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Lord McKenzie of Luton: Clause 537(4) explains how the clause operates when shares of a public
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company are offered for subscription and payment is to be made wholly or partly otherwise than in cash. The first two lines of subsection (4) are taken without any change from the equivalent part of Section 84(4) of the Companies Act 1985. The amendment would replace those words with a slightly different formulation, but without making any substantive change to the operation of the provision. The question is whether the amendment is a drafting improvement. There is a difficulty with it. Unlike the current drafting of subsection (4), the amendment does not follow the opening wording of subsection (1).
The clause applies where there has been an offer for subscription of shares of a public company. The amendment refers instead to "shares subscribed". It is less accurate to refer to "shares subscribed" because the whole point of the clause is that the shares should not be allotted unless the requirements of subsection (1) are satisfied. These requirements focus on the offer either that the issue is subscribed for in full or that the offer is made on certain terms and those terms are met. Subsections (2) to (4) set out what happens if the shares being offered for subscription are prohibited from being allotted because the requirements of subsection (1) are not met. I hope that helps the noble Lord.
Lord Hodgson of Astley Abbotts: I am grateful. The Minister knows that I am not a lawyer, and I do not find it easy to understand some of the fine points here. He said that we have changed the words, but what is the difference between "shares offered for subscription" and "shares subscribed"? It seems to me that the wording—it took some getting there—was clearer to a non-legal mind. For someone wishing to come from the outside to read this, the amendment was more clearly drafted, but I will read what the Minister has said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6 pm
Clause 539 [Return of allotment by limited company]:
Lord Hodgson of Astley Abbotts moved Amendment No. A39B:
The noble Lord said: This clause concerns the return of allotments by limited companies. I have tabled Amendments Nos. A39B and A39C. Amendment No. A39C concerns the subsequent clause, Clause 540, which is the subset of the issue. With these two amendments we return to the familiar topic of what more precisely will be required by the terms of these clauses, which seem to give open-ended powers to the registrar. For example, in these two clauses there are references to "prescribed information" in line 10, and "prescribed particulars of those rights" in line 27. The Bill gives no indication of what that information is likely to be, or should be; simply that it is "prescribed", presumably by the registrar. For example, in
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Clauses 539 and 540, one might expect the names and addresses of the subscribers to be included. It would be helpful if the Minister could explain what sort of information the Government expect to be prescribed so that we have an idea of the extent of what will be asked for in these two clauses. I beg to move.
Lord McKenzie of Luton: Clause 539 replaces Section 88 of the 1985 Act. As now, within one month of an allotment of new shares in a limited company, the company is required to make a return of allotments to the Registrar of Companies. A return of allotments made under this clause must be accompanied by a statement of capital, which is in essence a snapshot of a company's total subscribed capital at the date to which the return of allotments is made up. This statement includes prescribed particulars of the rights attached to each class of the company's shares. Such information is currently required to be filed under either Section 123 of the 1985 Act, which relates to increases in authorised share capital and which is repealed by the Bill, or Section 128(1) and (2) of that Act, relating to allotments of a new class of shares and which will be repealed as a consequential amendment.
Currently, Section 88 provides that the return of allotments must state the number and nominal amount of the shares comprised in the allotment, the names and addresses of the allottees and the amount, if any, paid or due and payable on each share. In addition, where the shares are allotted as fully or partly paid up otherwise than in cash, the company must deliver the contract that it has with the allottee, or prescribed particulars of that contract if it is not in writing, to the Registrar of Companies.
In framing those provisions we have sought to address the concerns expressed by the Law Society regarding this latter requirement. We accept its point that contracts may contain commercially sensitive information which the company would not normally want to disclose. Following discussions with the Registrar, the Government have concluded that there is no need to continue with this requirement, so Clause 539 does not require companies to provide the Registrar with a copy of the contract where shares are allotted for a non-cash consideration.
Clause 539 does not set out the detail of the information which must be included in the return of allotment. Instead, the Secretary of State has the power to prescribe by statutory instrument the information which must be included in the return of allotments. This follows from the definition of "prescribed" in Section 744 of the 1985 Act, which will continue to apply for the purposes of the Bill. It is this provision which is the subject of the amendment. It is envisaged that such information will include, as now, details relating to the shares allotted and the identity of the allottees. It will also need to include details of any consideration received in respect of shares which are allotted as fully or partly paid up otherwise than in cash due to the removal of the requirement to file a written contract.
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Clause 540 requires unlimited companies to make a return of allotments to the registrar where the directors allot a new class of shares. That reflects current law; that is, the provisions of subsections (1) and (2) of Section 128 of the 1985 Act. The reference to the return of allotments containing "prescribed" particulars of those class rights, which the noble Lord's amendment seeks to remove, is again a reference to the power which the Secretary of State has to prescribe such information by statutory instrument. It is envisaged that such information will mirror the information relating to the rights attaching to a class of shares required to be included in the statement of capital which, as I have said, must accompany a return of allotment made by a limited company.
I hope that that has given an indication of the type of information which will be sought under these provisions and that my explanation on the manner in which the power to prescribe information will be exercised offers assurance to the noble Lord. I hope that, in consequence, he will feel able to withdraw the amendment.
Lord Hodgson of Astley Abbotts: That response was helpful. Perhaps I may press the Minister for one further comment, which is that there is no present intention to increase the amount of prescribed information. He listed some of the information that is currently asked for; it would be helpful if he could put on the record that we will not move on from that.
Lord McKenzie of Luton: The immediate answer is that there is no current intention to increase it. If the case is other than that, I shall write to the noble Lord, but the answer to his question is that there is no such intention.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister for that and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 540 [Return of allotment of new class of shares by unlimited company]:
[Amendment No. A39C not moved.]
Clause 542 [Time for acceptance of pre-emption offers]:
Lord Hodgson of Astley Abbotts moved Amendment No. A40:
( ) may include such conditions as to member agreement as he thinks fit"
The noble Lord said: The amendment addresses an issue that has been raised with us by the UK Share Association. Clause 542 gives power to make regulations reducing the period for communication of pre-emption offers. We believe that for any company, the period should be reduced to 14 days only if a
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substantial majority of the members agree. As this is a power to make regulations, it will be desirable to include in the power the ability to include such conditions on member agreements as the Secretary of State thinks fit. That is what our amendment seeks to achieve. I beg to move.
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