§ 111 After Clause 54, insert the following new Clause:—
§ ("Power to alter certain provisions with respect to redemption or purchase by a company of its own shares
§ .—(1) The Secretary of State may by regulations made by statutory instrument modify the provisions of this Part of this Act with respect to any of the following matters—
- (a) the authority required for a purchase by a company of any of its own shares;
- (b) the authority required for the release by a company of its rights under any contract for the purchase of its own shares or any contract under which the company may (subject to any conditions) become entitled or obliged to purchase any of its own shares;
- (c) the information to be included in any return delivered by a company to the registrar of companies in accordance with section 47(1) of this Act;
- (d) the matters to be dealt with in the statutory declaration of the directors required by section 50 of this Act with a view to indicating their opinion of their company's ability to make a proposed payment out of capital with due regard to its financial situation and prospects; and
- (e) the contents of the auditor's report required by that section to be annexed to that declaration.
§ (2) The Secretary of State may also by regulations so made make such provision including provision by way of modifying the provisions of this Part of this Act as appears to him to be appropriate—
- (a) for wholly or partly relieving companies from the requirement under section 49(2)(a) of this Act that any available profits must be taken into account in determining the amount of the permissible capital payment for any shares under that section; or
- (b) for permitting a company's share premium account to be applied, to any extent appearing to the Secretary of State to be appropriate, in providing for the premiums payable on the redemption or purchase by the company of any of its own shares.
§ (3) Regulations under this section—
- (a) may make such further modifications of any provisions of this Part of this Act as appear to the Secretary of State to be reasonably necessary in consequence of any provision made by any such regulations by virtue of subsection (1) or (2) above;
- (b) may make different provision for different cases or classes of case; and
- (c) may contain such further consequential provisions, and such incidental and supplementary provisions, as the Secretary of State thinks fit.
§ (4) No regulations shall be made under this section unless a draft of the instrument containing the regulations has been laid before Parliament and has been approved by resolution of each House of Parliament.").
§ Lord Mackay of Clashfern
My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 111. The new clause in this amendment provides a power for the Secretary of State to modify by statutory instrument certain provisions of the Bill relating to various aspects of redemption or purchase by a company of its own shares. These concern the authority required for a purchase or for a release by a company of its rights under a contract of purchase; the information relating to purchases to be disclosed to the registrar of companies; the content of the statutory declaration to be made by the directors when a private company wishes to reduce capital in a purchase and of the associated auditors' report; and possible relief from the require- 1004 ment to deplete available profits before having recourse to capital and from restrictions imposed upon the use of share premium account in paying for premium on redemption or purchase. Provision is also made for consequential modifications and for different provisions for different cases. Any regulation is to be subject to Affirmative Resolution in each House. This clause was brought forward by the Government in response to a request to that effect from the Opposition in another place.
§ Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
Lord Bruce of Donington
My Lords, this will be the last intervention I shall be making on this part of the Bill. Therefore, may I say that I am not wholly satisfied with the advice that was offered to the Government in another place by the Opposition in another place. We have the right, like the Conservative Party opposite, as we recently experienced. We are a broad church in which there can be a variety of opinion and, just as there are divisions in the noble Lord's party which have been so obvious in recent days, so we have slight differences of technical opinion in my own.
I regard it as highly dangerous that the Secretary of State should be empowered in this Bill to make recommendations of such a broad character. One of the curses of professional life over the last 15 or 20 years in particular has been the proliferation not only of legislation but of regulations which impose on practising accountants, solicitors and professional men of all kinds, including industrialists, a considerable burden. Far better have it in the Act; but what the noble and learned Lord is really saying is that there are certain sections of this Bill which when it becomes an Act he has a suspicion that he may have to be extremely flexible about. Therefore he seeks to take powers to make regulations.
Regulations have one disadvantage of which we are all well aware. If in the form of a statutory instrument, they cannot be amended. They can only be objected to as a whole or accepted as a whole. Therefore, that procedure in itself lacks flexibility. On the whole, in the light of the desire of Her Majesty's Government to rush into permanent print so many statutes affecting companies, I am of the view that it would be wise for them to stick to that procedure so that what they in fact enact can be subject to detailed examination not only by another place but by this House. I regard with some misgiving this general power.
There are other reasons too. I have a suspicion that the noble and learned Lord knows quite well that all these particular parts of the Bill relating to the reduction of capital and the purchase of shares have very wide taxation implications. In fact, as he will be well aware, the Commissioners of Inland Revenue issued a consultation document in September—that was before this amendment was put down, because it was put down only on Report stage long after the end of September—in which they asked for the views of the professions generally on the particular reduction of capital proposals that were incorporated in the Bill as it then stood. The noble and learned Lord will be 1005 well aware that there are implications for capital gains tax, for capital transfer tax and for other taxation as the result of a distribution or a disposal occurring within the meaning of the Income Tax Act 1970 and the Capital Gains Tax Act of 1979. Therefore there is bound to be some relationship between taxation law and company law. Incidentally, it is one of the reasons why, in our view, this Bill should have been postponed, or at any rate these particular parts of it, until such time as the consultation called for by the Commissioners of Inland Revenue had in fact occurred.
The Inland Revenue put a deadline of, I think, 10th November, and the consultations have not yet occurred. Therefore, the noble and learned Lord must know that these are matters of some ambiguity, and I wonder whether it is for that reason that this Amendment No. 111 has been proposed, whereby there is some flexibility now so that various exigencies may have to be incorporated in the 1982 Finance Act or in such earlier Budget as his right honourable friend the Chancellor of the Exchequer may feel constrained to bring forward this November in order that they can deal with the economic crisis of their own creation. This is what will happen. This is why they want a certain amount of flexibility. We on this side of the House—and we pay due deference to the observations that were made by our colleagues in another place, who were also operating under conditions of great stress—much prefer that the right to amend over this wide field by regulation by statutory instrument is not put into the Bill, and we shall therefore be very much against it.
§ Lord Mackay of Clashfern
My Lords, I explained that this clause was put forward in response to suggestions made by Opposition spokesmen in another place. I must say I think it unlikely that the principal purpose that those Opposition spokesmen had in putting forward these suggestions was what the noble Lord, Lord Bruce, has specified. We accepted these suggestions with the view that it would make for a better company code as a whole if there was a limited flexibility of this kind in it. Accordingly, I commend this amendment to your Lordships.
§ On Question, Motion agreed to.