Section 745: Register of debenture holders: response to request for inspection or copy
1040. This is a new provision. It provides a procedure by which the company can refer the matter to the court if it considers the request is not for a proper purpose. It specifies a 5-day period within which the company must either comply with the request or apply to the court for relief from the obligation. If the company opts for the latter, then subsections (3), (4) and (5) apply. Under subsection (3), if the court is satisfied that the access to the register of debenture holders is not sought for a proper purpose, it will require the company not to comply with the obligation to meet the request and may require that the person who made the request pay the company’s costs. Under subsection (4), the court may also require the company not to comply with other requests made for similar purposes. If the court does not make an order under subsection (3), or the proceedings are discontinued, then, under subsection (5), the company must immediately comply with the request.
Section 746: Register of debenture holders: refusal of inspection or default in providing copy
1041. This section retains the existing sanctions under section 191 of the 1985 Act for failure to comply with a request. They do not apply if the court has directed that the company need not comply with the request.
Section 747: Register of debenture holders: offences in connection with request for or disclosure of information
1042. This is a new provision. It creates two offences. First, in relation to the new requirement in section 744 to provide information in a request for access, it is an offence knowingly or recklessly to make a statement that is misleading, false or deceptive in a material particular. Second, it is an offence for a person having obtained information pursuant to an exercise of the rights in section 744 to do anything or fail to do anything which results in that information being disclosed to another person knowing or having reason to suspect that the other person may use the information for a purpose that is not a proper purpose.
Section 748: Time limit for claims arising from entry in register
1043. This section replaces section 191(7) of the 1985 Act. It amends the existing time limit for claims arising from errors in the register from twenty years to ten years. This mirrors equivalent provisions applicable to the register of members (see section 128).
1044. The provisions of this Part set out the two major differences between public and private companies.
1045. Chapter 1 replaces sections 58(3), 81 and 742A of the 1985 Act which provide that private companies are not allowed to offer their shares to the public.
1046. Chapter 2 replaces sections 117 and 118 of the 1985 Act which deal with the minimum share capital requirement for public companies (known as the “authorised minimum”). It contains new provisions that enable this requirement to be satisfied in euros as well as sterling. To facilitate this change it has been necessary to seek two new powers:-
a) a power to prescribe the amount in euros that is to be treated as equivalent to the sterling amount of the authorised minimum (see section 763); and
b) a power to prescribe how references to the authorised minimum in the Act are to be applied where a public company has shares denominated in more than one currency or redenominates its share capital (that is, converts its share capital from one currency to another) and to require that a company must re-register as a private company where the effect of redenomination is to bring the value of the company’s share capital below the authorised minimum (see section 766).
1047. The authorised minimum is relevant to all public companies, not just those that are incorporated as such, see for example, section 91.
1048. The CLR considered the prohibition on private companies offering their shares to the public in paragraph 4.160 of Developing the Framework and then examined the dividing line between public and private companies in Chapter 2 of Completing the Structure. The CLR presented their conclusions in paragraphs 4.54 to 4.62 of the Final Report.
Section 755: Prohibition of public offers by private company
1049. Subsection (1) of this section continues the prohibition in section 81(1) of the 1985 Act on private companies offering their shares or debentures to the public, though the consequences of breaching the prohibition are changed. The prohibition applies only to private companies limited by shares or limited by guarantee and having a share capital. The prohibition does not apply to unlimited companies or to companies limited by guarantee and not having a share capital.
1050. Private companies are also prohibited from allotting their shares or debentures with the intention that they are offered to the public by someone else. Subsection (2) creates a presumption as to when shares or debentures have been allotted in this way. Similar provision was made in section 58(3) of the 1985 Act which this subsection replaces.
1051. A private company will no longer commit an offence if it offers its securities to the public. Instead, if a private company does breach the prohibition it will be compelled to reregister as a public company, unless it appears to the court that the company does not meet the requirements for re-registration and that it is impractical or undesirable to require it to take steps to do so, in which case the court may make a remedial order and/or an order for the compulsory winding up of the company.
1052. Subsection (3) contains an exemption to the prohibition on public offers. Where a private company intends to become a public company it will be able to make an offer before it has completed the formalities of re-registration as a public company. Acts done in good faith before allotment in anticipation of re-registration will not be treated as breaching the prohibition on offers to the public, even if the re-registration arrangements do not ultimately succeed. The exemption also applies if, as part of the terms of the offer, the company undertakes to re-register as a public company and then complies with that undertaking not later than 6 months after the day on which the offer is first made to the public.
Section 756: Meaning of “offer to the public”
1053. This section explains what is meant by “offer to the public” for the purposes of the prohibition on public offers contained in section 755. This section also sets out certain circumstances where an offer is not to be regarded as an offer to the public. It replaces section 742A of the 1985 Act.
1054. An offer will not be an offer to the public if it is not calculated to result in shares or debentures of the company becoming available to anyone other than those receiving the offer. An example would be where shares are offered to a particular person, with the intention that no one other than that particular person may take up the offer or acquire the shares as a result. Nor will an offer be an offer to the public if the offer is otherwise a private concern of the person receiving it and the person making it.
1055. Subsection (4) creates two further exemptions for offers to persons already connected with the company (as defined in subsection (5)) and for offers in respect of securities to be held under an employees’ share scheme (as defined in section 1166). Such offers are presumed to be the private concern of those involved and so not an offer to the public if the conditions set out in subsection (4) are met.
1056. The range of persons already connected with the company for the purposes of subsection (4) has been expanded slightly from the current provision in section 742A of the 1985 Act. Subsection (5) now includes a trustee of a trust where the principal beneficiary is an existing debenture holder of the company or the widow or widower, or surviving civil partner of a person who was a member or employee of the company.
1057. Subsection (6) explains what is meant by a member of a person’s family for the purposes of subsection (5).
Section 757: Enforcement of prohibition: order restraining proposed contravention
1058. This section enables members, creditors or the Secretary of State to apply to the court for an order restraining a private company from carrying out any proposed contravention of the prohibition on offering shares or debentures to the public. This is a new procedure which will enable the member, the creditor or the Secretary of State to prevent by civil action any further activity by the company towards making an offer in contravention of the public offer prohibition. The court must also make such an order if, in proceedings brought by a member under section 994 or by the Secretary of State under section 995, it appears to the court that the company is proposing to breach the public offer prohibition.