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Tuesday, 1 November 1983
Page: 2151

Question No. 319

Mr Jacobi asked the Minister representing the Attorney-General, upon notice, on 23 August 1983:

(1) Further to the Attorney-General's predecessor's answer to my Question No. 4702 ( Hansard, 8 December 1982, page 3217), is he able to say, in the light of the McCabe Lafranchi report, whether there appear to be gaps in the Companies Act which lend themselves to tax abuse.

(2) What progress has been made towards inserting in the Companies Act the important and productive provision set out in the Second Directive 68/151 on Co- ordination of Safeguards of the Council of the European Communities, which has been implemented recently and which has the force of law in the United Kingdom.

(3) Is it a fact that the implementation of the undermentioned provisions would be critically important if the Companies Act is to play an important role in the battle against tax avoidance; 6 (minimum capital); 7 (non-cash consideration); 10 (non-cash consideration-valuing assets); 11 (promoters); 15 (payment of dividends); 17 (serious loss of capital); 25 (authorisation of new share issues) ; 27 (non-cash consideration); 29 (pre-emptive rights to new shares issues) and 35 (maintenance of capital).

(4) Will the Attorney-General consider the matters referred to in parts (5) to (13) of this question as the basis for possible amendment to the Act.

(5) Does section 81 of the Companies Act apply to a contract made by a person as agent or trustee for a company which the person wrongly believes to be incorporated; if so, why.

(6) Does sub-section 81 (11) apply to contracts within sub-section (1) which are not ratified; if so, is the effect of sub-section 81 (11) to exclude quasi- contractual remedies as well as contractual remedies.

(7) Does sub-section 81 (2) permit a company to ratify a contract notwithstanding that the parties to the contract have previously withdrawn from it or cancelled it.

(8) Bearing in mind sub-section 72 (1) can a class rights provision in a company memorandum be altered under sub-sections 125 (2), 126 (2) or 127 (2).

(9) If a company can alter a class rights clause in a memorandum, how can this be done, that is, by special or ordinary resolution.

(10) Once the class content has been obtained for a variation of rights contained in the (a) memorandum and (b) articles, does the company in general meeting then have to pass a resolution to alter the memorandum or the articles; if so, which sections of the Act require this to be done and what type of resolution, that is special or ordinary, is required to alter the (i) memorandum and (ii) articles.

(11) Why does sub-section 453 (1) and sub-section 453 (2) not contain a provision similar to sub-paragraph 230 (1) (a) (iv).

(12) With respect to sections 33 to 37, why does the Act not include a requirement for all companies to raise and maintain a prescribed minimum nominal and paid-up capital.

(13) Has action been taken to remedy the defects in section 117 referred to in parts (12) to (16) of Question No. 3212 to the former Minister for Business and Consumer Affairs (Hansard, 18 November 1981 page 3173); if not, why not and will urgent action now be taken.

(14) If the provisions referred to in parts (5) to (13) remain as structured will they constitute an open invitation to the corporate manipulator to make transactions to the detriment of a company and its creditors.

Mr Lionel Bowen —The Attorney-General has provided the following answer to the honourable member's question:

(1) I am unaware of any conclusions in the McCabe-Lafranchi report which would indicate a need for any specific amendments of the Companies Act 1981;

(2) and (3) I expect that these provisions (which were the subject of Question No. 2866, (Hansard, 16 February 1982, pages 109-112) will be considered by the Companies and Securities Law Review Committee, which will be operative from 1 January 1984, in the context of an examination of the theory and legitimate use of the corporate form;

(4)-(12) and (14) It would be inappropriate to provide in this answer legal opinions on the questions raised in these parts of the question. I assure the honourable member however that the possible need for amendments arising out of the questions will be considered by my Department. Where appropriate, matters will be referred to the Ministerial Council on Companies and Securities or to the proposed Companies and Securities Law Review Committee.

(13) Yes. The exposure draft of the Companies and Securities Legislation ( Miscellaneous Amendments) Bill 1983 contained (in clause 23) proposed amendments to section 117 which would remedy the defects referred to by the honourable member in parts (12) to (16) of Question No. 3213. This exposure draft was made available to the public on 1 December 1982. These proposed amendments have now been included in clause 49 of the Companies and Securities Legislation ( Miscellaneous Amendments) Bill 1983.