Buckley on the Companies Acts 15th edition

6310 Pages·2021·21.863 MB·English

by  Dame Mary Arden DBE (Author) , Dan Prentice (Author) , Mr Justice David Richards (Author)

Introduction to Buckley on
the Companies Acts
IMPORTANTNOTE:
Buckley on the Companies Acts has been restructured. Divisions 1–32 contain
theCompaniesAct2006,relatedActsandrelatedmaterials.DivisionsA–Ocontain
thenowrepealed CompaniesAct1985andthesedivisionshavebeenarchived.
The Consolidation and De-Consolidation of
the Companies Acts
[0.1] On 1 July 1985, exactly 37 years after the last consolidating Act came
into operation, the 10 Acts, or parts of Acts, which made up the Companies
Acts1948to1983wererepealed.Subjecttotheamendmentsmadepursuantto
CA 1981, s 116, and with the exception of certain obsolete provisions and
matters of a transitional nature, the provisions of CA 1980 as to ‘insider
dealing’,andtheprovisionsofthe1980and1981Actsastobusinessnames,the
repealedActsbecamecontainedinonesingle CompaniesAct,containing747
sectionsand25Schedules.
[0.2] This consolidation differed from that effected by the 1908, 1929 and
1948Acts,eachofwhichwasprecededbyanActpassedinthepreviousyear,
providing for substantial amendments to the existing law (mostly recom-
mended by a Royal Commission) but, with minor exceptions, coming into
operationonlyonthepassingoftheconsolidatingAct.Inthepresentcasethe
consolidation followed the Jenkins Report (the Report of the Company
Law Committee,1962Cmnd1749)publishedin1962,theamendingActsof
1967,1976,1980and1981andtheCompanies(BeneficialInterests)Act1983.
[0.3] Two statutory instruments made under CA 1981, s 116 made amend-
mentstotheexistinglawrecommendedjointlybytheLawCommissionandthe
Scottish Law Commission to come into operation only on the passing of the
consolidating Act. These amendments, being within the very limited scope of
theauthorityconferredbysection116(namely,amendmentsrecommended‘as
desirabletoenableasatisfactoryconsolidationofthewholeorthegreaterpart
oftheCompaniesActstobeproduced’)consistedinthemainofthecorrection
ofdraftingslipsinthemorerecentActs.
[0.4] Theprovisionofthe1985 Actcorrespondingtothatofoneormoreof
therepealedenactmentsappearsfromtheTablesofDestinationandDerivation
printedat[0.32]-[0.34].
[0.5] Theobsoleteprovisionsmentionedabovewerethesubjectmatterofthe
Law Commission’s Eleventh Report on Statute Law Revision (Cmnd 9236)
presentedinMay1984whichrecommendedtherepealofcertainprovisionsin
BCA•Issue41 1
[0.5] IntroductiontoBuckleyonthe Companies Acts
the 1948 Act as being ‘obsolete, unnecessary or otherwise not of practical
utility’. These related to cost book companies in the stannaries and, by
CC(CP)A1985,s 28,ceasedtohaveeffecton1 July1985andweretherefore
notrepeatedinthe1985Act.
[0.6] Of the three Acts which were passed and came into operation simulta-
neouslywithCA1985:
(1) The Business Names Act 1985 (see [0.35]) was derived substantially
from sections 28 and 29 of the 1981 Act (which did not form part of
the Companies Acts) and may therefore be regarded as the current
successoroftherepealedRegistrationofBusinessNamesAct1916.
(2) The CompaniesSecurities(InsiderDealing)Act1985wasderivedsub-
stantiallyfromPartVofthe1980Act,sothattheprovisionsrelatingto
‘insiderdealing’comparativelyrecentlyintroducedintotheCompanies
Actswereremovedfromthem.
