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Lord Hodgson of Astley Abbotts moved Amendment No. A44:
"OFFERS TO SHAREHOLDERS TO BE ON PRE-EMPTIVE BASIS
(1) Subject to the provisions of this section and sections (Communication of pre-emption offers to shareholders) to (Savings for company's pre-emption procedure operative before 1982), a company proposing to allot equity securities (as defined in section (Definitions for sections (Offers to shareholders to be on pre-emptive basis) to (Saving for company's pre-emption procedure operative before 1982))—
(a) shall not allot any of them on any terms to a person unless it has made an offer to each person who holds relevant shares or relevant employee shares to allot to him on the same or more favourable terms a proportion of those securities which is as nearly as practicable equal to the proportion in nominal value held by him of the aggregate of relevant shares and relevant employee shares, and
(b) shall not allot any of those securities to a person unless the period during which any such offer may be accepted has expired or the company has received notice of the acceptance or refusal of every offer so made.
(2) Subsection (3) below applies to any provision of a company's memorandum or articles which requires the company, when proposing to allot equity securities consisting of relevant shares of any particular class, not to allot those securities on any terms unless it has complied with the condition that it makes such an offer as is described in subsection (1) to each person who holds relevant shares or relevant employee shares of that class.
(3) If in accordance with a provision to which this subsection applies—
(a) a company makes an offer to allot securities to such a holder, and
(b) he or anyone in whose favour he has renounced his right to their allotment accepts the offer,
subsection (1) does not apply to the allotment of those securities, and the company may allot them accordingly; but this is without prejudice to the application of subsection (1) in any other case.
(4) Subsection (1) does not apply to a particular allotment of equity securities if these are, or are to be, wholly or partly paid up otherwise than in cash; and securities which a company has offered to allot to a holder of relevant shares or relevant employee shares may be allotted to him, or anyone in whose favour he has renounced his right to their allotment, without contravening subsection (1)(b).
(5) Subsection (1) does not apply to the allotment of securities which would, apart from a renunciation or assignment of the right to their allotment, be held under an employees' share scheme.
(6) Where a company holds relevant shares as treasury shares—
(a) for the purposes of subsections (1) and (2), the company is not a "person who holds relevant shares"; and
(b) for the purposes of subsection (1), the shares held as treasury shares do not form part of "the aggregate of relevant shares and relevant employee shares"."
The noble Lord said: There are a large number of amendments in this group: Amendments Nos. A44 to A50. They concern a pretty chunky set of new clauses. I apologise for the length of the amendments, but we inquired whether there was any other way technically to achieve what we wanted and we were told that this was the only way to do it. I comfort myself with the
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thought that at least I shall reduce the length of the Marshalled List as a result when we pass by this group. We have spoken about this issue several times before. The issue is that of consolidation—more precisely, the lack of it in parts of the Bill. It has been brought to our attention independently of our efforts to promote consolidation by City corporate lawyers.
Part 18 re-enacts, as amended, Sections 80 to 88 inclusive and Sections 95, 97 and 98 of the Companies Act 1985. Sections 89 to 94 inclusive and Section 96 are to remain in the Act. Our practitioner advisers say that the provisions in the Companies Act 1985 on allotment and pre-emption are among the most frequently consulted sections in the entire Act. The depth of some of the technical amendments that we have discussed this afternoon shows that that is not an unreasonable statement.
Having some of the provisions in the Companies Act 1985 and others in the Company Law Reform Act 2006, as I assume that the Bill will become, is surely a recipe for confusion. This group of amendments inserts the missing sections and, as such, is aimed to provide greater clarity at no cost. I hope that the Minister will appreciate that our interest in achieving that greater consultation is not an academic exercise but is sought by those who will be using the Bill when it becomes law. I hope that he will see the benefits in that consolidation. I beg to move.
Lord Sainsbury of Turville: First, we do not regard this as an academic exercise. We want to achieve as much consolidation as possible, but I hope that I can explain why we have come to this position.
