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(c) no further shares may be issued in right of the shares or in pursuance of an offer made to their holder;
(d) except in a liquidation, no payment may be made of sums due from the company on the shares, whether in respect of capital or otherwise.
(2) Where shares are subject to the restriction in subsection (1)(a), an agreement to transfer the shares is void.
This does not apply to an agreement to transfer the shares on the making of an order under section (Removal of restrictions) made by virtue of subsection (3)(b) (removal of restrictions in case of court-approved transfer).
(3) Where shares are subject to the restriction in subsection (1)(c) or (d), an agreement to transfer any right to be issued with other shares in right of those shares, or to receive any payment on them (otherwise than in a liquidation), is void.
This does not apply to an agreement to transfer any such right on the making of an order under section (Removal of restrictions) made by virtue of subsection (3)(b) (removal of restrictions in case of court-approved transfer).
(4) The provisions of this section are subject—
(a) to any directions under section 803(2) or section (Relaxation of restrictions) (3) (directions for protection of third parties), and
(b) in the case of an interim order under section 803(3), to the terms of the order.’.— [Margaret Hodge.]
Brought up, and read the First time.
3.30 pm
Margaret Hodge: I beg to move, That the clause be read a Second time.
Madam Deputy Speaker: With this it will be convenient to discuss the following:
Government new clause 59— Penalty for attempted evasion of restrictions.
Government new clause 60— Relaxation of restrictions.
Government new clause 61— Removal of restrictions.
Government new clause 62— Order for sale of shares.
Government new clause 63— Application of proceeds of sale under court order.
Government amendments Nos. 454 to 458.
Margaret Hodge: The right hon. Member for Suffolk, Coastal (Mr. Gummer) has been in the Chamber for much of our proceedings and has made a welcome contribution. However, I must tell him that the new clauses in this group, those that we have just discussed and many others are simply a restatement of existing legislation. At the behest of Members of the House of Lords, we decided to incorporate the provisions in one place so that it would be easier for businesses—especially small businesses, which are enabled by much of the legislation to act more effectively and efficiently, with less regulation—to ensure that they understood and could cope with the law.
The new clauses in this group restate part 15 of the Companies Act 1985 in so far as the provisions apply in relation to part 23 of the Bill. Part 23 enables public companies and members of those companies to ascertain the underlying beneficial owners of shares. The company may apply to the court for an order under clause 803 directing that the shares in question be subject to various restrictions under part 15 of the
1985 Act, which include voiding any transfer of the shares and providing that voting rights are not exercisable in respect of the shares. Those provisions are restated without substantive change in the new clauses.
Part 15 will remain in the 1985 Act because it also applies to part 14 of that Act, which will remain in force. Nevertheless, we think that it is helpful to make a restatement through the new clauses so that the reader can find all the relevant provisions for part 23 in one place. Again, we have consulted on the new clauses and we are especially grateful to the Law Society for its useful comments.
James Brokenshire (Hornchurch) (Con): The new clauses relate to the old section 212 notice provisions. Where a shareholder or beneficial holder fails to respond to a section 212 notice inquiry into the ownership of the shares in question, a public company generally has powers in its articles to remove rights from the shares. Those powers will now go into the Bill so that transfers can be blocked, rights to vote removed, and so forth. However, the Minister will appreciate that that is very much the nuclear option and that, in all likelihood, it will rarely, if ever, be used. I have only one question: how extensive has the Minister’s consultation been, and what further consultation and review will be undertaken on the matter?
Margaret Hodge: There has been extensive consultation over the summer with stakeholders. I do not see a need for further consultation, and I accept that, as the hon. Gentleman says, the provision is unlikely to be widely used. If he puts an argument to me, I will take it on board and see whether further consultation is required.
Clause read a Second time, and added to the Bill.
Question, That new clauses 59 to 63 be brought up, read the First and Second time, and added to the Bill, put and agreed to.
