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Company Law Reform Bill

Paragraph (a) restates Section 321(3) of the Companies Act 1985. The only substantive change is to expand the exception to include the acquisition of assets from the member. Paragraph (b) reinstates Section 321(2)(a) of that Act. The wording in paragraph (a), creating an exception from the requirement for approval for substantial property transactions between a company and person in his character as a member, is taken directly from the 1985 Act. It is intended to cover transactions such as the payment of the dividend in specie as well as the distribution of assets to a member of a company during the winding-up of the company and in satisfaction of his rights qua member in the liquidation. Likewise a duly sanctioned return of capital in the form of non-cash assets would fall within this exception. It is also intended to put beyond doubt that the issue of shares or other rights to a member does not require approval under the rules for substantial property transactions. Paragraph (b) creates an exemption for transactions between wholly owned subsidiaries of the same holding company. This is not a strong reason to require member approval in the case of a wholly owned subsidiary, as the holding company should be able to exercise all the control it wishes through its 100 per cent shareholding. I hope that makes clear what we mean by a person,"““in his character as a member””."