(3) The Companies Consolidation (Consequential Provisions) Act 1985
(see [0.37]) was principally concerned with matters of a transitional
nature(particularlyinrelationto‘oldpubliccompanies’,whichtookup
the first nine of the 35 sections, the next 15 being grouped under the
cross-heading‘MiscellaneousSavings’).Themostimportantoftheother
provisionswere:
(a) Section 29 and Schedule 1, which repealed on 1 July 1985 all
theCompaniesActs1948to1983,aswellasanumberofother
relatedstatutoryprovisions;and
(b) Section31,whichmadeprovisionfor‘continuityoflaw’andin
particular by subsection (2) which enabled all statutory instru-
ments made under the repealed enactments to be treated as
though made under the corresponding provisions of the four
1985Acts.
(b) As a refreshing change from recent legislation, the four Acts
referred to above, all of which received the Royal Assent on
11 March 1985, came into force on 1 July 1985, with a single
exception: the CA 1985 by section 746 came into force on that
day except as provided by s 243(6), which required an order of
theSecretaryofStateinastatutoryinstrumenttobringintoforce
sub-ss (3) and (4) of that section which imposed penalties on a
company for a failure to deliver accounts to the registrar. This
wastheoneprovisionofthe1976Act1whichwasneverbrought
into operation: see the Companies Act 1976 (Commencement
No 9) Order 1984, SI 1984/683. CA 1989, s 1(a) and s 11
substituteds242Afortheformers243.
1 SeeSection4(3)and(4)
[0.7] Amongst the statutory instruments made under provisions in the
1985 Act, the Companies (Forms) Regulations 1985, SI 1985/854 have ad-
opted the helpful device of numbering the forms by the number of the sec-
tionunderwhicheachonewasprescribed.
[0.8] Asexplainedbelow,thishappystateofaffairsprovedshort-lived.
2 BCA•Issue41
De-Consolidation [0.23]
De-Consolidation
[0.9] On30October1985theIA1985waspassedinorderto‘makeprovision
withrespecttotheinsolvencyofcompaniesandindividuals,thewindingupof
companies,thedisqualificationandpersonalliabilityofpersonsinvolvedinthe
management of companies and the avoidance of certain transactions at an
undervalue; and for connected purposes’. The Act contained substantial
amendmentsoftheexistinglawofcompaniescontainedintheCA1985,afew
of which were brought into force by four commencement orders before the
passingon25July1986oftheIA1986inorderto‘consolidatetheenactments
relating to company insolvency and winding up (including the winding up of
companiesthatarenotinsolvent,andofunregisteredcompanies);enactments
relatingtotheinsolvencyandbankruptcyofindividualsandotherenactments
bearing on those two subject matters, including the functions of insolvency
practitioners, the public administration of insolvency, the penalisation and
redressofmalpracticeandwrongdoing,andtheavoidanceofcertaintransac-
tionsatanundervalue.’
[0.10]–[0.20] The IA 1986 is a consolidating act similar to the 1908, 1929
and1948 Actsmentionedabove:thatis,itwas‘precededbyanActpassedin
the previous year, providing for substantial amendments to the existing law’
(namely,theIA1985)‘but,withminorexceptions,comingintooperationonly
onthepassingoftheconsolidatingAct’.
[0.21] Putbriefly,theresultofthesetwoActstogetheristohaverepealedon
29 December 1986 the provisions of the CA 1985 as to receivers and
winding-up and the bankruptcy provisions of the Bankruptcy Act 1914 and
otherenactmentsandtocontinuethem,asamendedbythe1985 Act,onthat
dateinthe1986Act.
[0.22] On29December1986anotherconsolidatingActcameintoforce:the
CDDA 1986. This took over from CA 1985 and the IA 1985 the provisions
relatingtothedisqualificationandpersonalliabilityofpersonsinvolvedinthe
management of companies: that is, those derived from section 188 of the CA
1948,assubstantiallyamendedandextendedbysubsequentActsandasfurther
amendedbytheIA1985whichcameintoforcebeforethesetwoconsolidating
Actswerepassed.Afurtherstepinthereversaloftheprocessofconsolidation
was taken when the FSA 1986 was passed on 7 November 1986. Its objects
includedmaking‘newprovisionwithrespecttotheofficiallistingofsecurities,
offersofunlistedsecurities,takeoveroffersandinsiderdealing’,whichinvolved
repealingtheprovisionsoftheCA1985relatingtoprospectusesandsubstitut-
ing entirely new provisions; substituting for CA 1985, ss 428 to 430 (which
repeateds209ofthe1948Act)ninenewsections(CA1985,ss428to430F);
and extending some of the provisions of the Company Securities (Insider
Dealing)Act1985soas,amongstotherthings,toincludereferencestomatters
providedforintheFSA1986andincludinganewprovisionforinvestigations
intoinsiderdealingsbyinspectorsappointedbytheSecretaryofState.
