B)Any person who makes a false statement under subsection (3A) which he knows to be false or does not believe to be true is liable to imprisonment or a fine, or both.]

(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.

Textual Amendments

F54Words in s. 43(3)(e) inserted (22.12.2000) by S.I. 2000/3373, art. 6(1)(2)

F55S. 43(3A)(3B) inserted (22.12.2000) by S.I. 2000/3373, art. 6(3)

44 Consideration for shares recently allotted to be valued.E+W+S

(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 [F56section 110 of the Insolvency Act] (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 M9Chartered Companies Act 1837.

Textual Amendments

Marginal Citations

45 Additional requirements relating to share capital.E+W+S

(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 re-registered 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).

46 Meaning of “unqualified report” in s. 43(3).E+W+S

(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.

[F57(2)If the balance sheet was prepared for a financial year of the company, the reference is to an auditors’ report stating without material qualification the auditors’ opinion that the balance sheet has been properly prepared in accordance with this Act.

(3)If the balance sheet was not prepared for a financial year of the company, the reference is to an auditors’ report stating without material qualification the auditors’ opinion that the balance sheet has been properly prepared in accordance with the provisions of this Act which would have applied if it had been so prepared.

For the purposes of an auditors’ report under this subsection the provisions of this Act shall be deemed to apply with such modifications as are necessary by reason of the fact that the balance sheet is not prepared for a financial year of the company.

(4)A qualification shall be regarded as material unless the auditors state in their report that the matter giving rise to the qualification is not material for the purpose of determining (by reference to the company’s 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.

In this subsection “net assets” and “undistributable reserves” have the meaning given by section 264(2) and (3).]

Textual Amendments

F57S. 46(2)-(4) substituted for s. 46(2)-(6) by Companies Act 1989 (c. 40, SIF 27), ss. 23, 213(2), Sch. 10 para. 1 (subject to transitional and saving provisions in S.I. 1990/355, arts. 6-9, Sch. 3 para. 1)

47 Certificate of re-registration under s. 43.E+W+S

(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) [F58or a statement under section 43(3A)]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.

48 Modification for unlimited company re-registering.E+W+S

(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 unlimitedE+W+S

49 Re-registration of limited company as unlimited.E+W+S

(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 M10Companies 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 re-registered 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)[F59Subject to subsection (8A),]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.

[F60(8A)In place of the lodging of a statutory declaration under paragraph (b) of subsection (8), there may be delivered to the registrar of companies using electronic communications a statement made by the directors of the company as to the matters set out in sub-paragraphs (i) and (ii) of that paragraph.

F60(8B)Any person who makes a false statement under subsection (8A) which he knows to be false or does not believe to be true is liable to imprisonment or a fine, or both.]

(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.

Textual Amendments

F59Words in s. 49(8)(b) inserted (22.12.2000) by S.I. 2000/3373, art. 8(1)(2)

F60S. 49(8A)(8B) inserted (22.12.2000) by S.I. 2000/3373, art. 8(1)(3)

Modifications etc. (not altering text)

Marginal Citations

50 Certificate of re-registration under s. 49.E+W+S

(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 limitedE+W+S

51 Re-registration of unlimited company as limited.E+W+S

(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 re-registering under it if it is unlimited by virtue of re-registration under section 43 of the M11Companies 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.

Marginal Citations

52 Certification of re-registration under s. 51.E+W+S

(1)The register 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 privateE+W+S

53 Re-registration of public company as private.E+W+S

(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.

54 Litigated objection to resolution under s. 53. E+W+S

(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.

Modifications etc. (not altering text)

55 Certificate of re-registration under s. 53.E+W+S

(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.

[F61F62Part IIIU.K. Capital Issues

Textual Amendments

F61Pt. III (ss. 56-79) repealed by Financial Services Act 1986 (c. 60, SIF 69), ss. 211(1), 212(3), Sch. 17 Pt. I (the repeal coming into force as mentioned in S.I. 1986/2246, art. 5, Sch. 4, S.I. 1988/740, arts. 2-7, Sch. (as amended by S.I 1988/1960, arts. 2-4 and by S.I. 1988/2285, arts. 2-6) and S.I. 1995/1538, art. 2 and otherwise prosp.)

