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Lord Sainsbury of Turville: My Lords, the listing arrangements of the London Stock Exchange have to do with market transactions. This is about making certain that there are no distortions in the market. We are dealing here with a public company, a plc, but it is not listed on the Stock Exchange. That has to be a major consideration. The National Audit Office intends to produce a report, but the publication date is for the NAO to decide.
When we discussed the noble Baroness's previous amendment at the Committee stage I gave a commitment that if what we were proposing in respect of disclosure for the Post Office company fell in any way short of the London Stock Exchange disclosure requirements then we would look at the issue again. My intentions are exactly the same as the noble Baroness's in wishing to ensure transparency when the Post Office company makes a major acquisition or disposal, but while seeking to be fair to its competitors, I do not wish to see the Post Office company unfairly treated. The noble Baroness and I obviously do not have a meeting of minds on the means of achieving that end.
Perhaps I may try again to persuade the noble Baroness that her proposed course is not the best means of securing our joint objective by explaining in more detail the implications of her proposed amendment. It takes the argument a stage forward that the noble Baroness now seeks to require an announcement to follow the agreement of the terms of the transaction. But her amendment would still place an unfair burden on the Post Office company. In particular, it should be noted that the scope of her amendment is such that it would catch very minor transactions which, for example, fall under the related party rules, set out in Chapter 11 of the Listing Rules, where the materiality threshold is extremely low or Class 3 transactions where the relevant percentage ratios are below 5 per cent.
The Listing Rules provide for listed companies also to consult the UK listing authority at an early stage about the application of the rules of Chapter 10--or Chapter 11--to a particular transaction. This is especially so where there is any doubt about the application of the rules, because in practice it is not always easy to tell whether a transaction falls within the rules or within a particular class. Furthermore, where the calculations which determine which, if any, class applies produce an anomalous result or the calculations are inappropriate to the sphere of activity of the listed company, the UK Listing Authority may disregard the calculation and may substitute other relevant indicators of size, including industry specific tests. For example, the consideration to market capitalisation test would not be applicable for the unlisted Post Office company.
Listed companies and their advisers often spend a fair amount of time in consultation with the UK Listing Authority as to the exact classification of a particular transaction, the precise interpretation of a rule or obtaining a company or transaction specific ruling on an ad hoc basis. There is therefore an element of flexibility in the operation of the Listing Rules which would not be available to the Post Office company. Instead it would be faced with deciding whether disclosure is required against a set of tests, incorporated by reference into the statute. The tests are therefore inflexible, especially as there is no possibility of the UK Listing Authority exercising its discretion to apply the rules in a manner appropriate to the Post Office company's business.
In any case, the analogy between the Post Office company and a public listed company does not really work when it comes to public announcements of information. In the case of the Post Office company, it is the public at large, as well as Parliament, who would be interested to know about the transaction, although, I think, not with any great urgency. In the case of a listed company, the information is announced to the market through the Company Announcements Office, with the intention that the listed company's shareholders, and potential shareholders, are made aware of the transaction as soon as possible so they can make an informed investment decision regarding the holding, buying or selling of the shares in the
Perhaps I may return to the noble Baroness's main theme. It would appear that the purpose of this transparency would mainly be to the benefit of the Post Office's competitors and, to some extent, the public at large. I have no difficulty with that idea. But at the same time I do not wish to subject the Post Office company to an unnecessarily onerous and inflexible regime which is designed to serve a very different purpose. The Post Office company's competitors and, more generally, the public would be kept informed about what the company was doing if it made a press announcement once a major acquisition or disposal had been agreed. That would be a far more practical arrangement than an announcement in the London Gazette and is the one which the Post Office has already adopted for its recent major acquisitions.
We want to achieve a sensible and practical regime for the Post Office company without detracting from the principle of transparency. If we enshrine disclosure requirements in the Bill which are linked to the Listing Rules, which contain a degree of discretion for the UK Listing Authority in their application and are regularly updated and amended and, in the light of recent developments, particularly concerning the London Stock Exchange's proposed merger, may well be subject to significant revision over the next few years, we would be setting in concrete in the Bill before the House a regime which may be totally inappropriate in a few years' time and which would be accompanied by none of the flexibility which is presently available to listed companies under the Listing Rules as applied and interpreted by the UK Listing Authority.
The way to achieve this flexibility is to make provision for the disclosure of information in the Post Office company's articles of association. We are currently discussing with the Post Office the draft memorandum and articles of association and we shall be discussing the inclusion of an article which requires the disclosure to the Secretary of State of information about major acquisitions and disposals relating to transactions involving 10 per cent or more of consolidated profits, turnover or gross assets. The provision will require disclosure within a specified period of business days after the transaction in question has been agreed, by way of a press announcement giving the prescribed information.
It is the Government's intention that the Post Office company should provide transparent information on completed acquisitions and disposals along the lines of the London Stock Exchange disclosure requirements, at least in terms of content, if not in method or timing. The Post Office is already following this policy for all but the most minor acquisitions and it will also provide summary information in its annual report and accounts. The inclusion of a disclosure requirement in
It is intended that our proposals will achieve the transparency that the noble Baroness desires, but without inflexibly shackling the Post Office company to a regime which is intended for another purpose entirely and to which no competitor would be bound in the same way. I hope that the noble Baroness is both persuaded by my arguments and takes comfort from my assurances. I would ask her to withdraw her amendment.
Baroness Miller of Hendon: My Lords, I take some comfort from the assurances given by the Minister. However, I must say that I have been having some difficulty in certain cases in drafting amendments that are technically acceptable or that can be met. However, I take the point made by the noble Lord, Lord Razzall; namely, that it may not be possible to draft an amendment that would be suitable. That may well be why the Government did not come back with their own amendment, as I suggested they should. I should have thought that that would have provided an answer.
Having said that, I asked the Minister certain questions and told him that I did not necessarily require the answers now. I should like to see the responses before we move on to Third Reading. However, the Minister was able to confirm that the National Audit Office had produced a report, although he did not know when it was going to be published. I should tell the Minister that I did not specifically ask when it was going to be published. I have the question in the notes for my speech, but I decided not to ask the question; I thought that would be more tactful. I have crossed it out to ensure that the Hansard writers do not put in something that I did not say in the Chamber.
However, the second question I put to the Minister is more important; namely, am I correct in saying that the report did agree with my amendment? That is what I have been told--that the National Audit Office had in fact recommended something similar, if not quite the same. I believe the NAO thought that my amendment was rather wider than it should have been. I agree. For that reason, I have returned with a somewhat narrower amendment. However, I understand that the NAO did agree that this is something that should be done.
The Minister has confirmed that there is to be a report. I should now like him to confirm whether the report did in fact recommend that this kind of disclosure should take place. The Minister does not need to reply to me now, but I should like to have a response to that question before we return to the Bill at Third Reading.
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