Company Law Bill [HL]

Section 153 of the 1985 Act sets out a list of transactions which are not caught by the general prohibition on the giving of financial assistance contained in Section 151 of that Act. All the schemes mentioned in Section 153(3) are subject to other requirements designed to ensure the protection of creditors and to prevent the misuse or depletion of the company’s assets. There is no need, therefore, to subject such transactions to the prohibition on financial assistance. The exemption that is the subject of this amendment relates to the distribution of a company’s assets by way of dividend lawfully made. The amendment seeks to amend the exemption by stating that in order to fall within the exemption it is necessary for the company to establish only that the distribution of assets was by way of a distribution lawfully made under Part VIII of the 1985 Act. As noble Lords are aware, while Part VIII provides the technical framework which determines what amounts to a lawful distribution by a company to its members, these statutory provisions operate alongside the common law which is expressly retained by Section 281 of the 1985 Act and which remains an essential component in the regulation of unlawful dividends. The drafting of Clause 153(3)(a) was deliberate in not confining itself to distributions made under Part VIII for the very reason that companies are required also to comply with the relevant common law rules relating to dividends in specie. There may be circumstances in which a distribution of an asset, made in accordance with Part VIII, may, if it is given for the purpose of an acquisition of shares, fall subject to the prohibition on the giving of financial assistance and, therefore, should not fall within the exemption. We are accordingly unable to accept Amendment No. A77.