Clause 90
Company Law Reform Bill [Lords]
2:15 pm
Margaret Hodge (Minister of State (Industry and the Regions), Department of Trade and Industry; Barking, Labour)
As the hon. Gentleman rightly said, the amendment relates to a process by which a private company can change its status and become a public company. There is, of course, a substantial difference between the two company types. I understand that many companies will want to make that change at a certain point in their lives.
We have no interest in making that change unnecessarily difficult, but—I hope that this explanation satisfies the hon. Gentleman—it is important to bear in mind the position of existing shareholders in private companies. In some cases they will have become members of the company, whether at formation or at a later stage, with some expectation that it might sooner or later go public, but in other cases there may be no such expectation. A company going public has implications for existing members. The most obvious one is that it brings the prospect of dilution of their control, as the membership base becomes larger and more diverse. Existing shareholders need to be able to take a view on the matter through the special resolution provisions. The 1985 Act therefore provides that there must be a special resolution, which requires a 75 per cent. majority rather than the simple majority required by an ordinary resolution.
When it comes to significant decisions about the company’s status and future which would have important implications for the position of individual shareholders, it is right—I have reflected on this—that the bar should be set high and that something more than an ordinary resolution should be required. That is why we have chosen to continue the existing requirement. I should add that I am not aware of any suggestion that that will cause difficulties in practice.