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Lord Sainsbury of Turville: My Lords, as someone who hated cricket with a passion I will resist responding in similar terms. I hope that I can meet the noble Lord's points. These amendments would all largely have the effect of bringing up elements of the existing law unchanged into the new Bill. They would thus take a further step towards putting the new legislation on to a consolidated basis. We discussed this general issue in Grand Committee, and I said there that I recognised that there were strong arguments in favour of restating elements of the remaining 1985 Act provisions in the Bill.
I can confirm that we are now looking at all of the remaining elements of the 1985 Act to see whether they could sensibly be brought into the Bill. There will be certain areas which do not lend themselves to this treatment; for example, areas of the law that have an
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application wider than companies, and which it would not make sense to bring up into a new Bill, which would in effect be a consolidated code of companies legislation. In certain other areas where there is a specific power to set out the law in regulations, and where we expect to make such regulations in the medium term, it may not make sense to consolidate the existing primary legislation into the new Bill now.
These sorts of exceptions apart, I can assure the House that we are looking at what remains of the 1985 Act very much with an eye to bringing it into the new Bill wherever possible. I think the introduction of amendments giving effect to this approach, if it is to be managed in a coherent and co-ordinated way, may need to wait until the Bill is in another place. But I would certainly hope to be able to say more at Third Reading about the areas we are currently identifying as candidates for further consolidation, and I would certainly expect that the areas which are the subject of these amendments—pre-emption rights and share transfers—would be prime candidates for future consolidating amendments.
In particular, I said in Grand Committee that we support the principle that provisions relating to the transfer of securities should be brought together in one place, and I confirm that the Government will bring forward their own consolidating amendments to Part 20. Unfortunately, there have been other significant issues to be dealt with by way of government amendment on Report and we have not had time to deal with the proposed amendments to Part 20 at this stage. We would also like to consult key City stakeholders on the draft amendments in view of the technical complexity of this part of the Bill.
4.45 pm
I would like to make one final point regarding consolidation. This is already a very substantial Bill and I suspect that there would be a general reluctance to see amendments introduced at any stage that greatly added to the requirement for parliamentary scrutiny during its passage. While I certainly do not seek in any way to constrain the debates that will be held here and in another place, I hope we all recognise that amendments that effectively did no more than restate existing provisions in the law without substantial change would not require the same level of scrutiny as those elements of the Bill that do make changes.
I hope that what I have said has demonstrated how actively the Government are pursuing the principle that lies behind these amendments, and I hope on that basis that noble Lords and noble Baronesses will agree not to press their respective amendments for the moment. I will of course be happy to say more when we return at Third Reading.
Lord Hodgson of Astley Abbotts: My Lords, that was a handsome offer. The Minister may not like cricket, but he certainly hit the ball to the boundary very effectively. I accept his warning about the extent to which consolidation can be achieved and that parts
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of the Bill which do not directly concern companies may be left over. Steps to bring all the company-relevant legislation into one place would be helpful. Provided that the Minister is prepared to say on the Floor of the House that further consolidation does not entail substantial change in the law, we would be happy to facilitate the passage of such legislation—always provided that we do not hear from an outside body such as the Law Society that there is an issue here which has been waiting to be sorted out for 20 years. It might be worthwhile to address such an issue in this Bill, but, as far as wading through the detail of the legislation, and provided that the Minister can say that there is no plan to change the law, I am sure that we can facilitate the passage of the legislation through this House.
Lord Razzall: My Lords, from these Benches I echo the point made by the noble Lord, Lord Hodgson. The Minister has been kind enough to explain the Government's plans on consolidation to us and indeed to the Tory Opposition. We certainly do not intend to hold up the Bill's passage by arguing the finer points of consolidation, unless those who advise us say there is some noticeable howler in it—which I am sure the Minister would take on board. Apart from that, I concur with the words of the noble Lord, Lord Hodgson.
Lord Hodgson of Astley Abbotts: My Lords, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 419B to 419G not moved.]