‘(1) Where a document required or authorised to be delivered to the registrar under any enactment is required—
(a) to be certified as an accurate translation or transliteration, or
(b) to be certified as a correct copy or verified,
the registrar may impose requirements as to the person, or description of person, by whom the certificate or verification is to be given.
(2) The power conferred by section 1034 (registrar’s requirements as to form, authentication and manner of delivery) is exercisable in relation to the certificate or verification as if it were a separate document.
(3) Requirements imposed under this section must not be inconsistent with requirements imposed by any enactment with respect to the certification or verification of the document concerned.’.— [Vera Baird.]
Brought up, and read the First time.
Vera Baird: I beg to move, That the clause be read a Second time.
Madam Deputy Speaker: With this it will be convenient to discuss the following:
Government new clause 84— Power to accept documents not meeting requirements for proper delivery.
Government new clause 85— Documents containing unnecessary material.
Government amendments Nos. 741, 484, 466 to 469, 742, 174, 743 to 748, 175 to 187, 749, 188, 189, 233, 750, 190, 191, 234 and 192 to 194.
Vera Baird: The majority of the amendments in this group are drafting amendments and I do not propose to dwell on them at length. If hon. Members have questions about them, I shall do my best to reply. The amendments are all pretty self-evident. They make improvements to the Bill and should cause no contention.
I should say something about the amendments relating to the provisions on proper delivery, as these introduce changes to the Bill in the interests of clarity and consistency. It is clear from the Bill, as set out in clause 1038(1), what requirements a company must meet in order to have “properly delivered” a document. In the Bill there is some inconsistency as to the implications of failure to comply with these requirements. For example, clause 862(6) as it currently stands makes it clear that when we talk about a company failing to deliver its annual return, what is meant is failure to comply with all the requirements set out in clause 1038(1). If the company does not meet those requirements, it cannot be said to have delivered the document for the purposes of compliance with the law.
However, provisions in the Bill in relation to many other documents do not make similar reference to clause 1038, implying that there are, so to speak, two sorts of delivery, a “first class” status of “proper delivery” and a “second class” one of “mere delivery”. Such an inconsistency cannot be helpful to anyone and it leaves the status of documents that are “delivered” but not “properly delivered” somewhat uncertain.
It is important to be clear about what a company does and does not need to do in order to comply with the law when it submits documents. Clarity is provided by amendment No. 742, which makes it clear that in order for a document to be considered as delivered, it must be properly delivered in the terms of clause 1038. That clarity will be helpful to companies, so that they know what they need to do, and to Companies House, which needs to be sure when it can and cannot take action against a company. Introducing a consistent policy across the Bill has some implications for other clauses, which are dealt with by other amendments.
James Brokenshire: As the Minister said, these are largely drafting, technical and legal changes. We agree that they improve the Bill, so we have no objection to the amendments and new clauses.
Clause read a Second time, and added to the Bill.
‘(1) Where the court sanctions the compromise or arrangement, it must—
(a) in the order sanctioning the compromise or arrangement, or
(b) in a subsequent order under section 906 (powers of court to facilitate reconstruction or amalgamation),
fix a date on which the transfer (or transfers) to the transferee company (or transferee companies) of the undertaking, property and liabilities of the transferor company is (or are) to take place.
(2) Any such order that provides for the dissolution of the transferor company must fix the same date for the dissolution.
(3) If it is necessary for the transferor company to take steps to ensure that the undertaking, property and liabilities are fully transferred, the court must fix a date, not later than six months after the date fixed under subsection (1), by which such steps must be taken.
(4) In that case, the court may postpone the dissolution of the transferor company until that date.
(5) The court may postpone or further postpone the date fixed under subsection (3) if it is satisfied that the steps mentioned cannot be completed by the date (or latest date) fixed under that subsection.’.— [Margaret Hodge.]
Brought up, read the First and Second time, and added to the Bill.
‘(1) The provisions of this Part apply where a compromise or arrangement is proposed between a company and—
(a) its creditors, or any class of them, or
(b) its members, or any class of them.
