The Gazette 1984

GAZETTE

JANUARY/FEBRUARY 1984

Accordingly a company that has received its own shares by way of gift may now hold them in its own name. Furthermore, where shares of either a public or private company are issued to a nominee or where a nominee acquires any partly-paid shares the shares are treated as being held by the nominee for his own account and the company is regarded as having no beneficial interest. If the nominee fails to pay the amount of any call in respect of such shares the directors at the time of issue (or the other subscribers to the Memorandum if the shares were issued to them as subscribers) are jointly and severally liable with him. These provisions do not apply to shares issued or transferred as a result of an application or an agreement made before the appointed day or where a nominee of a company acquires shares in such a way that the company has no beneficial interest in those shares, nor do they apply where a nominee of a public company acquires shares, otherwise than by subscription, with the financial assistance of the company and the company has a beneficial interest in the shares: in this latter case, however, the directors will be jointly and severally liable with the nominee to pay any call. The Court may grant relief to subscribers or directors who would otherwise have liability to pay calls if it appears that they acted honestly and reasonably and ought, in all the circum- stances, fairly to be excused. Certain special rules apply to public companies in most cases where shares are acquired by the company (or other persons) and the company has a beneficial interest in those shares or where shares are forfeited or surrendered. In these circumstances no voting rights may be exercised by the company (or by its nominee or other shareholders concerned) and the company must dispose of the shares within three years (or one year if the company provided financial assistance in connection with the acquisition) or cancel the shares and thereby effectively reduce the capital, in which event the directors must apply for re- registration as a private company if the cancellation has the effect of reducing the allotted capital below the authorised minimum. Collateral with Section 42, paragraph 10 of the Second Schedule to the Act provides for amendment of Section 60 of the 1963 Act so as to provide that: (a) the general exceptions under that Section to the prohibition on financial assistance given by a company in connection with the purchase of its own shares do not apply to public limited companies unless the Special Resolution required by that Section was passed prior to re-registration under the 1983 Act; (b) a public limited company may only give assistance pursuant to sub-section (13) of Section 60 (dealing with employee share schemes) if its net assets are not thereby reduced or, to the extent that they are so reduced, that the financial assistance is provided from profits available for dividend. Under Section 44, a lien or any other charge that a public company holds on its own shares is void except for a charge for any amount that is payable in respect of those shares or a charge in connection with any transaction entered into in the ordinary course of a company's business of lending money or providing credit or hire purchase.

Restrictions on Distribution Part IV of the Act relating to distributions applies to public limited companies from original registration or from their re-registration under the Act and to private companies (to the extent that they apply at all) from the end of the transitional period. 'Distribution' is defined for the purpose of the Act as any distribution of a company's assets to its members, whether or not in cash, other than a distribution made by way of: (i) the issue of bonus shares, (ii) the redemption of preference shares in accordance with the usual rules, (iii) the reduction of share capital or (iv) the distribution of assets to members on a winding up. Neither public or private companies may make a distribution except out of profits 'available for the purpose' which mean, in this context, the accumulated realised revenue or capital profits not previously either distributed or capitalised, less accumulated realised revenue or capital losses, so far as they have not been previously written off in either a reduction or a re- organisation of capital. A public limited company (but not a private company) is precluded under Section 46 from making a distribution unless the amount of its net assets at the time of the proposed distribution exceed the aggregate of its called- up share capital and its 'undistributable reserves'. Further, any such distribution must not reduce the amount of its net assets below this aggregate. 'Undistri- butable reserves' for the purpose of this Section are stated to be: (a) the share premium account, (b) the capital redemption reserve fund, (c) the excess of accumulated unrealised profits, that have not been capitalised, over accumulated unrealised losses that have not previously been written off by a reduction or reorganisation of capital and (d) any reserve that the company is prohibited from distributing for any other reason. The effect of this provision is that a public limited company must provide for any existing net unrealised losses before making a distribution. An old public company which re-registers as a public limited company will before paying any further dividend to its share- holders, be required to cover the amount of any unrealised profits which it has previously distributed by realised profits. There are special provisions, in Sections 47 and 48 in respect of distributions by investment companies and assurance companies. Section 49 deals with the accounts of a company which must be used in making determinations under this Part. Broadly the Statutory accounts for the last financial year are to be used, but if a distribution would be found to contravene the relevant section on the basis of such accounts, interim accounts may be used as would enable a reasonable judgment to be made in the matter. Any member who receives an unlawful distribution is liable, under Section 50 to repay it to the company if at the time he received it he knew, or he had reasonable grounds to believe, that it was made in contravention of the

provisions of this Part. Unlimited Companies

Section 52 introduces for the first time in Irish Law a procedure whereby a limited company may, with the consent of all its members, re-register as unlimited. When the United Kingdom introduced such a provision in 1967,

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