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Lord Sharman: I understand what the noble Lord has said and, as I said previously, I will reflect on his comments. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Hodgson of Astley Abbotts moved Amendment No. A173A:

The noble Lord said: This group of amendments—Amendments Nos. A173A, A173B, A173C and A173D—relates to clarification of paragraph 4 of Schedule 3. It has been suggested that it is easier and clearer to refer back to the definition of "takeover
 
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offer" in Section 428(1) of the Companies Act 1985 rather than have a more complicated arrangement in new subsection (1A) on page 440 of the Bill. I have tabled the amendments simply for clarification and, as the Government like to say, accessibility. I beg to move.

Lord Sainsbury of Turville: In considering the current sequence of amendments, we move on from provisions relating to squeeze-out, which we have just been discussing, to those relating to sell-out. We are now concerned with the rights of the residual minority shareholders rather than those of the successful takeover bidder.

The twin sources of the amendments to Part 13A in the Bill nevertheless mirror those in relation to squeeze-out—namely, the takeovers directive, but this time Article 16—and recommendations of the Company Law Review. The tabled amendments seek to improve the clarity of the drafting of these new provisions. Perhaps the most substantive of the amendments in form, if not in substance, is Amendment No. A173D, which loses the separate provision defining "takeover offer" for the purposes of the sell-out provisions. The current draft mirrors the approach of the Companies Act 1985. It splits the notion of "takeover offer", defined by cross-reference to Section 428(1) of the Companies Act, from the substantive sell-out provisions that apply to such offers.

Amendments Nos. A173C and A173D are certainly more brief in their approach, but one might quibble about whether they remain as clear and precise for the reader. Were these two amendments to be adopted, it might be thought on a first reading of the provisions that the cross-reference was to a meaning of "company" at Section 428(1) or, perhaps more logically, the definition of "all the shares in the company". It would not be correct to limit the definition of "all the shares in a company" to that contained in Section 428(1). The whole of Section 428 must be read to give proper meaning to these words—for example, "shares" are defined in Section 428(2).

So, on balance, I would rather keep to the existing draft. It strikes me as more conceptually certain and accurate. Similarly, I am not convinced that the other two, more minor, amendments to what would become the new Clause 430A(1A) are real improvements.

Lord Hodgson of Astley Abbotts: I am grateful to the Minister. I do not think that ten to seven on a Tuesday evening is the time to argue about the drafting and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. A173B to A173D not moved.]

Lord Hodgson of Astley Abbotts moved Amendment No. A173E:


 
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The noble Lord said: This amendment intends to correct an anomaly present in the current drafting. As I read the Bill, it appears that subsections (1B), (1C) and (2) mentioned in Schedule 3 on page 441 refer not to time periods as new subsection (3) states but, instead, to conditions which can be fulfilled. Therefore, this new subsection should read:

as opposed to "of the time specified". It seems to us that if they are conditions, that is what new subsection (3) should state, otherwise we are in danger of having an extremely confusing bit of drafting. I beg to move.

Lord Sainsbury of Turville: The amendment raises an interesting conceptual issue—that is, whether the requirement to give notice of the sell-out right should be linked to the fulfilment of the relevant sell-out criteria or the time at which such criteria are fulfilled. The current draft provision in the Bill follows the existing drafting of Section 430A. It links the notice period to the time at which the conditions are achieved.

We think that there is merit in staying with the tried and trusted formula in the Companies Act 1985. We firmly believe that the effect is that the notice of sell-out right must be given by the offeror within one month of the time at which the relevant sell-out conditions have been satisfied.

Lord Hodgson of Astley Abbotts: Again, we will not dwell on this at length this evening, but I think that if the Minister reads subsections (1B) and (1C), he will see conditions there that are nothing to do with time. We talk about the time specified but the 90 per cent condition is the key part of this, and therefore I am not sure that the current drafting will make sense.

I accept that the formula is tried and tested and that it has been in the Companies Act since God was a boy, so we will leave it there this evening, but I think that a better formulation of the wording here would meet the two questions of time and conditions. Perhaps we can look at that for a later stage of the Bill. There is a point here regarding clarity, and possibly more than clarity, but, in the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. A174 not moved.]

Lord Sharman moved Amendment No. A175:


"(6A) Notwithstanding subsection (2), if by the end of six weeks from the date of a notice under section 429, the offeror has not been given notice of an application under section 430C, subsection (5) of section 430 shall have immediate effect, notwithstanding any application to the court under subsection (1) which is then pending."

The noble Lord said: This amendment seeks to remove a loophole which we think has the potential to eliminate much of the benefit of other proposed amendments to Section 430C.

Section 430C provides a mechanism for shareholders who have received a notice under Section 429 to apply to court to object to the
 
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compulsory acquisition. While such an application is outstanding, the compulsory acquisition cannot proceed. That has the potential of extending the period between the time of issue of a notice under Section 429 and the compulsory acquisition beyond the six weeks required by Section 429.

The amendments to the section set out in the Bill require that a shareholder making an application under Section 430C must give notice of the application to the offeror. This is a welcome proposal as it removes the onerous obligation on the offeror to make inquiries of the companies court and all other district registries with chancery jurisdiction in order to find out whether any applications under Section 430C have been made. In practice, because the company will not know the name of any shareholder who may have made an application, it can be impossible to establish whether an application has been made.

However, the current proposal does not positively state that, where no notices under Section 430C have been received within the statutory six-week period, the offeror can proceed with the compulsory acquisition. That lacuna should be filled. Without such a correction, the offeror will still need to make searches of the relevant courts and much of the benefit of the proposed amendments will be lost. I beg to move.

Lord Sainsbury of Turville: The amendment provides in terms that, where a notice of an application under Section 430C has not been served on the offeror by the expiry of the six-week period, Section 430(5) will have effect. The offeror will be required to proceed with the squeeze-out process, irrespective of whether a court application has been made.

We understand and sympathise with the frustrations giving rise to this amendment. The offeror wishes to have certainty as to his position; otherwise, he may feel constrained to make searches of the companies court and the district registries to find out whether an application under Section 430C has been lodged. But we do not think that the best means of resolving that practical issue is by providing that the bidder be bound to proceed under Section 430(5), notwithstanding the fact that an application may have been lodged by the minority shareholder. However we appreciate the very real practical issues and will reflect on other means by which these concerns might be dealt with.

7 pm


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