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Lord Hodgson of Astley Abbotts: They may not be necessary or desirable, but they could be achieved. I will not try to answer the detailed points. I am grateful to the Minister for having given a considered response. He has mentioned other changes which mean that the clause which we have proposed to replace Clause 554 does not hit the spot, so to speak. We will have to look at that.
If, at the end of a discussion about consolidation—the Minister clearly understood what we were driving at—we fall back on saying, "Well, it's all in Butterworths; we do not need to worry about whether it is consolidated or not", I would be sorry that we could not do a bit better than that in once-in-20-years company legislation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Razzall moved Amendment No. A61:
"CONVICTION OF COMPANY
In section 122 of the Companies Act 1985 (c. 6) (notice to registrar of alteration of share capital) for subsection (2) substitute—
"(2) If default is made in complying with subsection (1), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(2A) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.""
The noble Lord said: Amendment No. 61 stands in the names of my noble friend Lord Sharman and myself. In the light of the remarks just made by the noble Lord, Lord Hodgson of Astley Abbotts, I am sure that I speak for my noble friend in saying that, as a director of Reed Elsevier—one of the major publishers of legal textbooks—he would entirely agree with them. That is a neat introduction to the amendments that I will initially be speaking to: Amendments Nos. A61, A67, A80, A81 and A85, which are grouped together. I will come to the last four in a moment.
The purpose of the amendments is clear. We are not advocating any change in the law, just a movement of provisions within the framework of the Act. We accept, although we have lost the argument, that this is not a full consolidation, but it incorporates amendments to the Companies Act 1985. It seems sensible that users of the Act should not have to rush off to enrich the pockets of my noble friend in purchasing legal textbooks to check different parts of the Act and determine the extent to which a particular provision has been amended.
The purpose of these amendments is that, where amendments are made in the main body of the Bill to sections which are also amended in Schedule 4—on
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offences—those provisions be moved from Schedule 4 to the main body of the Bill. This reasoning applies to Amendments Nos. A61; A67, which amends Clause 559; A80, which amends Clause 567; and A85, which amends Clause 573. Clearly, if these amendments are passed, consequential amendments would need to be made to Schedule 4. If Amendment No. A61 were passed, paragraph 5 of Schedule 4 would need to be deleted, because it is replaced by that amendment. If Amendment No. A67 were passed, paragraph 7 of Schedule 4 would need to be deleted. If Amendment No. A80 were passed, consequential amendments would be necessary to delete paragraphs 14 and 15 of Schedule 4. Lastly, if Amendment No. 85 was passed, paragraph 16 of Schedule 4 would need to be deleted. This is not a change in the law. We seek simply to consolidate the offences in the main section.
Although Amendments Nos. A172, A174, A201 and A202 have been included in this group, I am not sure that they necessarily make the same points. As we will probably be in the middle of the Lord's test match by the time we reach Amendment No. A172, perhaps I may reserve our position and speak to them when we get to that point in the Bill. For now, I should like to degroup them. I beg to move.
Lord McKenzie of Luton: Clause 733, entitled:
introduces Schedule 4 to the Bill and contains amendments to the Companies Act 1985 relating to offences. The changes in Schedule 4 clarify the wording of the offences in the 1985 Act and, in some cases, introduce substantive changes such as whether a company or its officers, or both, may be guilty of an offence.
The amendments to this group of clauses would shift the provisions set out in paragraphs 5, 7, 14, 15, 16, 32 and 33 of Schedule 4 into Clauses 554, 559, 569(1), 569(2) and 573, and Schedule 3. As has been explained by the noble Lord, Lord Razzall, they aim to ensure that where the Bill makes two amendments to a single provision in the 1985 Act, they should be set out in one place in the Bill. The Bill does not currently do this because all amendments related to offences in the 1985 Act are set out separately in Schedule 4. While I understand the intention behind the amendments in the group, I find the argument for keeping all of the amendments to the offences in the 1985 Act together in Schedule 4 more compelling. As currently drafted, Schedule 4 provides a comprehensive list of amendments to those offences in the 1985 Act which remain. Any person who is interested in these amendments need look no further than Schedule 4. A choice needs to made here and we believe it right to collect the offences together in Schedule 4. I now forbear from making any further reference to textbooks.
Lord Razzall: I understand the argument and I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 555 agreed to.
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Clause 556 [Variation of class rights: companies having a share capital]:
The Deputy Chairman of Committees (Baroness Fookes): Before calling Amendment No. A62, I should tell the Committee that if this amendment is agreed, I shall not be able to call Amendment No. A63 by reason of pre-emption.
Lord Razzall moved Amendment No. A62:
The noble Lord said: I hope that this will be dealt with by a simple nod from the Minister. The amendment covers yet another argument in relation to transitional provisions. Clause 556 substitutes a new section for Section 125 into the Companies Act 1985 and deals with the variation of class rights by companies having a share capital. Clearly there needs to be a transitional provision to permit a variation of class rights pursuant to the procedure laid down in Section 125 where the variation is by extraordinary resolution at a separate general meeting of the holders of the relevant class and the meeting is convened before the clause comes into effect. I hope that this is just another matter to be dealt with under Amendment No. A272. It is another to add to the list to ensure that it is covered in the list of transitional provisions. I beg to move.
7.30 pm
Lord McKenzie of Luton: For the sake of completeness, I will go through the note, but the noble Lord is right in his conclusion. New Section 125 provides that the rights attached to a class of shares—for example, a right attaching to a class of preference shares entitling the holders to a preferential dividend of 10 per cent—may be varied only with the written consent of the holders of at least three-quarters in nominal value of the shares of that class or by a special resolution passed by the holders of the class. That is, however, without prejudice to any other restrictions on the variation of the class rights.
The effect of that is that, where the articles of association prescribe a more onerous regime for the variation of class rights, that more onerous regime must be complied with. For example, the articles may prescribe that the holders of 90 per cent in nominal value of shares in that class must consent to a variation. That differs from existing Section 125, which contains complicated provisions which provide that the relevant rule governing a variation of class rights depends on the origin of the class rights and whether any specific provision has been made for their alteration.
Under existing provisions there are circumstances in which a company's articles may prescribe a less onerous regime than the statutory scheme. If they do, under current law, that regime will prevail. The circumstances in which a company may have a less onerous regime for the variation of class rights are limited. Those circumstances are prescribed in
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Section 125(4) of the 1985 Act. The amendment proposed by the noble Lord would appear to be directed at such cases.
We understand that it is rare for the articles to make provision for a lower majority than 75 per cent of the holders of shares in the class. In the interests of simplifying the law in that area, we do not propose to retain an equivalent provision to Section 125(4). That does, however, leave open the question of what provision, if any, should be made for existing companies whose articles specify less onerous conditions for a variation of class rights. The concern is that such provisions may still be subsisting at the time that new Section 125 comes into force.
We need to look carefully at those issues when we come to address transitional matters generally. I am grateful to the noble Lord for raising this point and adding it to the list of those things which we need to cover.
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