F62Ss. 56-79 repealed (prosp.) by Companies Act 2006 (c. 46), ss. 1295, 1300, Sch. 16 and the repeal being partly in force, as to which see individual sections.

Modifications etc. (not altering text)

C165Pt. III (ss. 56-79): functions transferred from the Secretary of State to the Treasury (7.6.1992) by S.I. 1992/1315, arts. 2(3)(4), 6.

Chapter IE+W+S Issues by Companies Registered, or to be Registered, in Great Britain

Modifications etc. (not altering text)

C166Pt. III Ch. I (ss.56–71) applied with modifications by S.I. 1985/680, regs. 4–6, Sch.

The prospectusE+W+S

56 Matters to be stated, and reports to be set out, in prospectus.E+W+S

(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.

Modifications etc. (not altering text)

57 Attempted evasion of s. 56 to be void.E+W+S

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.

58 Document offering shares etc. for sale deemed a prospectus.E+W+S

(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.

Modifications etc. (not altering text)

59 Rule governing what is an “offer to the public".E+W+S

(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.

60 Exceptions from rule in s. 59.E+W+S

(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.

Modifications etc. (not altering text)

C169S. 60(8) amended (2.10.1991) by S.I. 1991/2000, reg. 5(1).

61 Prospectus containing statement by expert.E+W+S

(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.

Modifications etc. (not altering text)

62 Meaning of “expert”.E+W+S

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.

63 Prospectus to be dated.E+W+S

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.

Modifications etc. (not altering text)

Registration of prospectusE+W+S

64 Registration requirement applicable in all cases.E+W+S

(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.

Modifications etc. (not altering text)

65 Additional requirements in case of prospectus issued generally.E+W+S

(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 prospectusE+W+S

66 Directors, etc. exempt from liability in certain cases.E+W+S

(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.

67 Compensation for subscribers misled by statement in prospectus.E+W+S

(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.

68 Exemption from s. 67 for those acting with propriety.E+W+S

(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.

69 Indemnity for innocent director or expert.E+W+S

(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 proceedings 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.

70 Criminal liability for untrue statements.E+W+S

(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.

SupplementaryE+W+S

71 Interpretation for ss. 56 to 70.E+W+S

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 IIU.K. Issues by Companies Incorporated, or to be Incorporated, Outside Great Britain

72 Prospectus of oversea company.U.K.

(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.

Modifications etc. (not altering text)

73 Attempted evasion of s. 72 to be void.U.K.

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.

74 Prospectus containing statement by expert.U.K.

(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.

Modifications etc. (not altering text)

75 Restrictions on allotment to be secured in prospectus.U.K.

(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.

Modifications etc. (not altering text)

76 Stock exchange certificate exempting from compliance with Sch. 3.U.K.

(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.

77 Registration of oversea prospectus before issue.U.K.

(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.

Modifications etc. (not altering text)

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

(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.

79 Supplementary.U.K.

(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.]

Modifications etc. (not altering text)

Part IVE+W+S Allotment of Shares and Debentures

General provisions as to allotmentE+W+S

80 Authority of company required for certain allotments.E+W+S

(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 [F63or section 80A], 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 M12Companies Act 1980 or this section has effect for those purposes if passed at any time after the end of April 1980.

Textual Amendments

F63Words inserted (subject to the transitional and savings provisions in S.I. 1990/355, arts. 4, 10, Sch. 4) by Companies Act 1989 (c. 40, SIF 27), ss. 115(1), 213(2)

Marginal Citations

[F6480A Election by private company as to duration of authority.E+W+S

(1)A private company may elect (by elective resolution in accordance with section 379A) that the provisions of this section shall apply, instead of the provisions of section 80(4) and (5), in relation to the giving or renewal, after the election, of an authority under that section.

