Companies Act 2006 – PART 22

INFORMATION ABOUT INTERESTS IN COMPANY’S SHARES
BACKGROUND

1107. The provisions of this Part concern a public company’s right to investigate who has an
interest in its shares. They replace equivalent provisions in Part 6 of the 1985 Act. These are
purely domestic provisions, and are not required by European Community Law.

1108. The automatic disclosure obligations currently contained in sections 198 to 211 of
Part 6 of the 1985 Act will be replaced by regulations under the Financial Services and
Markets Act 2000, as amended by Part 43 of this Act, in implementation of the Transparency
Obligations Directive. In the regulations, a different concept of “interest in voting rights” will
be adopted in order to implement the Transparency Obligations Directive.

1109. This Part re-enacts, with certain modifications, the disclosure obligations pursuant to
a notice issued by the company contained in sections 212 to 219 of the 1985 Act. There is no
change to the definition of “interest in shares” for this purpose.

1110. The main changes to section 212 of the 1985 Act and related provisions are:

• making clear that notices are not required to be in hard copy, and therefore can be
given in electronic form (section 793 read in conjunction with the provisions in Part
37 on the sending or supplying of documents or information);

• providing for how information is to be entered on the register of interests disclosed
when the name of the present holder of the shares is not known or there is no present
holder (section 808);

• removing the requirement on the company to verify third party information supplied in
response to a section 793 notice before putting it on the register (section 817);

• requiring a company to refuse a request to inspect the register if it is not satisfied that
the request is made for a proper purpose (section 812);

• removing the requirement for a company to keep information on the register in
relation to entries made more than six years previously (section 816).

Section 791: Companies to which this Part applies

1111. This section provides that this Part only applies to public companies (as section 212 of
the 1985 Act provides currently).

Section 792: Shares to which this Part applies

1112. This section re-enacts in part the definition in section 198(2) of the 1985 Act of the
type of shares concerning which a section 793 notice may be issued, namely shares carrying
rights to vote in all circumstances at general meetings. However, shares held by a company
“in treasury” following a purchase of its own shares (as an alternative to cancelling such
shares on purchase) are now included in the definition.

Section 793: Notice by company requiring information about interests in its shares

1113. This section re-enacts section 212(1) to (4) of the 1985 Act. It allows a public
company to issue a notice requiring a person it knows, or has reasonable cause to believe, has
an interest in its shares (or to have had an interest in the previous three years) to confirm or
deny the fact, and, if the former, to disclose certain information about the interest, including
information about any other person with an interest in the shares.

1114. Subsections (3) and (4) enable the company to require details to be given of a
person’s past or present interests and to provide details of any other interest subsisting in the
shares of which he is aware. This provision allows the company to pursue information
through a chain of nominees by requiring each in the chain to disclose the person for whom
they are acting. Under subsection (6), where the addressee’s interest is a past one, a company
can ask for information concerning any person by whom the interest was acquired
immediately subsequent to their interest. Particulars may also be required of any share
acquisition agreements, or any agreement or arrangement as to how the rights attaching to
those shares should be exercised (sections 824 and 825).

1115. This section serves a different purpose to the automatic disclosure obligations
currently contained in sections 198 to 211 of Part 6 of the 1985 Act. It enables companies to
discover the identity of those with voting rights (direct or indirect) that fall below the
thresholds for automatic disclosure, and it also enables companies (and members of the
company) to ascertain the underlying beneficial owners of shares.

1116. The notice is not required to be in hard copy (see the general provisions on sending or
supplying documents or information in Part 37 of the Bill). Notices, and responses thereto,
may be given in electronic form. A response must be given in a reasonable time. What is
reasonable has not been defined so as to allow flexibility according to the circumstances, but
if the time given is not reasonable, the company will not have served a valid notice.

Sections 794 and 795: Notice requiring information: order imposing restrictions on
shares and offences

1117. These sections re-enact section 216(1) to (4) of the 1985 Act. They specify the
penalties for failure to provide information within the specified time when served with a
notice under section 793. There are criminal penalties (although a person does not commit an
offence if he can show that the requirement to give information was frivolous or vexatious).

1118. Additionally, application may be made to the court for a direction that the shares in
question are to be subject to the restrictions specified in section 797.

Section 796: Notice requiring information: persons exempted from obligation to comply

1119. This section re-enacts section 216(5) of the 1985 Act. It provides that the Secretary of
State may exempt a person from complying with a notice. The Secretary of State must
consult the Governor of the Bank of England, and must be satisfied that there are special
reasons for exempting the person (taking account of any undertaking given).

Sections 797 to 802: Orders imposing restrictions on shares

1120. These sections restate Part 15 of the 1985 Act without substantive change in so far as
its provisions apply in relation to Part 22 of this Act. They set out the effect of a court order
made under section 794 imposing restrictions on shares, and the penalties for attempted
evasion of the restrictions. They also make provision for the relaxation or removal of
restrictions, or for an order for the sale of shares.

Section 803: Power of members to require company to act

1121. This section re-enacts section 214(1) and (2) of the 1985 Act. It requires a company to
exercise its powers under section 793 on the request of members holding at least 10% of such
of the paid up capital of the company as carries the right to vote at general meetings (other
than voting rights attached to shares held in treasury). This provision, which has rarely been
used under the 1985 Act, recognises that members of a company may have a legitimate
reason for wanting the company to exercise its statutory powers to demand information even
if the management does not want to. For example, the members might want to act where they
suspect that the directors are involved in building a holding from behind the shelter of
nominees.

1122. Provision is made as to the form and the procedure in relation to requests. In contrast
to section 214, the 10% threshold may be met by a series of requests from members that the
company act, rather than one collective request. Those making a request must not only
specify the manner in which they require the powers to be exercised, but must also give
reasonable grounds for requiring the company to exercise the powers in the manner specified
(subsection (3)(b)(ii) and (iii)).