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

§ Mr. Eyre
I beg to move amendment No. 43, in page 43, line 18, leave out 'subsection (5)' and insert 'subsections (5) and (6)'.

Mr. Deputy Speaker
With this it will be convenient to discuss Government amendments No. 44 to 48.

§ Mr. Eyre
The purpose of the amendments is to modify the operation of what is presently subsection (5). That subsection contains two exemptions from the provisions of the clause.
The first exemption applies where a nominee for a public company acquires shares in that company in circumstances where clause 37(1)(c) applies. That is where the company provides financial assistance for the acquisition and acquires a beneficial interest. Such assistance is of course likely to be in breach of section 54 of the Companies Act 1948, but none the less there is recent authority in the Court of Appeal that the company may acquire a beneficial interest in the shares, since recognising such an interest 1518 protects creditors and section 54 is intended to protect creditors.
The first exemption deals with this case. As presently drafted, it exempts such cases entirely from subsection (1) and from subsection (2). Subsection (1) strikes down the beneficial interest of the company when the nominee takes shares on subscription from the company and where he acquires partly paid-up shares from third parties. The exemption is therefore necessary, otherwise the company's beneficial interest will be destroyed. However, in the somewhat unusual case of a nominee for the company taking shares on subscription from the company, the second directive insists that the company should acquire no beneficial interest, and therefore the exemption as presently drafted goes too wide. The effect of amendment No. 46 is to exclude from the exemption cases where subscription is involved.
The first exemption in subsection (5) also operates at present to exclude subsection (2) in such cases. Subsection (2) imposes personal liability on those responsible for the improper subscription or acquisition, and there is no reason why they should be exempted because they have contravened section 54 of the 1948 Act. Amendment No. 45 therefore operates to restrict the first exemption to subsection (1).