Companies Act 2006 – Section 745

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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).

PART 20: PRIVATE AND PUBLIC COMPANIES

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.

CHAPTER 1: PROHIBITION OF PUBLIC OFFERS BY PRIVATE COMPANIES

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.

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