[0.23] Finally,CA1989wasenactedon16November1989.Itspurposes,so
farasconcernschangesaffectingCA1985,weretoimplementtheSeventhEC
Directive (OJ 83/349) on consolidated accounts and otherwise to improve
financial reporting by companies, to implement the Eighth EC Directive (OJ
84/253) with regard to eligibility for appointment of company auditors, to
amendthepowersofinvestigationavailabletotheSecretaryofState,toamend
BCA•Issue41 3
[0.23] IntroductiontoBuckleyonthe Companies Acts
thelawwithregardtotheregistrationofcompanychargesandtomakeother
amendments to the CA 1985. Many of these changes have been made by
amendment of the CA 1985 but the CA 1989 also contains other provisions
affectingtheCA19851.
1 ForacommentaryontheCompaniesAct1989,seeBuckleyontheCompaniesActs,
SpecialBulletin,TheCompaniesAct1989(Butterworths,1990).
Construction
[0.24] Itwasformerlythoughtthat,intheconstructionofaconsolidatingAct,
primafaciethesameeffectoughttobegiventoitsprovisionsaswasgivento
thoseoftheActsforwhichitwassubstituted1.ButinFarrellvAlexander2the
majorityintheHouseofLordssaidthatsuchanActshouldbeinterpretedin
accordancewiththeusualcanonsofconstructionandwithoutrecoursetothe
Act’s antecedents. Only where there is a real and substantial difficulty or
ambiguityshouldthatrecoursebehad.Althoughtheremaybecircumstancesin
whichsuchrecoursemaybehad,thatisnotthecasewhereaconsolidatingAct
consolidatesActswhicharethemselvesamendingActs3.
Neverthelessthereisastrongpresumptionthataprovisioninaconsolidating
Act does not alter the pre-existing law4 and it appears that the courts will be
reluctant to presume that any major change in the law has been effected in
relation to any particular word or collocation of words, unless compelled to
reachsuchaconclusion5.
1 MitchellvSimpson(1890)25QBD183at190.
2 [1977]AC59.
3 GreyvIRC[1960]AC1.
4 DirectorofPublicProsecutionsvSchildkamp[1971]AC1.
5 ReBJohnson&Co(Builders)Ltd[1955]Ch634at645.
[0.25] A number of provisions in the Acts are designed to implement EEC
DirectivesinaccordancewiththeobligationsoftheUnitedKingdomunderthe
TreatyofRome.Thoseprovisionsmustbeconstruedsoastogiveeffecttothe
directivesinaccordancewithwhichtheyareenactedandtotherulingsofthe
European Court1. Furthermore, the European Court has said that a national
courtisrequiredtointerpretnationallaw,sofaraspossible,soastogiveeffect
toarelevantdirectivewhetherthenationallawwasenactedbeforeorafterthe
directive2.ThiswasacceptedbytheHouseofLordsinWebbvEMOAirCargo
(UK)Ltd3wheredomesticlawisopentoaninterpretationconsistentwiththe
directive.
1 InternationalSalesandAgenciesLtdvMarcus[1982]3AllER551,[1982]2CMLR
46;TCBvGray[1986]Ch621,[1986]1AllER587,affdonothergrounds[1987]
Ch458n,[1988]1AllER108;DukevRelianceSystemsLtd[1988]AC618,[1988]
1AllER626;PickstonevFreemansplc[1989]AC66at123,[1988]2AllER803at
815; Litster v Forth Dry Dock Co Ltd[1990] 1 AC 546, [1989] 1 All ER 1134;
VonColsonvLandNordrhein-Westfalen:14/83[1984]ECR1891,ECJ.
