Clause 28
Company Law Reform Bill [Lords]
4:30 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. 13, in clause 28, page 11, line 7, at end insert—
‘(4) If there is a conflict between a provision which immediately before the commencement of this Part was contained in a company's memorandum of association and a provision contained in that company's articles of association, the former shall prevail.'.
The clause deals with existing companies and with provisions of memorandum treated as provisions of articles, and contains new provisions. When there is a conflict between the memorandum of association and the articles of association, case law would dictate that the provisions in the memorandum of association would take precedent. Under clause 28(1), the parts of a company’s memorandum of association that do not constitute part of the new style memorandum will be treated as being in the articles. Clearly, it would be ideal for companies to change their articles at that point so that they can review all clauses in context and prioritise accordingly. However, life being what it is, it is likely that the vast majority of small private companies will not do that, mainly because it involves paying corporate lawyers fees for essentially non-productive work. The question of priority will be important in practice.
In the Lords Grand Committee, Lord McKenzie spoke of returning to the issue on clause 882. To be frank, I am not sure whether that was done; perhaps the Minister could put me right. On Report, the Government said that they would consult on the issue. Could she update us on when and how the consultation is likely to take place?