(2)The authority must state the maximum amount of relevant securities that may be allotted under it and may be given—

(a)for an indefinite period, or

(b)for a fixed period, in which case it must state the date on which it will expire.

(3)In either case an authority (including an authority contained in the articles) may be revoked or varied by the company in general meeting.

(4)An authority given for a fixed period may be renewed or further renewed by the company in general meeting.

(5)A resolution renewing an authority—

(a)must state, or re-state, 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

(b)must state whether the authority is renewed for an indefinite period or for a fixed period, in which case it must state the date on which the renewed authority will expire.

(6)The references in this section to the maximum amount of relevant securities that may be allotted shall be construed in accordance with section 80(6).

(7)If an election under this section ceases to have effect, an authority then in force which was given for an indefinite period or for a fixed period of more than five years—

(a)if given five years or more before the election ceases to have effect, shall expire forthwith, and

(b)otherwise, shall have effect as if it had been given for a fixed period of five years.]

Textual Amendments

F64S. 80A inserted (subject to the transitional and savings provisions as mentioned in S.I. 1990/355, arts. 4, 10, Sch. 4) by Companies Act 1989 (c. 40, SIF 27), ss. 115(1), 213(2)

[F6581 Restriction on public offers by private company. E+W+S

(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.]

Textual Amendments

Modifications etc. (not altering text)

[F6682 Application for, and allotment of, shares and debentures. E+W+S

(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.]

Textual Amendments

F66Ss. 82, 83 repealed (29.4.1988 for specified purposes and 10.5.1999 for further specified purposes and otherwiseprosp.) by Financial Services Act 1986 (c.60, SIF 69), ss. 211(1), 212(3), Sch. 17 Pt. I; S.I. 1988/740, art. 2, Sch.; S.I. 1999/727, art. 2(a)

Modifications etc. (not altering text)

C179S. 82 applied with modifications by S.I. 1985/680, regs. 4–6, Sch.

[F6783 No allotment unless minimum subscription received.E+W+S

(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.]

Textual Amendments

F67Ss. 82, 83 repealed (29.4.1988 for specified purposes and 10.5.1999 for further specified purposes and otherwiseprosp.) by Financial Services Act 1986 (c.60, SIF 69), ss. 211(1), 212(3), Sch. 17 Pt. I; S.I. 1988/740, art. 2, Sch.; S.I. 1999/727, art. 2(a)

84 Allotment where issue not fully subscribed.E+W+S

(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.

[F68This 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.

Textual Amendments

85 Effect of irregular allotment.E+W+S

(1)An allotment made by a company to an applicant in contravention of section [F6983 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.

Textual Amendments

F7086. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E+W+S

Textual Amendments

F70Ss. 86, 87 repealed (29.4.1988 for specified purposes and otherwise 10.5.1999) by Financial Services Act 1986 (c.60, SIF 69), s. 211(1), Sch. 17 Pt. I; S.I. 1988/740, art. 2, Sch.; S.I. 1999/727, art. 2(b)

F7187. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E+W+S

Textual Amendments

F71Ss. 86, 87 repealed (29.4.1988 for specified purposes and otherwise 10.5.1999) by Financial Services Act 1986 (c.60, SIF 69), ss. 211(1), 212(3), Sch. 17 Pt. I; S.I. 1988/740, art. 2, Sch.; S.I. 1999/727, art. 2(b)

88 Return as to allotments, etc.E+W+S

(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 M13Stamp 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.

Modifications etc. (not altering text)

C180S. 88 excluded (27.7.1999) by 1999 c. 20, s. 6(3) (with s. 15)

Marginal Citations

M1354 & 55 Vict c.39.

Pre-emption rightsE+W+S

89 Offers to shareholders to be on pre-emptive basis.E+W+S

(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.

90 Communication of pre-emption offers to shareholders.E+W+S

(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 title 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 addrerss 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.

91 Exclusion of ss. 89, 90 by private company.E+W+S

(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).