4 BCA•Issue41
HumanRightsAct 1998 [0.25C]
2 Case C-106/89 Marleasing SA v La Commercial Internacional de Alimentacion
SA[1990]ECRI-4135,ECJ.
3 [1992]4AllER929at939.
[0.25A] The EEC Directives which are reflected in the legislation covered by
thisworkcanbeinDividerTinvolumeIII,togetherwithatableshowingthe
principalprovisionstowhichtheyarerelevant.1
1 Foradetailedanalysisofthesedirectives,seeVanessaEdwardsECCompanyLaw
(Clarendon,1999).
Human Rights Act 1998
[0.25B] On 2 October 2000 the Human Rights Act 1998 took effect in
England and Wales1. The extent to which the Act will affect company law or
the Companies Acts is unclear, but in all likelihood its effect will not be
extensive.Sincesomeprovisionsmaybeaffectedandsincealllegislationmust
in future be construed so as far as possible in conformity with the rights
(‘Conventionrights’)conferredbytheEuropeanConventiononHumanRights
(‘ECHR’), to which the Act gives further effect, some general explanation of
theECHR,theActandConventionrightsisnecessary.
1 SavethatHRA1998,s19hadalreadycomeintoforce.
[0.25C] TheECHRwassignedin1950but,untiltheHumanRightsAct1998
was implemented, the domestic courts of England and Wales were in general
unable to give effect to Convention rights, eg where they appeared to be
overriddenbyEnglishlegislation.ThustherearefewEnglishcasessofarwhich
considerwhethertheCompaniesActsorcompanylawareinconformitywith
theECHR.However,apersonwhoallegedaviolationofhisConventionrights
could bring a case in Strasbourg once he had exhausted his remedies under
Englishlaw,butthisdidnotoftenoccur.TheEuropeanCourtofHumanRights
in Strasbourg, whose jurisdiction extends to the interpretation of the ECHR,
anditspredecessororgans,hasconsideredthe CompaniesActsonlyinavery
few cases1. The best known of those cases is that of Saunders v UK2 which
establishedthatitwasaviolationofArticle6ofthe ECHRforanswersgiven
undercompulsionbyapersontoinspectorsappointedunderCA1985,ss432
and 442 to be used in evidence in criminal proceedings against him as a
significantpartoftheprosecutioncase.
1 InanyeventtheEuropeanCourtofHumanRightsappliestheprincipleofevolutive
interpretation, ie interpretation in the light of current conditions, and thus the
interpretationofConventionrightsmaychangeovertime.
2 [1998] 1 BCLC 362; see also IJL, GMR and AKP v UK[2000] Crim LR 133,
(2000)33EHRR11,ECtHR.Buttheconvictionwillnotbesetasideasunsafeifthe
trial court applied substantive law as it stood at the date of the conviction: R v
Lyons[2002]UKHL44,[2003]1AC976.
BCA•Issue41 5
[0.25D] IntroductiontoBuckleyonthe Companies Acts
[0.25D] The Convention rights for the purposes of the Human Rights Act
1998 are those set out in Sch 1 to the Human Rights Act 1998. These rights
include most but not all of the rights protected by the ECHR. Most of
the ConventionrightsinSch1areavailabletocompanies1,butsomebytheir
natureareinapplicable(egtherighttomarryinArticle12oftheECHR).The
rightswhicharemostlikelytobeofimportanceinthecontextoftheCompanies
Actsaretherighttoafairtrial(Article6)andtherighttoprotectionofproperty
(Article 1 of the First Protocol to the ECHR). For instance, the question has
arisenwhetheraprovisioninaschemeofarrangementbetweenacompanyand
its creditors for the submission of disputes to a non-judicial tribunal with a
limitedrighttoapplytothecourtwouldbecompatiblewiththeArticle62.In
addition the courts may have to consider whether the provisions of the Com-
panies Acts which create criminal offences but require the director to prove
some fact to avoid liability also violate Article 6 3. It has been held that civil
penaltiesunderCA1985,s242AdonotviolateArticle6orArticle1oftheFirst
Protocol4.
