ACQUISITION OF A COMPANY'S SHARES BY THE COMPANY (Hansard, 27 February 1980)

§ Mr. Eyre
I beg to move amendment No. 41, in page 42, line 33, at beginning insert Except as provided by subsection (1A) below,".

Mr. Deputy Speaker
With this it will be convenient to take Government amendments Nos. 42, 49, 50, 52 and 53 and the following amendments: No. 364, in clause 36, page 44, line 11, at end insert— (b) to shares acquired by a nomineee of a company in the ordinary course of its business as a trustee and when the company has no beneficial interest in the share; or". Government amendment No. 305, in clause 37, page 44, line 30, at end add— In determining for the purposes of paragraph (aa) and (b) above whether a company has a beneficial interest in any shares, there shall be disregarded, in any case where the company is a trustee (whether as personal representative or otherwise), any right of the company (as trustees) to recover its expenses or be remunerated out of the trust property.".

§ Mr. Eyre
These amendments arise from a commitment that we gave in Committee to meet points made by my right hon. Friend the Member for Crosby (Sir G. Page). He pointed out that under the existing law a company may receive a gift of its own shares but may not hold them directly in its own name. It must arrange for a nominee to hold the shares, as was the case in re Castiglione.
My right hon. Friend argued that there was no sensible reason why the company should always have to put such shares in the name of a nominee. I was grateful to him for raising this matter because although, as he said, it is hardly a vital issue, one way or the other, we agree that it is unnecessary to maintain the need for a nominee in such cases. The amendments therefore change this rule by allowing companies to acquire their own shares by way of gift. This change will undoubtedly delight new generations of law students.
The amendments to clause 37 are called for by articles 19 to 22 of the second directive and treat shares given to the company in the same way as other shares falling under clause 37; that is, voting rights in respect of the shares may not be exercised, the company must cancel or dispose of the shares within three years, and so forth. These provisions apply only to public companies.
The amendment to clause 35 will apply to all companies and will allow both public and private companies to acquire their own shares by way of gift. Whether companies should be allowed to purchase their shares for valuable consideration is another question. We attach high priority to relaxing this rule, mainly as a means—I think that this will please my right hon. Friend—of enabling small companies to operate and grow. A consultative document is at an advanced stage of preparation. It will set out an examination of the complex issues that are involved. This is a matter that will require careful consideration. We intend that our consultation will lead to legislation in our Companies Bill next Session.
The amendment is a minor rationalisation which I am sure will be welcomed. I am grateful to my right hon. Friend, as I am sure companies will be, for 1517 prompting this useful change, which I commend to the House.

§ Sir Graham Page
I am grateful to my hon. Friend for tabling the right amendments. I tabled amendments No. 364 and (a) to 305. My amendments are well covered by the Government's amendments and I need not argue the proposals contained in them. Amendment No. 364 is an amendment to clause 36. That is why I tabled the amendment to the Minister's amendment. Neither of my amendments is now necessary. I am grateful to my hon. Friend. It is an important issue, and it has been cleared up by the Government's amendments.