Clause 98
Company Law Reform Bill [Lords]
2:15 pm
David Howarth (Shadow Minister (Energy), Trade & Industry; Cambridge, Liberal Democrat)
I want to add a short point in support of what the hon. Gentleman said. Setting the number at 5 per cent. as opposed to 10 per cent. gives rise to a temptation that it might be useful for the law to discourage. If the limit is set at only 5 per cent., people faced with a blocking minority of 5 per cent. might be tempted to use section 429 of the 1985 Act, which, as I understand it, will not be changed. There is a judicial interpretation of that section. It allows, on takeover, those with a 90 per cent. hold of the shares compulsorily to purchase the remaining 10 per cent. It can be used to clear minorities of less than 10 per cent.
Case law from re Bugle Press suggests that that provision cannot be used beyond its original purpose. However, even given that case law, people faced with a blocking minority of less than 10 per cent. might be tempted to use section 429, take their chances with the case law and produce litigation that it would be helpful for the law to avoid. That litigation could be avoided by raising the relevant percentage to 10 per cent., as in section 429.