1 Article8,forinstance,conferstherighttorespectforprivatelife,andinadifferent
contexttheEnglishcourtshavealreadyheldthatacompanyhasarighttoprivacy:
see[13.35].
2 SeeHawkInsuranceCoLtd[2001]2BCLC480,[2001]BCC57.
3 See, eg,CA1985,ss210(4),234(6),241(3),241A(11),242(4),327(1),343(8)(a),
347H(1),(4),381B(3),389B(3),394A(2),429(7),430(7),652E(3),(4),(5),703(2),
703R(3).Article6(2)providesforthepresumptionofinnocence, iethat‘everyone
charged with a criminal offence shall be presumed innocent until proved guilty
accordingtolaw’.Aprovisioncreatingacriminaloffencewillviolatethepresump-
tionofinnocencecontainedinart6(2)ifitarbitrarilyshiftstheonusofprooffrom
theprosecutiontothedefendant.Inthatevent,thequestionwillarisewhetherthe
provisioncanbereaddowninaccordancewiththecourt’sinterpretativeobligation
undertheHumanRightsAct1998,s3soastoimposeanevidentialandnotalegal
burdenofproof:seeSheldrakevDPP[2004]UKHL43,[2005]1 All ER237.An
evidentialburdenofproofmeansthatthedefendantmustraiseontheevidenceinthe
caseanissueastothematterinquestionfitfortheconsiderationbythetribunalof
fact.Theprosecutionthenhastheonusofprovingbeyondreasonabledoubtthatthe
groundofexonerationdoesnotavailthedefendant.Theimpositionofanevidential
onusisnotincompatiblewiththepresumptionofinnocence.
4 R (on the application of POW Trust) v Chief Executive and Registrar of Com-
panies[2003]2BCLC295,[2004]BCC268.Seealsoparas[242A.6]and[242A.7].
[0.25E] Article1oftheFirstProtocolconferstherighttopeacefulenjoyment
of possessions and protects persons where the state deprives them of or
interferes with their property, eg as a result of nationalisation. However this
right is qualified. A state can deprive a person of his property if this is in
accordance with the law, the law serves a legitimate aim and the interference
with property is proportionate to the objective of the law. This Convention
right would be relevant where the Companies Acts impose or permit the
acquisitionorrestrictionofrightsvestedinshareholderswithouttheirconsent.
ThisprovisioncouldthusberelevanttoCA1985,s429,wherebyapersonwho
makes an offer and acquires 90% in value of the shares in a company can in
certain circumstances acquire the outstanding shares1. For the requirement of
proportionality to be satisfied it is generally necessary that there should be
reasonablecompensationforthedeprivationoforinterferencewithproperty.
6 BCA•Issue41
HumanRightsAct 1998 [0.25I]
TheStrasbourgorganshavepermittedstatesawidemarginofappreciationin
determiningtheappropriatelevelofcompensation2.Itwouldnotbeopentoan
English court, however, to apply the same margin of appreciation. As to the
positionunderCA1985,s425,seealso[425]ff.
1 Seebelowpara[430C.3A].Astothepositionasregardsschemesofarrangement
underCA1985,s425,see[425.53].Article1oftheFirstProtocolisalsorelevantto
thesituationwhere,pursuanttoCA1985,s395,aregistrablechargebecomesvoid
asaresultofnon-registration:see[395.51]below,wheretheviewisexpressedthat
theActmaysatisfytherequirementforproportionality.
2 SeeHawkInsuranceCoLtd[2001]2BCLC480,[2001]BCC57,at501,reversedon
othergrounds[2001]2BCLC508.
