HL Deb 27 October 1981 vol 424 cc1000-1

107 Clause 54, page 60, leave out from beginning of line 39 to end of line 30 on page 61 and insert: ("(1) Where on or after the appointed day a company—

  1. (a) issues shares on terms that they are or are liable to be redeemed; or
  2. (b) agrees to purchase any of its own shares;
the following provisions of this section shall apply in relation thereto.

(2) A company shall not be liable in damages in respect of any failure on its part to redeem or purchase any of the shares.

(3) Subsection (2) above is without prejudice to any right of the holder of any of the shares other than his right to sue the company for damages in respect of its failure; but the court shall not grant an order for specific performance of the terms of redemption or purchase if the company shows that it is unable to meet the cost of redeeming or purchasing the shares in question out of distributable profits.

(4) Where the company is wound up and at the commencement of the winding up any of the shares have not been redeemed or purchased then subject to the following provisions of this section the terms of redemption or purchase may be enforced against the company; and when shares are redeemed or purchased under this subsection they shall be treated as cancelled.

(5) Subsection (4) above shall not apply if—

  1. (a) the terms of redemption or purchase provided for the redemption or purchase to take place at a date later than the date of the commencement of the winding up; or
  2. (b) during the period beginning with the date on which the redemption or purchase was to have taken place and ending with the commencement of the winding up the company could not at any time have lawfully made a distribution equal in value to the price at which the shares were to have been redeemed or purchased.

(6) There shall be paid in priority to any amount which the company is liable by virtue of subsection (4) above to pay in respect of any shares—

  1. (a) all other debts and liabilities of the company (other than any due to members in their character as such);
  2. (b) if other shares carry rights whether as to capital or as to income which are preferred to the rights as to capital attaching to the first mentioned shares, any amount due in satisfaction of those preferred rights;
but, subject to that, any such amount shall be paid in priority to any amounts due to members in satisfaction of their rights (whether as to capital or income) as members.").

108 page 61, line 37, leave out ("(5)") and insert ("(6)").

109 page 61, line 37, leave out lines 38 and 39.

Lord Mackay of Clashfern

My Lords, I beg to move that this House doth agree with the Commons in their said Amendments Nos. 107, 108 and 109. These amendments are consequential on an amendment I moved earlier.

Moved, That this House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)

Lord Bruce of Donington

My Lords, before we part with Amendment No. 107, I should be grateful if the noble and learned Lord could elucidate one small problem for me that occurs as a result of my recent reading of Amendment No. 107. Had I had an opportunity of studying it earlier I might have added more observations. If the noble Lord will refer to subsections (2) and (3) he will see: (2) A company shall not be liable in damages in respect of any failure on its part to redeem or purchase any of the shares. (3) Subsection (2) above is without prejudice to any right of the holder of any of the shares other than his right to sue the company for damages in respect of its failure;". which is a right already denied it under subsection (2). Would he kindly explain that?

Lord Mackay of Clashfern

Yes, my Lords. The purpose of subsection (2) is to prevent the remedy of damages for reasons which I explained earlier, because it would mean that this shareholder would have a priority over others in a liquidation. What subsection (3) is saying is that subsection (2), cutting off the right of damages is without prejudice to the other rights to enforce the contract that the shareholder has.

Lord Wedderburn of Charlton

My Lords, perhaps the noble and learned Lord could add a little more. Are we to understand that the word "damages", which is excluded, does or does not include compensation for breach of equitable obligations, other types of compensation in restitution or remedies of that kind?

Lord Mackay of Clashfern

My Lords, the intention is to exclude rights of action for damages for breach of the contract, the contract being the contract for the redemption or purchase of the shares. It is that right of action which is excluded.

On Question, Motion agreed to.

9.11 p.m.