| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
Lord Razzall moved Amendment No. A29:
Page 254, line 5, at end insert ", or an equivalent amount in another currency calculated by reference to the appropriate exchange rate prevailing on, or on such date as the company may select being not more than 28 days preceding—
(a) for the purposes of section 91, the date of the relevant special resolution under section 90,
(b) for the purposes of sections 531 and 532, the date of the application for a certificate under section 531,
(c) for the purposes of section 139 of the Companies Act 1985 (c. 6) (public company reducing capital below authorised minimum), the date of the relevant court order under section 138 of that Act (registration of order and minute of reduction)"
The noble Lord said: The purpose of the amendment, which is quite straightforward, is to enable public companies to have their minimum share capital denominated in a currency other than pounds sterling. Chapter 2 of Part 17 describes the minimum share capital requirement for public companies, and Clause 533 sets the authorised minimum as being £50,000. We submit that the Explanatory Notes to the Bill are misleading. They state that the minimum capital has to be,
that is, pounds sterling for the UK—because of EU legislation. Our submission is that Article 6 of the Second Company Law Directive does not say that, as the Minister will be aware. The directive states that a minimum capital shall be subscribed, the amount of which shall not be less than 25,000 ECU. It does not require or state anywhere that the minimum share capital is to be prescribed in a particular currency. It would certainly be convenient for some companies if their authorised share capital could be denominated in a currency other than pounds sterling. Those who know my noble friend Lord Sharman, whose name appears first on the amendment, will not be surprised were he to suggest that the most obvious example would be the euro. I beg to move.
Lord McKenzie of Luton: Clause 533 retains the current requirement, contained in Sections 117 and 118 of the 1985 Act, that before a public company may do business, a minimum share capital, known as the authorised minimum, must be subscribed. There is the same minimum share capital requirement where a private company re-registers as a public company under Part 7 of the Bill or under Section 43 of the 1985 Act.
This implements Article 6 of the Second Company Law Directive, which requires public companies to have a minimum share capital of not less than 25,000 ECU, which the noble Lord referred to. The directive goes on to lay down how the equivalent of 25,000 ECU in the member state's national currency is to be calculated. As noble Lords will be aware, the ECU was replaced by the euro with effect from 1 January 1999. While the directive does not prescribe that the minimum share capital requirements for a public company must be met in the member states' domestic currency, in Re Scandinavian Bank Group plc, Mr Justice Harman took the view that Article 6 seemed to require EU member states to impose on public companies incorporated within the EU a minimum share capital in their own national currency.
I accept that the note on Clause 533 might have been better expressed, but I do not think that it is misleading. The sentence that the noble Lord, Lord Razzall, referred to is a quote from the Second Company Law Directive, which was before the euro was invented. The first sentence sets out the current position.
The Government are not aware that there is any particular demand for the authorised minimum to be denominated in the sterling equivalent of another currency on registration or re-registration. The approach taken in the Bill, therefore, assumes that on registration or re-registration as a public company the minimum share capital requirement should be satisfied in sterling.
There does not, however, appear to be anything in Article 6 of the Second Company Law Directive that requires the authorised minimum to continue to be denominated in sterling once a public company has been registered or re-registered. Clauses 578 to 584 of the Bill therefore contain new provisions that enable
15 Mar 2006 : Column GC482
both public and private companies alike to easily redenominate their share capital from one currency to another. Those provisions enable a public company to redenominate all of its share capital, including the authorised minimum, into another currency of the company's choosing as soon as the company has been registered or re-registered. The practical effect is that you could end up denominated in whatever currency you chose. I hope that that goes some way towards addressing the noble Lord's concerns.
Lord Razzall: That is certainly an interesting point. As I understand it, the Minister is saying that the company could, as long as it had denominated its share capital in sterling to begin with, immediately re-register with currency denominated in—
Lord McKenzie of Luton: For the record, there are procedures that have to be gone through, which we will debate later.
Lord Razzall: You would have to follow those procedures. I will reflect on what the noble Lord has said, but that seems to answer the point. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McKenzie of Luton moved Amendment No. A30:
"CONSEQUENCES OF DOING BUSINESS ETC WITHOUT A TRADING CERTIFICATE
(1) If a company does business or exercises any borrowing powers in contravention of section 531, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(2) A person guilty of an offence under subsection (1) is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(3) A contravention of section 531 does not affect the validity of a transaction entered into by the company, but if a company—
(a) enters into a transaction in contravention of that section, and
(b) fails to comply with its obligations in connection with the transaction within 21 days from being called on to do so,
the directors of the company are jointly and severally liable to indemnify any other party to the transaction in respect of any loss or damage suffered by him by reason of the company's failure to comply with its obligations.
(4) The directors who are so liable are those who were directors at the time the company entered into the transaction."
On Question, amendment agreed to.
Clause 534 [Exercise by directors of power to allot shares etc]:
Lord Razzall moved Amendment No. A31:
(c) to the allotment of shares in pursuance of an authority conferred on them pursuant to section 80 of the Companies Act 1985 (c. 6) (authority of company required for certain allotments) following the coming into force of this section"
15 Mar 2006 : Column GC483
The noble Lord said: Although this seems to be a technical point, it raises an issue of considerable importance to public companies. Those of us who sit on the boards of public companies will be aware that it is absolutely normal practice at every annual general meeting for a resolution to be passed pursuant to Section 80 of the Companies Act 1985 relating to the authority of the company to make certain allotment in certain circumstances. That is absolutely common practice. The concern is that there are no transitional provisions to deal with companies that have those resolutions in the current year or in the period before this Bill comes into effect.
To summarise the position, Clause 534 prohibits the exercise of any power to allot shares or grant rights to subscribe for shares except in accordance with Section 535 or 536, as they will be. A number of companies—virtually every public company unless it happens to have its annual general meeting on the day on which this provision comes into effect—will have authorities that they have taken under Section 80 of the Companies Act 1985. One way of dealing with that would be to exclude from the scope of the Clause 534 prohibition any allotment pursuant to a valid Section 80 authority granted before Clause 534 came into effect, so allowing an orderly run-off of old allotment authorities in the same way as I understand the 1980 Act—for those of us who remember it—contained a saving provision for pre-emption procedures operative before 1982.
This is a transitional point. It may seem to be a point of detail, but it is a point of significant practical difficulty for companies in the 2006 AGM season. I attended a board meeting yesterday at which we approved our notice of meeting containing the normal Section 80 authority. The meeting will take place in April. It would be helpful to have reassurance from the Minister that transitional provisions will deal with the problems that I have just described. I beg to move.
4.45 pm
| Next Section | Back to Table of Contents | Lords Hansard Home Page |