[0.25F]–[0.25G] TheprovisionsoftheHumanRightsActprincipallyrelevant
tothisworkaress2to8.HRA1998,s2requiresacourtwhendeterminingany
questionwhicharisesinconnectionwithaConventionrighttotakeaccountof
thejurisprudenceoftheStrasbourgorgans.Thisisanewduty.HRA1998,s3
requiresthecourtsofaraspossibletointerpretlegislation(wheneverenacted)
sothatitisinconformitywith Conventionrights.Butthisdoesnotempower
thecourtto‘rewrite’legislation.Nordoesitempowerthecourttostrikedown
primary legislation, that is legislation enacted by Parliament as opposed to
secondarylegislationmadeunderpowersconferredbyParliament.Ifthecourt
cannotinterpretprimarylegislationsothatitconformstotheECHR,itcan(if
itisoneofthehighercourts)makeadeclarationofincompatibility1.Thereare
twoconsequencesofthis.First,inthecasebeforeit,thecourtmustapplythe
legislation as it stands (and it will not be able to give effect to the ECHR).
Second, the Government may use a streamlined procedure to introduce an
amendmenttomakethelegislationconformtotheECHR2.ThusParliamentary
sovereigntyispreserved.
1 HRA1998,s4.
2 HRA1998,s10.
[0.25H] HRA1998,s6providesthatitisunlawfulforpublicauthoritiestoact
inamannerwhichisincompatiblewithConventionrights.Soifadepartment
of state wishes to exercise a discretionary power, it must do so in conformity
with the ECHR. The Act does not define ‘public authority’. However HRA
1998,s6statesthatthecourtisapublicauthority.Ittoohasadutynottoact
incompatibly with Convention. This clearly means that the court must apply
Articles 5, 6 and 7 of the ECHR. It is also clear that in litigation involving a
publicauthoritythecourtmustenforcetheConventionrightsgiventotheother
party,whowillthusbeabletorelyontheECHR.Again,however,Parliamen-
tarysovereigntyispreservedbecausethenewdutydoesnotapplytoanactifthe
public authority could not have acted differently because of primary legis-
lation1.
1 HRA1998,s6(2)(a).
[0.25I] HRA1998,s6maybeoneofthemostdifficultsectionsintheActfor
civil courts because the extent to which the courts must enforce the ECHR
BCA•Issue41 7
[0.25I] IntroductiontoBuckleyonthe Companies Acts
where the parties are both private citizens is unclear. Often of course the
commonlawisinlinewiththeECHRoritcanbedevelopedinawaywhichis
compatible with the ECHR. In those circumstances this question may not
matter.Where,however,thisisnotthesituation,forexamplebecauseEnglish
lawdoesnotregardtheviolationasawrongwhichgivesrisetoaremedy,the
roleofthecourtisunclear.Thebetterviewonthisissueofhorizontalityseems
tobethatthecourthasadutytogivearemedyonlywheretheECHRhasbeen
heldbytheEuropean CourtofHumanRightstoimposeapositiveobligation
onthestate1andthereisalreadyacauseofactioninEnglishlaw.
1 Forexampletocontrolprivateemployerswhoseactionsinterferewithemployees’
freedomofassociationunderArticle11oftheECHR:Young,JamesandWebsterv
UK4EHRR38.
[0.25J] Sections7and8setoutanewremedyagainstpublicauthoritiesifthey
actincompatiblywiththeConvention.Thecourtmaygrantsuchremedyasit
thinksappropriate1.However,indecidingwhethertoawarddamages,andifso
how much, the court must take into account the jurisprudence of the Euro-
peanCourtofHumanRightsonjustsatisfactionunderArticle4oftheECHR2.
Forthispurposetheapplicantmustbea‘victim’forthepurposesofArticle34
of the ECHR3. In exceptional circumstances, in particular where it is clearly
established that it is impossible for the company itself to apply to the Euro-
pean Court of Human Rights through its organs, that Court may treat a
minorityshareholderasbeingavictiminrespectofabreachofa Convention
righttowhichthecompanyisentitled4.