92 Consequences of contravening ss. 89, 90.E+W+S

(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.

93 Saving for other restrictions as to offers.E+W+S

(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.

94 Definitions for ss. 89-96.E+W+S

(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.

95 Disapplication of pre-emption rights.E+W+S

(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.

96 Saving for company’s pre-emption procedure operative before 1982.E+W+S

(1)Where a company which is re-registered or registered as a public company is or, but for the provisions of the M14Companies 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.

Marginal Citations

Commissions and discountsE+W+S

97 Power of company to pay commissions.E+W+S

(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;

[F72and

(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].

Textual Amendments

F72Word “and" and s. 97(2)(b),(3)(4) repealed (29.4.1988 except as mentioned in S.I. 1988/740, art. 2, Sch.) by Financial Services Act 1986 (c. 60, SIF 69), ss. 211(1), 212(3), Sch. 17

Modifications etc. (not altering text)

98 Apart from s. 97, commissions and discounts barred.E+W+S

(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 paymentE+W+S

99 General rules as to payment for shares on allotment. E+W+S

(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.

100 Prohibition on allotment of shares at a discount.E+W+S

(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.

101 Shares to be allotted as at least one-quarter paid-up. E+W+S

(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).

102 Restriction on payment by long-term undertaking. E+W+S

(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.

103 Non-cash consideration to be valued before allotment. E+W+S

(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 [F73section 110 of the Insolvency Act] (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 M15Chartered Companies Act 1837.

104 Transfer to public company of non-cash asset in initial period.E+W+S

(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 M16Companies 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.

Marginal Citations

105 Agreements contravening s. 104.E+W+S

(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.

106 Shares issued to subscribers of memorandum. E+W+S

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.

107 Meaning of “the appropriate rate”.E+W+S

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 provisionsE+W+S

108 Valuation and report (s. 103). E+W+S

(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.

109 Valuation and report (s. 104).E+W+S

(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.

110 Entitlement of valuer to full disclosure. E+W+S

(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.

111 Matters to be communicated to registrar. E+W+S

(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 15 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.E+W+S

[F74111A Right to damages, &c. not affected.E+W+S

A person is not debarred from obtaining damages or other compensation from a company by reason only of his holding or having held shares in the company or any right to apply or subscribe for shares or to be included in the company’s register in respect of shares.]

Textual Amendments

112 Liability of subsequent holders of shares allotted. E+W+S

(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, another 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.

113 Relief in respect of certain liabilities under ss. 99 ff. E+W+S

(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.

114 Penalty for contravention. E+W+S

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.

115 Undertakings to do work, etc. E+W+S

(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.

116 Application of ss. 99 ff to special cases.E+W+S

Except as provided by section 9 of the Consequential Provisions Act (transitional cases dealt with by section 31 of the M17Companies Act 1980), sections 99, 101 to 103, 106, 108 [F75, 110, 111 and 112 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.

Textual Amendments

Marginal Citations

Part VU.K. Share Capital, its Increase, Maintenance and Reduction

Chapter IE+W+S General Provisions about Share Capital

117 Public company share capital requirements.E+W+S

(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. [F76This subsection is subject to subsection (3A).]

(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.

[F77(3A)In place of the statutory declaration referred to in subsection (2), there may be delivered to the registrar of companies using electronic communications a statement made by a director or secretary of the company complying with the requirements of subsection (3)(a) to (d).]

(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 [F78or statement] 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.

[F79(7A)Any person who makes a false statement under subsection (3A) which he knows to be false or does not believe to be true is liable to imprisonment or a fine, or both.]

(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.

