Clause 98
Company Law Reform Bill [Lords]
2:15 pm
Margaret Hodge (Minister of State (Industry and the Regions), Department of Trade and Industry; Barking, Labour)
I have been asked three questions and a supplementary question, although as I listened to the hon. Gentleman’s exposition I saw that section 429 might be consecutive rather than parallel to the issues that we are discussing. I am not sure that its existence prejudges the need for this provision. However, I shall answer the question to see whether I can satisfy him.
When a company is resolved to re-register from public to private, clause 98 enables the dissenting shareholders to apply to the court to cancel the resolution for re-registration. The application must be made within 28 days of the date on which the resolution is passed and the court will only entertain such an application when it is made by a qualifying number of shareholders and, when the company is not limited by shares, a qualifying number of members or, in either case, not fewer than 50 members.
The minimum thresholds for making such an application are set in subsections (1)(a), (b) and (c). When the company that proposes to re-register as private limited company has share capital, the application will be made by a single shareholder or by shareholders with a collective holding of at least 5 per cent. of the nominal value of the company’s issued share capital. The amendment would increase that threshold, and I appreciate that it is a probing amendment. Both amendments leave unchanged the 50 member option and the proposition in clause 98(1) that the members who voted in favour of the resolution for re-registration or consented to it do not count.
The reason behind the clause is that, as I am sure all Members accept, the re-registration of a company from public to private limited is a serious matter which has implications for all the shareholders, members and creditors of a company alike. In view of the significance of the change of status which will bring with it a lack of transferability for the individual’s share and the reduced marketability that is characteristic of shares in private companies, members should have the opportunity to object, subject, of course, to establishing that they represent a significant interest in the company. We accept that there is nothing magical about the thresholds that we made: all we have done, as hon. Members understand, is mirror those in the 1985 Act.