§ 182 Clause 115, page 118, line 14, leave out from beginning to end of line 27 on page 119.
§ 183 Page 119, line 34, at end, insert—
§ 'Provisions supplementing s. 736.
§ 736A.—(1) The provisions of this section explain expressions used in section 736 and otherwise supplement that section.
§ (2) In section 736(1)(a) and (c) the references to the voting rights in a company are to the rights conferred on shareholders in respect of their shares or, in the case of a company not having a share capital, on members, to vote at general meetings of the company on all, or substantially all, matters.
§ (3) In section 736(1)(b) the reference to the right to appoint or remove a majority of the board of directors is to the right to appoint or remove directors holding a majority of the voting rights at meetings of the board on 1019 all, or substantially all, matters; and for the purposes of that provision —
- (a) a company shall be treated as having the right to appoint to a directorship if —
- (i) a person's appointment to it follows necessarily from his appointment as director of the company, or
- (ii) the directorship is held by the company itself; and
- (b) a right to appoint or remove which is exercisable only with the consent or concurrence of another person shall be left out of account unless no other person has a right to appoint or, as the case may be, remove in relation to that directorship.
§ (4) Rights which are exercisable only in certain circumstances shall be taken into account only —
- (a) when the circumstances have arisen, and for so long as they continue to obtain, or
- (b) when the circumstances are within the control of the person having the rights;
§ (5) Rights held by a person in a fiduciary capacity shall be treated as not held by him.
§ (6) Rights held by a person as nominee for another shall be treated as held by the other; and rights shall be regarded as held as nominee for another if they are exercisable only on his instructions or with his consent or concurrence.
§ (7) Rights attached to shares held by way of security shall be treated as held by the person providing the security —
- (a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in accordance with his instructions;
- (b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in his interests.
§ (8) Rights shall be treated as held by a company if they are held by any of its subsidiaries; and nothing in subsection (6) or (7) shall be construed as requiring rights held by a company to be treated as held by any of its subsidiaries.
§ (9) For the purposes of subsection (7) rights shall be treated as being exercisable in accordance with the instructions or in the interests of a company if they are exercisable in accordance with the instructions of or, as the case may be, in the interests of —
- (a) any subsidiary of holding company of that company, Or
- (b) any subsidiary of a holding company of that company.
§ (10) The voting rights in a company shall be reduced by any rights by the company itself.
§ (11) References in any provision of subsections (5) to (10) to rights held by a person include rights falling to be treated as held by him by virtue of any other provision of those subsections but not rights which by virtue of any such provision are to be treated as not held by him.
§ (12) In this section "company" includes any body corporate.'.
§ 184 Page 119, line 47, leave out 'section 736' and insert `sections 736 and 736A'.
§ 185 Page 120, line 8, leave out 'of section 736' and insert `made'.
§
186 Page 120, line 11, at end insert—
'(5) So much of section 23(3) of the Interpretation Act 1978 as applies section 17(2)(a) of that Act (effect of repeal and re-enactment) to deeds, instruments and documents other than enactments shall not apply in relation to any
1020
repeal and re-enactment effected by regulations made under this section.'.
§
187 Page 120, line 18, at end insert—
'(6) So much of section 23(3) of the Interpretation Act 1978 as applies section 17(2)(a) of that Act (presumption as to meaning of references to enactments repealed and re-enacted) to deeds or other instruments or documents does not apply in relation to the repeal and re-enactment by this section of section 736 of the Companies Act 1985.'.
§ Lord Fraser of CarmyllieMy Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 182 to 187. In moving these amendments, I wish to speak also to Amendments Nos. 201 to 203 and 454. Amendments Nos. 182 to 185 make parallel changes, in relation to the definition of a subsidiary, to those we have already discussed in relation to the definition of a subsidiary undertaking. The two terms, which have different purposes under the Bill, overlap to a considerable degree. It is obviously important that where they overlap they do so perfectly. These amendments ensure that.
Amendment No. 187 ensures that the Bill does not unwittingly create a presumption that this new definition of a subsidiary is automatically substituted for the existing definition for the purposes of interpreting pre-existing private instruments which incorporate by reference to the Companies Act definition. Amendment No. 186 makes similar provision in relation to subsequent changes to the definition made by statutory instrument under new Section 736B. The other amendments are consequential.
Moved, That the House do agree with the Commons in the said amendments. —(Lord Fraser of Carmyllie.)
§ Lord Williams of ElvelMy Lords, I understand that some of the provisions in new Section 736A are a restatement of existing law. But, as I understand it, there are some variants to existing law designed to bring the new Bill into line with the definitions of subsidiaries which we have discussed. My concern is relatively minor. It refers to the rights of shareholders. New Section 736A(4) states:
rights which are normally exercisable but are temporarily incapable of exercise shall continue to be taken into account".What exactly does that mean? I do not understand the phrase about a shareholder who has normally exercisable rights which are then temporarily incapable of exercise. I cannot understand under what circumstances that may occur, but no doubt that will be explained. It seems that those rights will continue to be taken into account. I should think that if they are incapable of exercise, they should not be taken into account. I have no doubt the noble and learned Lord will be able to clear up my worry on that, but it is rather curious.My next problem concerns subsection (6):
Rights held by a person as nominee for another shall be treated as held by the other".That may be fine but it creates some rather odd problems because the nominee is the person whose name is on the share certificate. Did the noble and learned Lord wish to intervene?
§ Lord Fraser of CarmyllieMy Lords, perhaps I may ask the noble Lord to which amendment he is referring?
§ Lord Williams of ElvelMy Lords, I referred to Amendment No. 183. Subsection (6) of new Section 736A, which is on page 73 of the Commons amendment, reads:
Rights held by a person as nominee for another shall be treated as held by the other".It is the nominee whose name appears on the share certificate. It is a rather odd concept that one should treat someone whose name is on the share certificate as not holding rights. Obviously it is up to the nominee to decide whether he has an obligation to consult his beneficiary as to what he should do with the voting rights.My final concern relates to new subsection (10), which is over the page on page 74. It reads:
The voting rights in a company shall be reduced by any rights held by the company itself".I find that phraseology rather odd. It is not the voting rights in a company that shall be reduced by any rights held by the company itself because the company itself cannot vote shares which it holds in itself. If it were expressed like that it would be much clearer. It is not that the rights themselves lapse. The rights still exist but they cannot be exercised by the company which holds shares in itself. I hope that the noble and learned Lord can help me with my relatively minor problem.
§ Lord Fraser of CarmyllieMy Lords, the tailpiece to the new section (4) reflects a point which was put to the Government by the Law Society, which took the view that the present text is unclear as to how rights are to be treated when they are temporarily incapable of being exercised. There was optimism on this side of the House that the change would make it clear that such rights are to continue to be counted. Perhaps I may give as an example a freezing order made under Part XV of the 1985 Act. If the provision did not exist, a subsidiary might no longer be regarded as such upon an order being made.
The next provision which concerned the noble Lord was that contained in section 736A(6). I apologise for interrupting him but I was not quite clear which amendment he had moved on to. We are aiming at control here rather than questions of ownership. It is necessary to cover cases where shares are held by a nominee on behalf of another; otherwise there would be a loophole. It is for that reason that the provision is covered in that way.
Turning to subsection (10), the "rights" refer back to voting rights. It is a matter of drafting. It is believed that we have got it right, but I understand the point that the noble Lord made. However, I do not believe that there is the difficulty which he suggested.
On Question, Motion agreed to.
§ Lord TrefgarneMy Lords, I beg to move that further consideration of Commons amendments be adjourned until five past eight.
Moved accordingly, and on Question, Motion agreed to.