I shall speak to Amendments Nos. A44 to A50. The amendments would insert seven new clauses into the Bill that reproduce without amendment Sections 89 to 94 and 96 of the 1985 Act. Those sections form part of a discrete group of provisions which deal with the matter of pre-emption rights. The provisions have survived the Bill relatively intact, save for the fact that we have taken the opportunity in the Bill to reinstate the 1985 Act provisions on the disapplication of pre-emption rights contained in Section 95. I shall come to that later. The question of restatement is not without its difficulties. There are arguments for and against any proposed restatement. Part 18 is intended to strike a balance between the various competing views on the issue in the context of a particular section or group of sections of the 1985 Act.
It may be helpful at this point for me to outline the general approach that we have taken in the Bill to restatement of the 1985 Act provisions on share capital. Where a particular provision or group of provisions has been subject to substantial piecemeal amendment we have taken the view that, in most cases, it is better to restate it in the interests of greater clarity. Where we have not found it necessary to amend a particular provision or group of provisions, or where there have been only minor changes, as a general rule we have taken the view that the relevant section of the 1985 Act should remain intact—again, in the interests of clarity.
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Where we have decided to restate, that has in turn often led to changes in the drafting from that which is used in the current section, to reflect the drafting approach taken in the Bill as a whole—for example, as regards the general layout of the Bill and the structure of individual clauses. The Committee will be aware that that approach has prompted questions, such as have already been aired in this House, about why the drafting has changed and whether the intention is that the restated provision should have a different legal effect to the provision of the 1985 Act that it replaces. In the interests of avoiding creating uncertainty, we have therefore tried to resist restating for restatement's sake. The main consideration here has been whether the benefits of a proposed restatement outweigh the risk that the restatement may be interpreted as making a substantive change in the law when that is not the intention. Obviously, this is not a precise science and the process has necessarily been one of judgment.
The Committee may wonder why we have restated the provisions on the day's application of pre-emption rights currently contained in Section 95, but not the rules on the application of pre-emption rights. In a nutshell, that is because the former provisions are currently framed by reference to the authority to allot shares under Section 80 of the 1985 Act. Section 80 will be repealed by the Bill and replaced by the provisions in Clauses 534 to 536. It was therefore necessary to reframe the provisions governing that disapplication of pre-emption rights so that they fit with the new provisions relating to the authority of the directors to allot shares contained in Clauses 535 and 536.
By contrast, the provisions relating to the application of pre-emption rights are not amended by the Bill and, in the circumstances, we think that the difference in treatment is justified. As I said at the beginning, this is not an academic point but, equally, it is not a precise science and the process has necessarily been one of judgment. We have made that judgment.
6.45 pm
Lord Hodgson of Astley Abbotts: I am grateful but a little disappointed that we did not have further movement on that. First, it is absolutely correct, and it was the intention, that these new clauses were the same as the sections in the 1985 Act. That was not the purpose; the purpose was to have everything in one place. As I heard the Minister describe it, the reason for moving some clauses into this new Bill and not others was where they had been amended along the way and therefore various layers of amendments had been added to them, but, where there had not been, the clauses were to stay in the original Act.
I found that disappointing and strange. For the Minister to say that if the Government were to move the rest of the sections into this Bill it somehow might imply some change in the law, I did not find that credible. It seems to me that, as we have gone through the Bill, we have several times asked the Minister about where the wording has changed. He very kindly
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said, "No, we don't mean any changes at all". That is fine. So it would be perfectly simple for him to say, "We have moved these clauses up. They are in here. No change is intended". A practitioner would then have a series of clauses covering the whole of this subject. This is a sad answer more than anything else, because I think that we could have done something to make this complex and frequently consulted part of the law, in the words of the original press release, "more accessible".
I do not suppose that I will shift the Minister on this, and I do not suppose that the walls of Jericho are going to fall down if we have the legislation in two Acts. But we have missed an opportunity to help people who are practising law by bringing everything together in one place. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. A45 to A50 not moved.]
Clause 548 [Commissions, discounts and allowances]:
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