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,