Textual Amendments

F76Words in s. 117(2) inserted (22.12.2000) by S.I. 2000/3373, art. 9(1)(2)

F77S. 117(3A) inserted (22.12.2000) by S.I. 2000/3373, art. 9(1)(3)

F78Words in s. 117(5) inserted (22.12.2000) by S.I. 2000/3373, art. 9(1)(4)

F79S. 117(7A) inserted (22.12.2000) by S.I. 2000/3373, art. 9(1)(5)

Modifications etc. (not altering text)

C200S. 117 excluded (8.10.2004) by The European Public Limited-Liability Company Regulations 2004 (S.I. 2004/2326), regs. 85, 88, Sch. 4 para. 9(a) (with para. 11)

118 The authorised minimum.E+W+S

(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.

119 Provision for different amounts to be paid on shares.E+W+S

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.

120 Reserve liability of limited company.E+W+S

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.

121 Alteration of share capital (limited companies).E+W+S

(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.

122 Notice to registrar of alteration.E+W+S

(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 fine.

123 Notice to registrar of increased share capital.E+W+S

(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.

124 Reserve capital of unlimited company.E+W+S

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 IIE+W+S Class Rights

125 Variation of class rights.E+W+S

(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.

126 Saving for court’s powers under other provisions.E+W+S

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).

127 Shareholders’ right to object to variation.E+W+S

(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 fine.

(6)“Variation”, in this section, includes abrogation; and “varied” is to be construed accordingly.

128Registration of particulars of special rights.E+W+S

(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.

129 Registration of newly created class rights.E+W+S

(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 IIIE+W+S Share Premiums

130 Application of share premiums.E+W+S

(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.

Modifications etc. (not altering text)

C201S. 130 applied (1.5.1995) by 1988 c. 1, Sch. 28A, para. 5(2)(a)(as inserted by 1995 c. 4, s. 135, Sch. 26 para. 3 (with Sch. 8 para. 55(2), 57(1)))

131 Merger relief.E+W+S

(1)With the exception made by [F80section 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.

(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 [F81section 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.

Textual Amendments

F80S. 131(1): "section 132(8)" substituted (retrospectively) for "section 132(4)" by Companies Act 1989 (c. 40, SIF 27), ss. 145, 213(2), Sch. 19 para. 1

132 Relief in respect of group reconstructions.E+W+S

(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 M18Companies (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 M19Companies 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.

Marginal Citations

133 Provisions supplementing ss. 131, 132.E+W+S

(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.

(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.

134 Provision for extending or restricting relief from s. 130. E+W+S

(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 IVE+W+S Reduction of Share Capital

135 Special resolution for reduction of share capital.E+W+S

(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.E+W+S

(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.

137 Court order confirming reduction.E+W+S

(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.E+W+S

(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.E+W+S

(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.E+W+S

(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 [F82section 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.

Textual Amendments

141 Penalty for concealing name of creditor, etc.E+W+S

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 VE+W+S Maintenance of Capital

Modifications etc. (not altering text)

142 Duty of directors on serious loss of capital.E+W+S

(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.E+W+S

(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 re-registered 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.

144 Aquisition of shares by company’s nominee.E+W+S

(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.

Modifications etc. (not altering text)

C205S. 144(1) excluded by Companies Act 1989 (c. 40, SIF 27), ss. 144(4), 213(2), Sch. 18 para. 35 (subject to the transitional and savings provisions mentioned in S.I. 1990/1392, art. 6)

145 Exceptions from s. 144.E+W+S

(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. E+W+S

(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;

[F83(aa)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.

Textual Amendments

F83S. 146(1)(aa) inserted (21.3.1997) by 1986 c. 53, s. 102C(5) (as inserted (21.3.1997) by 1997 c. 41, s. 1(1) (with s. 2(2))

Modifications etc. (not altering text)

147 Matters arising out of compliance with s. 146(2). E+W+S

(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 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. E+W+S

(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.

149 Sanctions for non-compliance. E+W+S

(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.

150 Charges of public companies on own shares. E+W+S

(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 VIE+W+S Financial Assistance by a Company for Acquisition of its Own Shares

Provisions applying to both public and private companiesE+W+S

151 Financial assistance generally prohibited.E+W+S

(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.

152 Definitions for this Chapter.E+W+S

(1)In this Chapter—

(a)financial assistance” means—

(i)financial assistance 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.

