HL Deb 27 October 1981 vol 424 cc1001-3

110 After Clause 54, insert the following new clause:

("Supplementary provisions relating to Part III of the 1980 Act.

—. (1) For the purposes of determining by reference to any particular accounts whether any proposed distribution may be made in accordance with section 43 of the 1980 Act (determination of amount of distributable profits) subsection (7) of that section (reduction of distributable profits by amount of earlier distributions) shall apply if it would not otherwise to—

  1. (a) any financial assistance lawfully given by a public company out of its distributable profits in any case where the assistance is required to be so given by section 42(4) of this Act;
  2. (b) any financial assistance lawfully given by a private company out of its distributable profits in any case where the assistance is required to be so given by section (Relaxation of section 42 restrictions for private companies) (2) of this Act;
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  3. (c) any financial assistance given by any company in contravention of section 42 of this Act in any case where the giving of that assistance reduces the company's net assets or increases its net liabilities;
  4. (d) any payment made by any company in respect of the purchase by the company of any shares in the company except any payment lawfully made otherwise than out of distributable profits; and
  5. (e) any payment of a description specified in section (Payments apart from purchase price to be made out of distributable profits) of this Act;
being financial assistance given or payment made since those accounts were prepared, as if any such financial assistance or payment were a distribution already made in pursuance of a determination made by reference to those accounts.

(2) Section 44 of the 1980 Act (consequences of unlawful distributions) shall not apply in relation to—

  1. (a) any financial assistance given by any company in contravention of section 42 of this Act; or
  2. (b) any payment made by a company in respect of the redemption or purchase by the company of any shares in the company.

(3) In this section— financial assistance" has the meaning given by section 42(5) of this Act; net assets" has the meaning given by section 42(5C) of this Act; and net liabilities" in relation to the giving of financial assistance by any company means the amount by which the aggregate amount of the company's liabilities (within the meaning of section 42(5C)(b) of this Act) exceeds the aggregate amount of its assets taking the amount of the assets and liabilities to be as stated in the company's accounting records immediately before the financial assistance is given.").

Lord Mackay of Clashfern

My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 110. The new clause proposed n his amendment clarifies how Part III of the 1980 Act, which regulates distributions by companies, is to apply in relation to financial assistance given by a company for the acquisition of its shares or payments made by a company in respect of a purchase or redemption of its own shares. Section 43(7) of the 1980 Act requires a company to take into account any previous distributions made since accounts were prepared in determining, by reference to those accounts, whether any subsequent distribution would be lawful. The new clause provides, in subsection (1), that financial assistance given by a company for the purpose of the acquisition of its shares, whether lawfully under those subsections of Clause 42 and Amendment No. 62 which require the assistance to be provided out of distributable profits, or unlawfully in contravention of Clause 42 if the assistance reduces net assets or increases net liabilities; any payment made by a company for the purchase of its own shares, except a payment lawfully made from capital reserves or unrealised profits; and any payment made by a company for an option to purchase its own shares, or for a variation of or release from a contract of purchase, is to be treated as a previous distribution for the purposes of Section 43(7) of the 1980 Act.

Secondly, the new clause disapplies Section 44 of the 1980 Act, which makes provision for civil consequences of an unlawful distribution, for both financial assistance given in contravention of Clause 42 and any payment made by a company in respect of redemption or purchase of its own shares.

Moved, That this House doth agree with the Com- mons in the said amendment.—(Lord Mackay of Clashfern.)

On Question, Motion agreed to.