REQUIREMENTS AS TO SHARE CAPITAL OF PRIVATE COMPANY APPLYING TO REREGISTER AS PUBLIC (Hansard, 27 February 1980)

§ Sir Graham Page
I beg to move amendment No. 359, in page 8, line 19, after 'discharged', insert: 'except by another such undertaking'.

§ Mr. Speaker
With this it will be convenient to take the following amendments:
No. 360, in page 8, line 27, after 'discharged', insert: 'except by another such undertaking'. No. 362, in clause 8, page 11, line 44, after 'discharged', insert: 'except by another such undertaking'. No. 363, in page 12, line 8, after 'discharged', insert: 'except by another such undertaking'.

§ Sir G. Page
This is little more than a drafting amendment. Clause 5 provides for the re-registration of a private company as a public company. Clause 6 provides that the private company has to put its share capital in order before re-registration. One of the requirements of putting its share capital in order is in clause 6(1)(c), which provides that, as a condition of re-registration, where a share has been paid up by an undertaking to do work or perform services, that undertaking must be discharged to put the share capital of the private company in order for re-registration of the company.
The amendment would obviate the position if that undertaking were discharged by another undertaking. As I read the clause, that would be a way of getting round the Bill as it stands. The amendment would add that the undertaking must be discharged otherwise than by another undertaking of the same sort.
It is merely a drafting amendment, but, in my view, it is necessary. The other three amendments deal with exactly the same phrases in clause 6(1)(d)(i), clause 8(11)(b) and clause 8(1)(c)(i).

§ Mr. Eyre
My right hon. Friend the Member for Crosby (Sir G. Page) has correctly described the effect of clause 1494 6(1)(c). The Law Society of England and Wales has said that such an undertaking could be discharged by a further undertaking of the same sort. The same point applies to clause 6(1)(d)(ii) and clause 8(11)(b) and (c), as my right hon. Friend has shown in his amendments.
The same difficulty could be said to arise where, for example, an undertaking to provide a non-cash consideration is substituted for a previous undertaking to pay cash. The latter would not be the subject of valuation as under clause 24. Generally, when shares are paid up by an undertaking, it is possible subsequently to vary it.
I appreciate that the Law Society and my right hon. Friend have highlighted an area in which the statutory scheme does not cover every possibility. However, we must bear in mind that directors are under general duties towards the company. Thus, in substituting one undertaking for another, they must not prejudice the company's position. I am sure that my right hon. Friend will agree with that principle.
In the Bill we rely on that broad duty to hack up and enhance the statutory obligation of the substitution of one consideration for another, namely, where the second consideration supports an agreement to discharge the first consideration. In deciding how far it is proper or necessary to go in statute in setting out detailed rules to cover such situations, it is entirely legitimate to rely on the common law duties of directors. I believe that taken together they provide a satisfactory answer.
We therefore concluded—I hope that my right hon. Friend will agree—that we should not attempt to put even more complex rules into the statute. In all the circumstances, I hope that my right hon. Friend will not press the amendment.

§ Sir Graham Page
I cannot help feeling that it would be even more complex to rely on half a rule and on common law for the other half. However, as my hon. Friend has put on record the way in which we may proceed, I beg to ask leave to withdraw the amendment.