The Companies (Authorised Minimum) Regulations 2009

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations relate to provisions of the Companies Act 2006 (“the Act”) which refer to the “authorised minimum” share capital requirement for public companies.

There is a definition of “the authorised minimum” in section 763(1) of the Act: it is £50,000 or the prescribed euro equivalent. Regulation 2 prescribes, for the purposes of this definition, the amount in euros which is to be treated as equivalent to the sterling amount of the authorised minimum. The prescribed euro equivalent is €57,100.

Regulations 3 and 4 provide for the application of the authorised minimum requirement for the purposes of certain provisions of the Act. The provisions in question have the effect of requiring a public company to re-register as a private company where certain events cause the nominal value of its allotted share capital to fall below the authorised minimum. The events are a reduction of share capital confirmed by court order or the mandatory cancellation of shares in particular circumstances.

Regulation 3 requires the nominal value of the company’s allotted share capital to be treated as being below the authorised minimum if, applying the methods of calculation in that regulation, the sterling value is below £50,000 and the euro value is below €57,100.

The methods of calculation in regulation 3 involve converting the value of currencies into sterling or euros at the appropriate spot rate of exchange. The appropriate spot rate of exchange is defined in regulation 4 and, for particular purposes, the definition refers to rates published by the Financial Times. These published rates are also available at www.ft.com.

Regulations 3 and 4 only apply where (taking account of the reduction or diminution of the company’s share capital) the company has or will have shares denominated in more than one currency. If the company’s allotted share capital is denominated solely in sterling or euros, then it is the definition of “the authorised minimum” in section 763 of the Act which applies for the purpose of determining whether the nominal value of that share capital falls below the authorised minimum.

Regulation 5 deals with registration by the registrar of companies of court orders confirming the reduction of public companies’ share capital. It enables the registrar to assume, in certain circumstances, that the authorised minimum requirement is no longer satisfied by the company.

Regulation 6 enables the courts, in specified proceedings, to make a determination in certain circumstances about the exchange rates to be applied in working out whether a public company satisfies the authorised minimum requirement.

Regulation 7 prevents anyone from being liable as a result of reliance, for the purposes of these Regulations, on an exchange rate published by the Financial Times. It also prevents liability arising if an erroneous exchange rate published by the Financial Times is relied on for the purposes of the Regulations. Finally, it excludes liability for acts or omissions leading to the Financial Times not publishing an exchange rate capable of being relied on for the purposes of the Regulations.

Regulation 8 revokes regulation 2 of the Companies (Authorised Minimum) Regulations 2008 (S.I. 2008/729); and regulation 9 makes transitional provisions and savings. Those transitional provisions and savings take account of transitional provisions and savings in Schedule 2 to the Companies Act 2006 (Commencement No. 8, Transitional Provisions and Savings) Order 2008 (S.I. 2008/2860 (C. 126)).

An impact assessment has not been produced for these Regulations because they have no impact on the costs of business, charities or voluntary bodies.