Modifications etc. (not altering text)

C211S. 152(2) applied (E.W.) (16.1.1990 as mentioned in S.I. 1989/2445, art. 4 and so far as not already in force 7.10.1993) by Local Government and Housing Act 1989 (c. 42, SIF 81:1), s. 69(4)(a); S.I. 1989/2445, art. 4; S.I. 1993/2410, art.3

153 Transactions not prohibited by s. 151.E+W+S

(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 [F84section 110 of the Insolvency Act] (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 [F85Part I of the Insolvency Act].

(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,

[F86(b)the provision by a company, in good faith in the interests of the company, of financial assistance for the purposes of an employees’ share scheme,]

[F87(bb)without prejudice to paragraph (b), the provision of financial assistance by a company or any of its subsidiaries for the purposes of or in connection with anything done by the company (or [F88a company in the same group]) for the purpose of enabling or facilitating transactions in shares in the first-mentioned company between, and involving the acquisition of beneficial ownership of those shares by, any of the following persons—

(i)the bona fide employees or former employees of that company or of another company in the same group; or

(ii)the wives, husbands, widows, widowers, children or step-children under the age of eighteen of any such employees or former employees.]

(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.

[F89(5)For the purposes of subsection (4)(bb) a company is in the same group as another company if it is a holding company or subsidiary of that company, or a subsidiary of a holding company of that company.]

154 Special restriction for public companies.E+W+S

(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 companiesE+W+S

155 Relaxation of s. 151 for private companies.E+W+S

(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)[F90Subject to subsection (6A), 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.

[F91(6A)In place of the statutory declaration referred to in subsection (6), there may be delivered to the registrar of companies under section 156(5) a statement made by the persons mentioned in subsection (6) above complying with the section next following.]

Textual Amendments

F90Words in s. 155(6) substituted (22.12.2000) by S.I. 2000/3373, art. 10(1)(2)

F91S. 155(6A) inserted (22.12.2000) by S.I. 2000/3373, art. 10(1)(3)

156 Statutory declaration under s. 155.E+W+S

(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.

[F92(1A)A statement made by a company’s directors under section 155(6A) shall state—

(a)the names and addresses of all the directors of the company,

(b)whether the business of the company is that of a banking company or insurance company or some other business,

(c)that the company or (as the case may be) a company (naming such company) of which it is the holding company is proposing to give financial assistance in connection with the acquisition of shares in the company or (as the case may be) its holding company (naming that holding company),

(d)whether the assistance is for the purpose of that acquisition or for reducing or discharging a liability incurred for the purpose of that acquisition,

(e)the name and address of the person to whom the assistance is to be given (and in the case of a company its registered office),

(f)the name of the person who has acquired or will acquire the shares and the number and class of the shares acquired or to be acquired,

(g)the principal terms on which the assistance will be given,

(h)the form the financial assistance will take (stating the amount of cash or value of any asset to be transferred to the person assisted), and

(i)the date on which the assistance is to be given.]

(2)The declaration [F93under section 155(6) or (as the case may be) statement under section 155(6A)] 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 [F94section 122 of the Insolvency Act] (winding up by the court) to the question whether the company is unable to pay its debts.

(4)The directors’ statutory declaration [F95or statement] 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 [F95or statement] as to any of the matters mentioned in subsection (2) of this section is unreasonable in all the circumstances.

(5)The statutory declaration [F95or statement] 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 [F95or statement] under section 155 without having reasonable grounds for the opinion expressed in it is liable to imprisonment or a fine, or both.

Textual Amendments

F92S. 156(1A) inserted (22.12.2000) by S.I. 2000/3373, art. 11(1)(2)

F93Words in s. 156(2) inserted (22.12.2000) by S.I. 2000/3373, art. 11(1)(3)

F95Words in s. 156(4)(5)(7) inserted (22.12.2000) by S.I. 2000/3373, art. 11(1)(4)

157 Special resolution under s. 155.E+W+S

(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.