1 HRA1998,s8(1)
2 HRA1998,s8(4).TheEuropeanCourtofHumanRightsmayawardcompensation
forpecuniarydamage,thatisforlossactuallysufferedasaresultoftheviolation,and
fornon-pecuniaryloss,aswheretheapplicanthassufferedanxiety,inconvenienceor
uncertaintyasaresultoftheviolation.Awardsfornon-pecuniarylossmaybemade
tocompaniesaswellastoindividuals:ComingersollSAvPortugal(2000)31EHRR
772.
3 HRA1998,s7(3),(7).
4 SeeAgroteximHellasSAvGreece(1996) 21 EHRR250,appliedinHumberclyde
Finance Group Ltd v Hicks[2001] All ER (D) 202 (Nov) Neuberger J. Thus a
shareholdermaybeabletoestablishthatheisavictimofaviolationofaConvention
righttowhichthecompanyisentitledwherehiscomplaintrelatestothedurationof
court-supervised liquidation proceedings and the conduct of the liquidators: GJ v
Luxembourg(2000)36EHRR40.
European Union Law
[0.25K] ItiscontrarytoEuropeanlawforthelawofamemberstatetorestrict
the right of establishment conferred by Articles 43 and 48 of the European
Treaty: see Centros Ltd v Erhvervs-og Selskabsstyrelsen1 in which the Euro-
peanCourtofJustice(‘theECJ’)heldthatDenmarkhadtoregisterthebranch
ofacompanyincorporatedinEnglandandWalesevenifthecompanyhadno
business there and did not comply with Danish law on capital maintenance.
8 BCA•Issue41
The future [0.26]
Likewise in Uberseering BV v Nordic Construction Company Baumanage-
mentGmbH2,theECJheldthatitwascontrarytoEUlawforGermanlawnot
torecogniseforthepurposeofstandinginlegalproceedingstheexistenceofa
companyincorporatedinanothermemberstatebutnothavingitsrealseatof
businessthere.Itwassufficientifitwasvalidlyincorporatedbythelawofits
placeofincorporation.ItremainstobeseentowhatextentitiscontrarytoEU
lawforamemberstatetoplacerestrictionsoncompaniesincorporatedinother
memberstates3.TheECJhasalsoruledthattheretentionbythegovernmentof
rightsinacompanybymeansofshares(‘goldenshares’)havingspecialrights
entail restrictions on the free movement of capital contrary to the EC Treaty.
These restrictions may be justified but to be valid they must apply without
distinctiontothenationalsofallthememberstatesandbeproportionatetothe
aimtobeachieved4.
1 C-212/97[2000]Ch446,[2000] 2 BCLC68,ECJ(Full Court).Seepara[1.17A]
below.SeealsoKamervanKoophandelenFabrikenVoorAmsterdamvInspireArt
(EuropeanCourtofJustice,30September2003,CaseC-167/01).
2 Case C-208/00 (2002) Transcript, 5 November. See also Re Sevic Systems AG
(EuropeanCourtofJustice,CaseC-411/03)[2005]AllER(D)175.
3 Seepara[690A.7].
4 EC CommissionvSpainCaseC-463/00,[2003] 2 CMLR557;EC Commissionv
UnitedKingdom[2003]AllER(EC)878,[2003]2CMLR598.
The future
[0.26] InJuly2002,theDepartmentofTradeandIndustry(theDTI)issueda
whitepaperentitled‘ModernisingCompanyLaw’1followingthepublicationin
July2001ofthefinalreportoftheSteeringGroupoftheCompanyLawReview.
ThatreviewwassetupbytheDTIinMarch1998andinthecourseofitswork
publishedsomenineconsultationpapers2.Thewhitepaperseeksviewsonthe
DTI’s coreproposalsfornewlegislation,whichlargelyfollowtherecommen-
dations of the Steering Group of the Company Law Review. The white paper
alsoincludesanumberofdraftclauses,notablyadraftstatutorystatementof
thedutiesofdirectors.Itislikelythattherewillbelegislationonanumberof
issues3.
