§ 163 After Clause 107, insert the following new clause:
§ 'Issue of redeemable shares.
§ .—(1) In Part V of the Companies Act 1985 (share capital, its increase, maintenance and reduction), Chapter III (redeemable shares, purchase by a company of its own shares) is amended as follows.
§ (2) After section 159 (power to issue redeemable shares) insert —
§ "Terms and manner of redemption.
§ 159A. —(1) Redeemable shares may not be issued unless the following conditions are satisfied as regards the terms and manner of redemption.
§ (2) The date on or by which, or dates between which, the shares are to be or may be redeemed must be specified in the company's articles or, if the articles so provide, fixed by the directors, and in the latter case the date or dates must be fixed before the shares are issued.
§ (3) Any other circumstances in which the shares are to be or may be redeemed must be specified in the company's articles.
§ (4) The amount payable on redemption must be specified in, or determined in accordance with, the company's articles, and in the latter case the articles must not provide for the amount to be determined by reference to any person's descretion or opinion.
§ (5) Any other terms and conditions of redemption shall be specified in the company's articles.
§ (6) Nothing in this section shall be construed as requiring a company to provide in its articles for any matter for which provision is made by this Act.".
1000§ (3) In section 160 (financing, &c. of redemption)—
- (a) omit subsection (3) (which is superseded by the new section 159A), and
- (b) in subsection (4) (cancellation of shares on redemption) for "redeemed under this section" substitute "redeemed under this Chapter".
§
(4) In section 162 (power of company to purchase own shares), for subsection (2) (application of provisions relating to redeemable shares) substitute —
(2) Sections 159, 160 and 161 apply to the purchase by a company under this section of its own shares as they apply to the redemption of redeemable shares".
§ Lord Fraser of CarmyllieMy Lords, I beg to move that the House do agree with the Commons in their Amendment No. 163.
The amendment would allow a measure of discretion for the directors of a company to fix the terms and conditions of the redemption of redeemable shares as near as possible to the point where they allot them and would clarify that the redemption price may be set in terms of a formula. A number of companies and their advisers involved with such matters on a day-to-day basis have argued the case for this amendment with my department. The Government were sympathetic to the idea that the law in this area should be made clearer and accepted the amendment on that basis.
We accept that it is odd that the power to redeem shares should be so much more restrictively framed than the power to make market purchases of shares. We also accept that the interests of shareholders and creditors are protected against possible abuse through other company law provisions. However, sympathy for the intention is one thing; acceptance of a particular form of words is another. Company law provisions need to work in a technical sense alongside the rest of the law. They also need to take account of the relevant constraints. In the present case we need to be careful to keep within the terms of the second company law directive.
Moving from technical to policy considerations, we need to be sure that those who may stand to lose from a proposal have an opportunity to express their views as well as those who stand to gain. But because the matter was only raised with my department relatively late in the day, we have not had time to carry out these processes as thoroughly as we would ideally wish.
We take the view that the new clause works technically. I have no doubt that it meets the requirements of the second directive. The only remaining areas of possible doubt are whether it might have any side effects which in the enthusiasm for the motive behind it we may have overlooked, and whether there may be any dissenting voices that we have not had the opportunity to hear.
I believe that those possibilities are remote, and it is for that reason that I advise the House to agree the new clause. But I think it would provide a worthwhile extra safeguard if I were to say that we would not intend to commence the new clause if some unforeseen problem were to come to our attention in the near future which has not yet been discussed in Parliament.
Moved, That the House do agree with the Commons in the said amendment. —(Lord Fraser of Carmyllie.)
§ Lord Williams of ElvelMy Lords, I am grateful to the noble and learned Lord for his explanation of this amendment. However, it is rather odd that at this stage of the Bill when your Lordships are considering Commons amendments we have a new clause about which the Government express a certain amount of doubt. I am not saying that the Government are unjustified in expressing such doubt because the area of redeemable shares is a very difficult one. I accept that there may be unforeseen side effects. It is odd that we are considering this matter when the Bill is at the eleventh hour and fifty-ninth minute of its passage through both Houses of Parliament.
From what the noble and learned Lord has said, do I understand that, in the clause dealing with the commencement order to the various sections of the Bill, there will be some provision that the commencement order can be delayed as regards this new clause? Is that right?
§ Lord Fraser of CarmyllieMy Lords, yes. I hope the noble Lord appreciates that we are in a difficult area with a new matter of this kind. We are not dealing in some cavalier fashion with a proposal that we intend to introduce immediately without the most careful consideration. I sought to indicate to the noble Lord that we have discussed the matter as widely as possible, and we have every reason to believe that there are no problems. I signal to him and the whole House that if there were to be any difficulties as regards commencement it is not a question of having a special provision in the commencement order to deal with the problem. I believe I am giving the noble Lord the assurance that he wants.
On Question, Motion agreed to.