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New Clause 237

Company Law Reform Bill [Lords] – in a Public Bill Committee at 1:45 pm on 20th July 2006.

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The capital redemption reserve

‘(1) Where under this Part shares of a limited company are redeemed or purchased wholly out of the company’s profits, the amount by which the company’s issued share capital is diminished—

(a) on cancellation of the shares redeemed or purchased (see section (Redeemed shares treated as cancelled) or (Treatment of shares purchased)(3)), or

(b) on cancellation of shares held as treasury shares (see section (Treasury shares: cancellation),

must be transferred to a reserve, called the “capital redemption reserve”.

(2) Where—

(a) the shares are redeemed or purchased wholly or partly out of the proceeds of a fresh issue, and

(b) the aggregate amount of the proceeds is less than the aggregate nominal value of the shares redeemed or purchased,

the amount of the difference must be transferred to the capital redemption reserve.

(3) Subsection (2) does not apply in the case of a private company if, in addition to the proceeds of the fresh issue, the  company applies a payment out of capital under Chapter (Redemption or purchase by private company out of capital) in making the purchase of shares.

(4) The company may use the capital redemption reserve to pay up new shares to be allotted to members as fully paid bonus shares.

(5) Subject to that, the provisions of the Companies Acts relating to the reduction of a company’s share capital apply as if the capital redemption reserve were part of its paid up share capital.’.—[Margaret Hodge.]

Brought up, and added to the Bill.