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Clause 35

Volume 982: debated on Tuesday 15 April 1980

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Acquisition Of A Company's Shares By The Company

The Lords have agreed to the amendment made by the Commons in page 44, line 3, at end insert:

"(1A) A company limited by shares may acquire any of its own fully paid shares otherwise than for valuable consideration."
with the following amendment:

No. 2, at end insert:

"and any company may acquire its own shares in a reduction of capital duly made."

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take amendments Nos. 3, 4 and 5.

Amendment No. 2 is an addition to the new subsection (1A) of clause 35. Without the amendment, there would be room for doubt as to the legitimacy of reductions of capital made by companies. The reason for this doubt is that technically a company can acquire its shares in a reduction of capital. The exceptions in subsection (3) of clause 35 do not cover all reductions of capital, and it could therefore be concluded that subsection (1) of clause 35 would prevent such acquisitions of shares. The amendment removes the problem by stating that any company may acquire its own shares in a reduction of capital duly made.

With regard to amendment No. 3, it is necessary to exclude from the operation of clause 36 certain cases where shares are acquired by a nominee of the company, where the company is a trustee and has no beneficial interest in the shares, other than by reason of any right as trustee to recover its expenses or be remunerated out of trust property. At present, a company acting as trustee is able to accept in the name of a nominee shares issued by itself on behalf of the trust fund. The effect of clause 36, if unamended, would be to prevent this. We consider that it should be allowed, hence the amendment.

The effect of amendments Nos. 4 and 5 is to replace Commons amendment No. 149 with an amendment to the same effect with the deletion of the word "otherwise" in line 1 of paragraph (b) and to replace the reference to clause 36 in clause 35(3) of the Bill with a reference to paragraph (b) in amendment No. 149, which requires to be referred to in this context.

Question put and agreed to.

Lords amendments Nos. 3, 4 and 5 agreed to.