1 Publishedintwovolumes:Cm5553-IandCm5553-II.
2 ModernLawfora CompetitiveEconomy,the StrategicFramework(1999)(URN
99/654);ModernLawforaCompetitiveEconomy,CompanyGeneralMeetingsand
ShareholderCommunication(1999)(URN99/1440);ModernLawforaCompeti-
tive Economy, Company Formation and Capital Maintenance (1999) (URN
99/1145);ModernLawforaCompetitiveEconomy,ReformingtheLawconcerning
Oversea companies (1999) (URN 99/1146); Modern Law for a Competitive
Economy, Developing the Framework (2000) (URN 00/656); Modern Law for
aCompetitiveEconomy,CapitalMaintenance:OtherIssues(2000)(URN00/880);
ModernLawforaCompetitiveEconomy,RegistrationofCompanyCharges(2000)
(URN00/1213);ModernLawforaCompetitiveEconomy,CompletingtheStruc-
ture (2000) (URN 00/1335); Modern Law for a Competitive Economy: Trading
Disclosures(2001)(URN01/542).
BCA•Issue41 9
[0.26] IntroductiontoBuckleyonthe Companies Acts
3 See the written answer given in Parliament on 10 July 2003 by the Minister for
IndustryandtheRegions:PQNo2002/3553.
[0.27] The Law Commission has published two reports on company law
which recommend changes to the Companies Act 1985 and which await
implementation: Shareholder Remedies (1997) (Law Com 246), and, jointly
withtheScottishLawCommission,CompanyDirectors:RegulatingConflicts
ofInterestsandFormulatingaStatementofDuties(1999)(LawCom261;Scot
LawComNo173)1.Thesereportsformedthebasisofsomeoftherecommen-
dationsoftheSteeringGroupoftheCompanyLawReview.TheLawCommis-
sion, in August 2005, also produced a report on company security interests2
dealingwithregistrationofcharges.However,thegovernmenthasstatedthat
the recommendations of the Law Commission on company charges do not
carry a consensus of approach. Accordingly the Company Law Reform Bill
does not take a wide power to enable secondary legislation to be made
implementing the Law Commission’s recommendation. Instead, a more nar-
rowlydrawnpowertomakechangestotheregistrationofcompanychargesis
includedintheBill.
1 These are available on the Law Commission’s website:
http://www.open.gov.uk/lawcomm/.
2 CompanySecurityInterests(LawCommissionConsultationPaperNo296)(2005).
[0.28] On3December2003theCompanies(Audit,InvestigationsandCom-
munityEnterprise)BillwaslaidbeforeParliament.ThisBillcontainsprovisions
intended to strengthen the independence of auditors, the enforcement of
accounting standards and reporting requirements, the rights of auditors to
information and the regime for company investigations. It also introduces a
newvehicle–thecommunityinterestcompany.Thisnewformofincorporation
will make it easier to have companies whose profits and assets are not to be
distributedbutaretobeusedforthebenefitofthecommunity.
[0.28A] On1November2005,theCompanyLawReformBillwasintroduced
into Parliament. This Bill, now renamed the Companies Bill, contained on
introductionover800clausesandmanymorehavebeenaddedinthecourseof
thepassageoftheBillthroughParliament.Itincorporatesmanyofthepropos-
als for the reform of company law mentioned above. In particular, it will
introduce a statutory statement of the duties of the directors of a company.
Among other provisions, this statement will require directors to act in the
mannerthattheyconsidermostlikelytopromotethecompanyforthebenefit
of the members as a whole. The Bill also places the derivative action on a
statutoryfooting.Therearenewprovisionsthatenableacompanytoreduceits
sharecapitalwithouttheconfirmationofthecourt.TheprovisionsofCA1985,
ss151–158willnolongerapplytoprivatecompanies.TheBillisnot,however,
anupdatedversionofCA1985.ItmakesalargenumberofchangestothatAct,
andintroducessomenewprovisions,butitalsoleavesmanyprovisionsofthe
existing Act unaffected by the Bill. The Bill applies to the whole of the UK,
includingNorthernIreland.
[0.28B] The Bill is not expected to complete its passage through Parliament
beforetheautumnof2006.Itisnotexpectedtobebroughtintooperationuntil
10 BCA•Issue41