This is a reminder that on 1 October 2008 another tranche of the changes wrought by Companies Act 2006 will come into force. In particular there are two which may make re-organisations of private companies a little less fraught:
- They won’t need to follow the whitewash procedure in order to provide financial assistance on the acquisition of their shares; and
- They will be able to reduce their share capital by a much simpler process than the present rigmarole of application to the Court.
As to the second, a private limited company will be able to reduce its capital as follows:
- The company’s articles must allow it to do so;
- The company must still have at least one member holding shares after the reduction;
- The directors will make a solvency statement as to the ability of the company to pay or discharge all its liabilities (including contingent liabilities) after the reduction and for the ensuing 12 months (similar to the old whitewash statutory declaration);
- A special resolution of the company will need to be passed;
- The resolution, solvency statement and a memorandum (detailing the share capital of the company as after the reduction) are to be filed at Companies House and the reduction thereupon becomes effective
As with the current “whitewash” statutory declaration the penalties on the directors for making a solvency statement without having reasonable grounds for the opinion expressed in it are a fine, imprisonment or both.
The new Act continues of course to provide for company repurchase of shares either out of distributable reserves or (in the absence of adequate reserves) out of capital.
This article was later published by TaxationWeb.