Clause 277
Company Law Reform Bill [Lords]

John Bercow (Buckingham, Conservative)

I remind the Committee that with this we are discussing the following amendments:No. 240, in clause 299, page 134, line 44, leave out ‘public’.

No. 241, in clause 299, page 135, line 4, leave out ‘in complying’ and insert

‘incurred in printing and distributing a statement so as to comply’.

No. 242, in clause 299, page 135, line 7, leave out paragraph (b).

James Brokenshire (Hornchurch, Conservative)

I was debating the slightly different approach to cost in clause 299, “Expenses of circulating members’ statement”, in the context of a general meeting. The costs in that clause appear to be tied to the requirement to print and distribute the relevant statement.

In the context of clause 277, what protection does there need to be in respect of expenses that might be charged to a member for the cost of circulating the relevant statement or resolution? In simple terms, the amendment would ensure that there are checks and balances, that members are not taken advantage of, and that costs that are not reasonable are not required to be paid to or by members as a precondition of the circulation of a resolution or a statement.

Clause 288 appears to contain the power of a member to call a meeting at the company’s expense which, although I appreciate that it is not the same, touches on similar issues in terms of the ability to require the convening of a general meeting which could be used for the purposes of considering a resolution. In relation to clause 288 the reverse appears to apply, and shareholders may convene a meeting at the company’s cost without having any expense in those circumstances.

The amendment seeks clarification of the issue of expense generally. If shareholders are obliged to meet the costs—I can see that they might be, to ensure that the company is not prejudiced or disadvantaged—there should be appropriate methods of ensuring that they can be checked, audited or measured so that shareholders do not have to bear inappropriate costs.

Margaret Hodge (Minister of State (Industry and the Regions), Department of Trade and Industry; Barking, Labour)

The purpose of amendment No. 337 is to ensure that a company does not ask the members requesting the circulation of a written resolution to put in a bill for  what would be unreasonable expenses. The measure is unnecessary, and I shall tell the hon. Gentleman why. First, as he knows, not all companies need have auditors, and in the terms of the amendment as drafted, such a company would have to appoint someone because its members wanted to circulate a resolution. That would be a significant burden on business.

Secondly, if the directors asked for an unreasonable sum before circulating a resolution, they would not be complying with the relevant provisions, so they would be committing an offence. As that is within the framework of the legislation, further protections and safeguards are unnecessary. I am sure the hon. Gentleman would accept that the expenses incurred are minimal or relatively small. They certainly do not justify the costs of auditing, so I hope he will withdraw the amendment.

Clause 299 makes provisions for how the expenses for a members’ statement should be covered. Subsection (1) gives members of a company a new right to have a statement relating to an annual general meeting circulated at the company’s expense if their request is received in appropriate time before the end of the financial year preceding the meeting. The provision applies only to public companies, because only public companies are required to hold AGMs. It would not be appropriate to apply the requirement to private companies, as amendment No. 240 would do, as we will no longer require private companies to have a statutory AGM.

Clause 299(2) sets out what should happen when the criteria for a members’ statement being circulated at the company’s expense are not met. I am not sure from what the hon. Gentleman said what costs he is seeking to prevent a company from claiming. The expenses of complying with clause 298 are simply those of circulating the statement. In any event, the amendment fails to take into account electronic communications, which may mean that the company does not incur printing costs but only relatively minor costs through e-mailing people. An unintended consequence of the amendment could be to deter companies from using cheaper forms of communication such as e-mail because they want to be sure of claiming back costs.

Clause 299(2) also contains a provision whereby if the criteria for a statement to be circulated at a company’s expense are not met, the company is let off circulating it if members have not tendered sufficient costs to meet the expenses. To remove that provision would simply encourage the occasional frivolous or disruptive request for the circulation of material. Members requesting a statement will be able to claim back their money if the general membership resolves that the company should pay.

The hon. Gentleman referred to clause 288, which provides a remedy for members when directors fail to call a meeting at their request. In those circumstances it is appropriate to require the company to pay expenses for members. I hope that, with those explanations, he will withdraw the amendment.

James Brokenshire (Hornchurch, Conservative)

The Minister’s main point was that if companies seek to misuse the provisions on members’ statements by adding costs, they will be committing an offence. That was her most powerful argument and a valid point, and it is good that it is on the record. The message will be sent that if somebody  seeks to use the provisions to add inappropriate costs as a means of disincentivising shareholders from exercising their rights, that will be an offence and will carry commensurate sanctions. In the light of that powerful argument, it would be wrong for me to detain the Committee further.

If a company has a large shareholder base the cost of sending of hard copies might not be huge but could be significant. I hear what the Minister says about that and on sanctions. I beg to ask leave to withdraw the amendment.