New Clause 359

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

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Effect of notice under section (Right of offeror to buy out minority shareholder)

‘(1) Subject to section (Applications to the court), this section applies where the offeror gives a shareholder a notice under section (Right of offeror to buy out minority shareholder).

(2) The offeror is entitled and bound to acquire the shares to which the notice relates on the terms of the offer.

(3) Where the terms of an offer are such as to give the shareholder a choice of consideration, the notice must give particulars of the choice and state—

(a) that the shareholder may, within six weeks from the date of the notice, indicate his choice by a written communication sent to the offeror at an address specified in the notice, and

(b) which consideration specified in the offer will apply if he does not indicate a choice.

The reference in subsection (2) to the terms of the offer is to be read accordingly.

(4) Subsection (3) applies whether or not any time-limit or other conditions applicable to the choice under the terms of the offer can still be complied with.

(5) If the consideration offered to or (as the case may be) chosen by the shareholder—

(a) is not cash and the offeror is no longer able to provide it, or

(b) was to have been provided by a third party who is no longer bound or able to provide it,

the consideration is to be taken to consist of an amount of cash, payable by the offeror, which at the date of the notice is equivalent to the consideration offered or (as the case may be) chosen.

(6) At the end of six weeks from the date of the notice the offeror must immediately—

(a) send a copy of the notice to the company, and

(b) pay or transfer to the company the consideration for the shares to which the notice relates.

Where the consideration consists of shares or securities to be allotted by the offeror, the reference in paragraph (b) to the transfer of the consideration is to be read as a reference to the allotment of the shares or securities to the company.

(7) If the shares to which the notice relates are registered, the copy of the notice sent to the company under subsection (6)(a) must be accompanied by an instrument of transfer executed on behalf of the holder of the shares by a person appointed by the offeror.

On receipt of that instrument the company must register the offeror as the holder of those shares.

(8) If the shares to which the notice relates are transferable by the delivery of warrants or other instruments, the copy of the notice sent to the company under subsection (6)(a) must be accompanied by a statement to that effect.

On receipt of that statement the company must issue the offeror with warrants or other instruments in respect of the shares, and those already in issue in receipt of the shares become void.

(9) The company must hold any money or other consideration received by it under subsection (6)(b) on trust for the person who, before the offeror acquired them, was entitled to the shares in respect of which the money or other consideration was received.

Section (Further provision about consideration held on trust under section (Effect of notice under section (Right of offeror to buy out minority shareholder))(9)) contains further provision about how the company should deal with such money or other consideration.’.—[Margaret Hodge.]

Brought up, and added to the Bill.