Clause 10
Company Law Reform Bill [Lords]
10:30 am
Jonathan Djanogly (Shadow Solicitor General (Also Shadow Minister for Trade and Industry), Law Officers (Assist the Home Affairs Team); Huntingdon, Conservative)
I beg to move amendment No. 3, in clause 10, page 5, line 2, leave out subsection (1) and insert—
‘(1) The articles of association of a company on its incorporation shall contain a statement, which must comply with this section.'.
The clause relates to sections 2(5)(a) and (c), 6 and (6A) of the Companies Act 1985 and effectively accepts a recommendation by the company law review to abolish the requirement on a company to have an authorised share capital. In future, the memorandum will contain only a limited amount of information on a company’s founder members—the subscribers to the memorandum. Information about the shares subscribed for by them, which is currently set out in the memorandum itself, will in future be provided to the registrar in the form of two statements made inthe application for registration—one of initial shareholders, and one of share capital.
The statement of initial shareholdings must contain the names and addresses of the subscribers to the memorandum. In all cases, the requirement is for a contact address. House of Lords amendments took issue over the point at which names and addresses of initial shareholders of a company should first be published. The Bill required that to be at the point of formation, but the amendments would require it to be at the time of the first annual return.
My noble Friends argued that it was better to have a later declaration when it was more meaningful than one at the formation of the company, as the Government argued, when individuals were often essentially nominees. We do not intend to review that debate. However, to return to an earlier point, why is there the need for a separate form? We think that the Bill should be about limiting forms to the bare minimum.
In any event, newly formed companies will often include in their articles details of the share capital on incorporation. So making that compulsory and removing the form would be uncontroversial. That form might be linked to the implementation of the EU second company law directive 77/91/EC, but I do not see why that could not be complied with by using the articles to provide the information, rather than another form.