“arrangement” includes a reorganisation of the company’s share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods; and
(a) in section (Powers of court to facilitate reconstruction or amalgamation) (powers of court to facilitate reconstruction or amalgamation) means a company within the meaning of this Act, and
(b) elsewhere in this Part means any company liable to be wound up under the Insolvency Act 1986 (c. 45) or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).
(3) The provisions of this Part have effect subject to Part (Mergers and divisions of public companies) (mergers and divisions of public companies) where that Part applies (see sections (Application of Part 27A) and (Relationship of this Part with Part 27)).’.— [Margaret Hodge.]
Brought up, and read the First time.
Margaret Hodge: I beg to move, That the clause be read a Second time.
Madam Deputy Speaker: With this it will be convenient to discuss the following:
Government new clause 67— Court order for holding of meeting.
Government new clause 68— Statement to be circulated or made available.
Government new clause 69— Duty of directors and trustees to provide information.
Government new clause 70— Court sanction for compromise or arrangement.
Government new clause 71— Powers of court to facilitate reconstruction or amalgamation.
Government amendments No. 520 to 522
Amendment No. 113, in page 421, line 31, Clause 901, leave out from ‘application’ to ‘the’ in line 32 and insert
‘from the company, a member or a creditor’.
Government amendments Nos. 523 to 529
Amendment No. 117, in page 425, line 5, clause 908, leave out ‘900’ and insert ‘899(1)’.
Amendment No. 118, line 20, after ‘undertaking’, insert ‘,’.
Margaret Hodge: These new clauses replace the existing part 27, making a number of minor and technical amendments. Part 27 is part of the exercise of restating the Companies Act 1985. The provisions in part 27 concern reorganisations, arrangements and reconstructions within a company, and allow some types of merger or demerger to take place. They restate what is currently part 13 of the 1985 Act, without making any change in substance. Following our consultation over the summer, and particularly in light of comments received from the Law Society, we propose to delete clauses 899 to 908 in part 27 and replace them with new clauses containing amendments of a minor and technical nature. I hope that Opposition Members agree that their drafting amendments to these provisions—amendments Nos. 113, 117 and 118—should no longer be necessary in light of the Government changes, which replace the clauses that they address.
Let me explain the minor and technical changes that we propose. New clause 67 allows the court to order a meeting without having first received an application to sanction a scheme. What was clause 900 has been placed after what was clause 903 and becomes new clause 70. Clause 908, which provided a power to make regulations on mergers and divisions, has now been deleted. That should be welcome, as we are now including those provisions in full in the Bill. References to clause 908 have also been deleted. There are a few other minor drafting changes.
We have chosen to lift and replace the existing clauses largely because the Law Society had proposed some desirable reordering of the clauses, which we have adopted. If we had tried to achieve that through amendments, we considered that it would have been hard for Members to follow the end result.
James Brokenshire: As the Minister said, these are technical changes relating to arrangements and reconstructions, and they reflect the proposals of the Law Society. The only question that I had was whether amendment No. 113, which is a consequential change suggested by the Law Society, had been dealt with as part of the proposals that the Minister has just explained. I heard what she said about being satisfied that that had been addressed, and therefore I have no further objections.
3.45 pm
David Howarth: I also have no objection to these new clauses. They are entirely reasonable and sensible. However, I wish to observe that amendment No. 118 makes an extraordinary powerful change; it brings in a comma. I observe for the benefit of the hon. Member for Hornchurch (Mr. Brokenshire), who tabled the amendment, that he should perhaps bear in mind the words of one of the great observers of political life on that kind of amendment, which he refers to as comma-hunting.
“Another sport which wastes unlimited time is Comma hunting. Once start a comma and the whole pack will be off, full cry, especially if they have had a literary training...But comma-hunting is so exciting as to be a little dangerous. When attention is entirely concentrated on punctuation, there is some fear that the conduct of business may suffer, and a proposal get through without being properly obstructed on its own demerits.”
Clause read a Second time, and added to the Bill.
Question, That new clauses 67 to 71 be brought up, read the First and Second time, and added to the Bill, put and agreed to.
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