Lord Sainsbury of Turville moved Amendments Nos. 420 and 421:
"PROVISIONS NOT APPLICABLE TO SHARES TAKEN ON FORMATION
The provisions of—
(a) sections 538 to 551 of this Act, and
(b) sections 89 to 96 of the Companies Act 1985 (c. 6) (pre-emption rights),
have no application in relation to the taking of shares by the subscribers to the memorandum on the formation of the company."
Before Clause 553, insert the following new clause—
"COMPANIES HAVING A SHARE CAPITAL
(1) References in the Companies Acts to a company having a share capital are to a company that has power under its constitution to issue shares.
(2) References in the Companies Acts—
(a) to "issued share capital" are to shares of a company that have been issued;
(b) to "allotted share capital" are to shares of a company that have been allotted.
(3) References in the Companies Acts to issued or allotted shares, or to issued or allotted share capital, include shares taken on the formation of the company by the subscribers to the company's memorandum."
On Question, amendments agreed to.
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Clause 554 [Alteration of share capital of limited company]:
Lord Sainsbury of Turville moved Amendment No. 422:
"( ) section (Enforcement of prohibition: remedial orders) of this Act (remedial order in case of breach of prohibition of public offers by private company),"
On Question, amendment agreed to.
Clause 566 [Circumstances in which companies may reduce share capital]:
Lord Sainsbury of Turville moved Amendment No. 423:
"(1) A limited company having a share capital may reduce its share capital—
(a) in the case of a private company limited by shares, by special resolution supported by a solvency statement in accordance with section 135A;
(b) in any case, by special resolution confirmed by the court in accordance with sections 136 to 139.
(1A) A company may not reduce its capital under subsection (1)(a) if as a result of the reduction there would no longer be any member of the company holding shares other than redeemable shares.
(1B) Subject to that, a company may reduce its share capital under this section in any way."."
The noble Lord said: My Lords, in Grand Committee the noble Lord, Lord Hodgson, tabled an amendment to Clause 566 which if accepted would have completely removed the proviso presently in subsection (1B) of this clause that a company can reduce its share capital in any way under Clause 566 providing that,
"as a result of the reduction at least one member of the company would hold shares other than redeemable shares or shares held as treasury shares".
We were unable to accept that amendment in Grand Committee as it would have enabled private companies that wished to use the new solvency statement procedure to use that procedure to reduce their share capital to zero. That is undesirable.
In Committee the noble Lord, Lord Hodgson, explained that there may be circumstances where a company would want to reduce its share capital to zero; for example where the company is the target of a takeover bid and wants to cancel all of its own shares and issue new shares in the acquiring company. The noble Lord also explained that it is relatively common practice for a reduction of capital which is approved by the court to involve a reduction of the shares' capital to zero. We understand, however, that this is only on terms that the court can see that very shortly after the reduction taking effect, either a reserve will be capitalised in favour of someone who becomes the member or one or more shares are subscribed conditional upon the reduction taking effect. Thus the concern which prompted us to incorporate the
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provision—namely, a company being left without any issued shares—is not one that arises in the context of reductions confirmed by the court.
Having discussed this matter with the Law Society, we agree that subsection (1B) of Clause 566 does not achieve the desired effect. In particular, we do not intend either to fetter the powers of court or to reduce the flexibility that is currently afforded to companies limited by shares which apply to court to reduce their share capital under Section 135 of the 1985 Act, which is amended by Clause 566. I am grateful to both the noble Lord and the Law Society for raising this point.
Amendment No. 423 is designed to address the noble Lord's concerns. It limits the qualification that is presently in subsection (1B) of Clause 566 to private companies that wish to use the new solvency statement procedure to effect a reduction of capital. Amendment No. 424 provides a different drafting solution to the perceived problem, but, with the exception of what I am about to say about the reference to treasury shares in subsection (1B), the drafting solution which we have proposed in Amendment No. 423 achieves the same effect as this amendment. I therefore trust that noble Lords will agree to the amendment.
The deletion of the reference to treasury shares in subsection (1B) has been proposed because a private company may not hold its own shares in treasury, and since the redrafted proviso now applies only to private companies seeking to reduce their share capital under the new solvency procedure statement—whereas previously the proviso applied to both public and private companies—it is no longer necessary to refer to treasury shares. I beg to move.
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