§ 62 After Clause 42, insert the following new clause:
§ ("Relaxation of section 42 restrictions for private companies.
§ .—(1) Section 42(1) and (1A) of this Act shall not prohibit a private company from giving financial assistance in any 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 section (Provisions supplementary to section (Relaxation of section 42 restrictions for private companies)) of this Act are complied with as respects the giving of that assistance.
§ (2) Subsection (1) above shall authorise a company to give financial assistance to any person only if the company has net assets which are not thereby reduced, or to the extent that those assets are thereby reduced, if the financial assistance is provided out of distributable profits.
§ (3) Subsection (1) above shall not permit financial assistance to be given by a subsidiary in any 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 the financial assistance 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 any case where the acquisiton 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, any company which is a wholly owned subsidiary, shall also approve by special resolution in general meeting the giving of the financial assistance.
§ (6) The directors of the company proposing to give the financial assistance and, where the shares to be acquired 983 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 subsection (7) below.
§ (7) A statutory declaration made by the directors of any company in pursuance of subsection (6) above shall—
- (a) contain such particulars of the 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;
- (b) state that the directors have formed the opinion as regards its initial situation immediately following the date on which the assistance is proposed to be given, that there will be no ground on which their company could then be found to be unable to pay its debts; and either—
- (i) it is intended to commence the winding up of the company within twelve months of that date, that the company will be able to pay its debts in full within twelve months of the commencement of the winding up; or
- (ii) 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.
§ (8) Any statutory declaration made in pursuance of subsection (6) above shall have annexed to it a report addressed to the directors who made the declaration by the auditors of their company stating that they have enquired into the state of affairs of that company and are not aware of anything to indicate that the opinion expressed by the directors in the declaration as to any of the matters mentioned in subsection (7)(b) above is unreasonable in all the circumstances.
§ (9) Financial assistance shall not be given in pursuance of this section—
- (a) where a special resolution is required by this section to be passed approving the giving of that assistance, before the expiry of the period of four weeks beginning with the date on which that special resolution is passed or where more than one such resolution is passed, the date on which the last of them is passed unless, as respects that resolution (or, if more than one, each of them) every member of the company which passed the resolution who is entitled to vote at general meetings of the company voted in favour of the resolution;
- (b) where an application for the cancellation of any such resolution is made under section (Provisions supplementary to section (Relaxation of section 42 restrictions for private companies)) of this Act, before the final determination of the application, unless the court otherwise orders;
- (c) after the expiry of the period of eight weeks beginning with the date on which the directors of the company proposing to give the financial assistance made the statutory declaration in pursuance of subsection (6) above, or, where that company is a subsidiary and both its directors and the directors of any of its holding companies made such a declaration, the date on which the earliest of the declarations is made, unless the court, on any such application as is mentioned in paragraph (b) above, otherwise orders.
§ Lord Mackay of Clashfern
My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 62.
§ Lord Wedderburn of Charlton
My Lords, I beg not to 984 move the Motion that this House doth not agree with the amendment.
§ Lord Mackay of Clashfern
My Lords, I gather that the noble Lord, Lord Wedderburn, does not intend to move that this House doth not agree with the Commons in their Amendment No. 62, but I am not certain whether he wishes to move, as amendments to No. 62, Nos. 62A, 62B and 62C. I am moving that this House doth agree with the Commons in their Amendment No. 62 and I shall speak at the same time, with permission, to No. 63.
These amendments contain important new provisions which will complement Clause 42 as amended by enabling a private company to give financial assistance for the acquisition of its shares or those of any holding company which is also a private company, subject to appropriate safeguards for members and creditors. At first sight the provisions in these amendments may appear very far-reaching, but the general scheme of the safeguards is very much in the spirit of the approach of the Jenkins Committee and are on similar lines to those proposed in the case of a purchase by a company of its own shares. These provisions reflect the Government's recognition, in the light of representations by people who are closely and directly concerned with the development of industry and commerce in this country, that quite apart from the changes to Clause 42, it would be desirable to provide a gateway through the general prohibition, provided that adequate safeguards were incorporated, and we consider that adequate safeguards have been incorporated by the provisions in these amendments. I beg to move.
§ Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
§ As amendments to Amendment No. 62
62A Subsection (1) at end insert—
("(1A) No person shall be entitled to rely upon subsection (1) above by way of defence to civil liability under this section unless he proves that he believed and had reasonable cause to believe:
§ 62B Subsection (2), at the end insert ("and the assistance is given in good faith in the interests of the company and by way of a transaction effected or thing done which falls within the terms of any one of paragraphs (a) to (g) of subsection (2B) of section 42 above.").
§ 62C Subsection (4) at end insert ("but, notwithstanding any provision in the memorandum or articles of association of the company or in any other document or agreement, no person to whom any such assistance is provided or it so be provided shall be entitled to vote upon that resolution either on a poll or otherwise, in his own right or as a proxy".).
§ 8.40 p.m.
§ Lord Wedderburn of Charlton
My Lords, I beg to move formally Amendments Nos. 62A, 62B and 62C as amendments to Amendment No. 62.
§ Moved, That this House doth agree with the amendments to the amendment.—(Lord Charlton of Wedderburn.)
§ On Question, amendments to the amendment negatived.985
§ Lord Lloyd of Kilgerran
My Lords, I draw attention to the fact that I have already spoken about Amendment No. 62, when I earlier supported the amendment of the noble Lord, Lord Bruce of Donington, and I referred to that wonderful subsection (9) with its 320 odd words. I was very disappointed when the noble Lord, Lord Renton, left the House, because I am sure that he would have supported me in making an appeal for simplification and clarification in Acts of Parliament of this kind. Here we have a clause dealing with restrictions for private companies; indeed, not only restrictions, but relaxation of restrictions. But to have a sentence, with indeed two or three semi-colons, of 320 words is really not the way in which modern law should be written these days.
§ On Question, Motion agreed to.