Clause 34
Company Law Reform Bill [Lords]
5:30 pm
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. 21, in clause 34, page 14, line 8, after ‘part', insert ‘of the company and'.
This is a lawyers’ fest amendment. We have not had any of those so far. Amendments have been on practical issues, whereas this is the sort of thing on which law books are written. Hon. Members will be pleased to hear that I do not intend to read out a law book. The amendment is for the hon. Member for Cambridge (David Howarth) and no doubt he will wish to have his penny’s worth on it. It is covered by existing legislation—section 14 of the Companies Act.
Lord Wedderburn of Charlton, who has written a book on the subject, moved this amendment in the other place. He debated with skill and no little experience and put this vital clause into its historical context. He started at sections 7 to 10 of the Joint Stock Companies Act 1856. Simply put, no one now believes that this clause means other than that the constitution binds its members and the company as if they were covenants signed and sealed on the part of the company and of each member.
Lord Grabiner accepted Lord Wedderburn’s argument. Lord Sainsbury certainly did not disagree with it, but ended the debate by saying:
“I say now that the effect of a company’s constitution is not an area in which we want to introduce substantive changes.” —[Official Report, House of Lords, 30 January 2006; Vol. 678, GC. 37.]
I found that somewhat bizarre, not least considering the debates that we have had so far on the Bill, which have mainly centred on that point. Also, this is not what we should be doing in a 20-year reform of company law. If the clause has implications for the Foss v. Harbottle rule, should we not look at that now? I ask the Minister for her further comments.