Companies Act 2006 – Section 758
Section 758: Enforcement of prohibition: orders available to the court after
contravention
1059. This section applies where a private company breaches the prohibition on offering
securities to the public. It introduces a new enforcement procedure for breaches; it replaces
the criminal offence currently imposed in section 81 of the 1985 Act with a civil enforcement
procedure.
1060. If a company breaches the prohibition, certain members, certain creditors or the
Secretary of State may apply to the court. In order to have standing to bring the application,
the member or creditor must have been a member or a creditor at the time the offer was made
in contravention of the public offer prohibition; in addition anyone who became a member as
a result of the offer to the public may bring an application.
1061. On such an application, if the court decides the company has acted in contravention of
the public offer prohibition then it must order the re-registration of the company as a public
company, unless it appears to the court that the company does not meet the requirements for
re-registration as a public company (see Part 7 of the Act), and it is impracticable or
undesirable to require it to take steps to do so. If the court is unable to order re-registration
for these reasons, it may instead make a remedial order or an order for the compulsory
winding up of the company (see Chapter 6 of Part 4 of the Insolvency Act 1986). The court
has discretion as to whether or not to make these orders. This might be appropriate for
example where the company has breached the prohibition but has not allotted shares, and has
withdrawn the offer and undertaken not to do it again.
Section 759: Enforcement of prohibition: remedial order
1062. A remedial order is an order for the purpose of putting anyone affected by the breach
of the public offer prohibition back in the position they would have been in if the breach had
not occurred. It may require any person knowingly concerned in the contravention, whether
or not an officer of the company, to offer to purchase the shares or debentures that were the
subject of the offer on such terms as the court thinks fit. The remedial order will override the
terms of the company’s constitution, but no one holding the securities will be obliged to
accept the offer made to purchase them. It may be made whether or not the holder of the
securities subject to the order is the person to whom the company allotted or agreed to allot
them.
Section 760: Validity of allotment etc not affected
1063. This section makes clear that any allotment or sale of securities or any agreement to
allot or sell securities is not made void simply because there has been a breach of the
prohibition on offers to the public. Equivalent provision was made in section 81(3) of the
1985 Act.
CHAPTER 2: MINIMUM SHARE CAPITAL REQUIREMENT FOR PUBLIC COMPANIES
1064. Under the 1985 Act, a public company which is incorporated as such may not do
business without first obtaining a trading certificate from the registrar. There is a minimum
allotted share capital requirement, known as the “authorised minimum”, which is currently
set at £50,000 and which must be denominated in sterling. The same minimum share capital
requirement applies where a private company re-registers as a public company under Part 7
of the Act.
1065. If a public company reduces its share capital below the authorised minimum it will no
longer meet the minimum share capital requirement for a public company and must reregister
as a private company.
1066. The requirement for public companies to have a minimum share capital is derived
from EU law. Article 6 of the Second Company Law Directive (77/91/EEC) provides that:
“The laws of member states shall require that in order that a company may be incorporated or obtain
authorisation to commence business, a minimum share capital shall be subscribed the amount of which shall not
be less than 25,000 euros.”
1067. The Department’s interpretation of this Directive is that it permits the authorised
minimum to be denominated in euros, or the national currency of the Member State, but not
in other currencies (so for example, the authorised minimum could not be satisfied in dollars).
1068. When this requirement was implemented in the Companies Act 1980 the amount of
the authorised minimum was set at £50,000 (a figure considerably higher than the minimum
required under the Directive). The CLR considered whether the authorised minimum should
be maintained, increased or reduced. Their recommendation was to maintain it at £50,000.
Section 761: Public company: requirement as to minimum share capital
1069. This section replaces section 117(2) of the 1985 Act and restates section 117(1), (4)
and (6) of that Act. Like the provisions of the 1985 Act, it only applies to public companies
that are formed as such on their original incorporation (as opposed to companies that reregister
from private limited to public under the provisions of Part 7 of the Act).
1070. The current requirement for a statutory declaration to be filed with an application for a
trading certificate, contained in section 117(2) of the 1985 Act, has not been carried forward.
This is replaced by a requirement for a statement of compliance (see section 762 and the note
on section 13).
1071. As now, the registrar will only issue a trading certificate if she is satisfied that certain
conditions are met: in particular the company must satisfy the minimum share capital
requirement for public companies – known as the “authorised minimum” (see subsection (2)).
1072. A trading certificate has effect from the date that it is issued and is conclusive
evidence that the company is entitled to do business as a public company.
Section 762: Procedure for obtaining certificate
1073. This section replaces section 117(3) of the 1985 Act. It prescribes the contents of the
application for a trading certificate (see subsection (1)), which, amongst other things, must
include a statement that the nominal value of the company’s share capital is not less than the
authorised minimum.
1074. The current requirement for a statutory declaration (or “electronic statement”) when
an application is made for a trading certificate is replaced by a requirement to make a
statement of compliance. This statement does not need to be witnessed and may be made in
paper or electronic form. It will be for the registrar’s rules to specify who may make this
statement (and the form of it).
Section 763: The authorised minimum
1075. This section replaces section 118(1) of the 1985 Act. Under section 118 the authorised
minimum is £50,000. This implements Article 6 of the Second Company Law Directive
which requires that in order that a public company may be incorporated or obtain
authorisation to commence business, a minimum capital shall be subscribed (see above). As
recommended by the CLR (Completing the Structure, paragraph 7.6), this section retains the
authorised minimum at £50,000. In contrast to the 1985 Act provisions, the section also
enables the minimum share capital requirement for public companies to be satisfied in
sterling or the prescribed euro equivalent (see subsection (1)).
1076. Once a company has obtained a trading certificate under section 762 or section 117 of
the 1985 Act (in the case of companies that obtain a trading certificate before these
provisions of the Act come into force), there is no requirement for the authorised minimum to
remain denominated in sterling or euro, and if it wishes a public company may subsequently
redenominate all of its share capital (including the authorised minimum) under the provisions
of Chapter 8 of Part 17 of the Act (which contains new provisions which permit companies
easily to redenominate or convert their share capital from one currency to another).
1077. Subsection (2) of section 763 contains a new power which enables the Secretary of
State, in regulations made under the Act, to prescribe the amount in euros that is for the time
being to be treated as equivalent to the sterling amount of the authorised minimum. This is
required in order to achieve parity between the prescribed sterling and euro amounts (which
may become necessary due to exchange rate fluctuations). The amount prescribed will be
determined by applying an appropriate spot rate of exchange to the prescribed sterling
amount and rounding to the nearest 100 euros (see subsection (4)).
1078. The power to alter the authorised minimum, contained in section 118 of the 1985 Act,
is carried forward in section 764.