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Lord Hodgson of Astley Abbotts: I am sure the Committee is very grateful to the noble and learned Lord for that extensive introduction and his explanation of why the Government believe the Takeover Panel has earned its spurs in a rule-making capacity. I do not resile from what I said on Second Reading; I think the Takeover Panel has been one of the great successes of the London financial scene and has played a major role in ensuring that London remains the leading European financial centre.
Let me add, as we have tabled a number of amendments, that we have no wish to hamper the panel's work by imposing unduly burdensome or restrictive legislation. However, since this is the first time that the panel will come within a statutory wrapper, there are some issues in the Bill that are worth a public airing. Therefore, we want to scrutinise this part of the Bill and will be doing so in a positive way over the next hour or so.
I am slightly surprised at the number of representations we have had. I expected that we would have pretty much a clear run through this part of the Bill, but there has been a concern that the panel may have moved into a slightly more bureaucratic, box-ticking mindset. Some of our amendments are designed to address that, to ensure that the great
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success that it has had—which is based on its flexibility and its ability to respond quickly, as the noble and learned Lord said—can be maintained in future.
Lord Goldsmith: I welcome the fact that the noble Lord is going to engage and to invite the Committee to engage in constructive scrutiny of these important provisions, and I look forward to debate on the amendments as they arise.
On Question, amendment agreed to.
Clause 617, as amended, agreed to.
Lord Hodgson of Astley Abbotts moved Amendment No. A139A:
The noble Lord said: We come to the first of the probing amendments. I preface my comments on the amendments with a general inquiry. One issue that has been raised with us is the way in which the Bill links with the takeovers directive, which I understand has 20 May as a deadline for its implementation. It seems now certain that the Bill will not have cleared its parliamentary hurdles and received Royal Assent by that date. A number of people have asked us what provisions the Government have in mind for compliance with the directive until the process of the Bill is completed, so it would be helpful if the noble and learned Lord could explain his plan B to the Committee.
On the amendment itself, it has been brought to our attention that the Takeover Panel has proposed abolishing the rules on substantial acquisition of shares—the SARs. The amendment is tabled to probe the Government over whether Clause 618(3)(b), which makes allowance for the SARs, will be excised from the Bill if they are abolished. I beg to move.
Lord Goldsmith: On the question about plan B—which, in view of the time, is inevitably plan A, as we shall have to move to implement the directive in another way before the Bill has completed its passage through both Houses—that will be done by putting in place an interim regime by means of regulations under Section 2(2) of the European Communities Act 1972. A copy of guidance notes is to be found on the DTI website. An interim regime will be put in place under the European Communities Act, which we can do because that Act permits the implementation, among other things, of Community obligations, by way of secondary legislation.
I turn to the amendment. The Committee may find it helpful if I explain a little more about the intentions in relation to proposed rule-making powers. The rule-making power itself is entirely new but, in practice, we expect its effects to be reassuringly familiar, because since 1968 the panel has laid down rules in what we know as the blue book—The City Code on Takeovers and Mergers—and the SARs, the rules governing the substantial acquisition of shares. The blue book has been a great success and is widely respected and abided by and we have no intention at all of undermining a system of rule-making that has operated so effectively.
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But in implementing the takeovers directive, it is necessary to give formal statutory backing to rules made by the panel, which is the intention behind Clause 618.
In prescribing the rule-making power, it is necessary to provide certainty in two respects. First, we needed to ensure that the relevant provisions of the takeovers directive were implemented. That is achieved by Clause 618(1), which specifically provides that the panel must make rules giving effect to those articles in the takeovers directive. Secondly, we wanted to map out in broad terms the existing territory over which the panel rules apply—and that goes wider than the takeovers directive; it includes matters such as takeovers of public companies whose shares are not traded on a regulated market and mergers, and the rules governing the substantial acquisition of shares, the SARs, which are the subject of the amendment.
3.45 pm
There has been a deliberate policy choice that the whole of the panel's regulatory function should fall within the new legal framework. If we did not do that there would be a two-tier regulatory regime, part of it falling within Part 22 and part of it outside. That approach has been supported during the consultation. That is why Clause 618(3) is drafted in this way. Of course it is right to note that the panel has issued a consultation paper on the continuing relevance of the SARs with a proposal to abolish them. The consultation has closed, but the panel has not yet reached a decision on that. But it is a power, not an obligation. If the panel decided that it was no longer appropriate to regulate matters contained in the SARs, it simply would not use the power to continue to regulate—indeed, it could abolish them.
It seems right to leave with the panel the freedom to make that choice and it would not be right to delete the SARs in the description of the powers. I hope that that is an adequate explanation of the purpose behind the clause as a whole and this part of it.
Lord Hodgson of Astley Abbotts: I am grateful to the Attorney-General, first for explaining plan B; or is it plan A? It was important to put on record that this is a power, not an obligation, which was one of the issues raised with us, along with the dangers of a two-tier system of regulation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Goldsmith moved Amendment No. A140:
"(4) In relation to rules made by virtue of section 632 (fees and charges), functions under this section may be discharged either by the Panel itself or by a committee of the Panel (but not otherwise).
(5) In relation to rules of any other description, the Panel must discharge its functions under this section by a committee of the Panel."
On Question, amendment agreed to.
Clause 618, as amended, agreed to.
Clauses 619 to 621 agreed to.
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Clause 622 [Power to require documents and information]:
Lord Goldsmith moved Amendment No. A141:
The noble and learned Lord said: In moving the amendment in the name of my noble friend, I shall speak also to government Amendments Nos. A142, A143, A177, A178 and A213.
Clause 622 provides, for the first time, statutory powers for the Takeover Panel to obtain documents and information reasonably required by the panel in the exercise of its functions. These new powers are considered necessary to meet requirements of the takeovers directive.
Noble Lords will be well aware that, increasingly, information is not contained in a paper document or similar form capable of being read. Very common examples of this concern information held in electronic form, on computer disks, text messages and BlackBerrys. The clause would not be complete in its scope if it did not permit the panel to obtain such information in a readable form, in addition to existing hard copy documents.
Clause 622(9) already ensures that the panel can obtain information that is held, for example, in electronic form as a readable document—but we think it does that a little inelegantly. The current amendments seek to turn a simple concept into clear English, by substituting "hard copy", which is defined in the later amendment, for "legible and intelligible" information. Amendments Nos. A177 and A178 make similar changes to provisions in Part 23 in relation to company investigations.
There are also two amendments to amend Clause 653 and Section 434 of the Companies Act 1985 to rectify an anomaly in the parallel powers relating to company inspections, by allowing the taking of copies or extracts of documents produced. Finally, Amendment No. A213 tables a new clause before Clause 762 simplifying the existing drafting by inserting a general provision covering the meaning of "hard copy", "electronic communications" and related expressions wherever they appear in the Companies Act. That is the definition of provisions to which I drew attention a moment ago. I beg to move.
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