Clause 532
Company Law Reform Bill [Lords]
8:47 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. 509, in page 257, line 20, after ‘creditor’, insert ‘(of more than £5,000)’.

The clause enables members, creditors or the Secretary of State to apply to the court for an order restraining a private company from carrying out any proposed contravention of the prohibition on offering shares of ventures to the public. Will the Minister explain why the clause is needed? If someone is in breach of the law against private companies making offers to the public, the law can be enforced and surely someone could go to the court for an injunction in any event—with or without the clause. Why is it necessary? If it is necessary, is there not a concern that a competitor or discontented shareholder could use it vexatiously to inhibit the company?

Amendment No. 509 is a probing amendment intended to give some security against vexatious requests for orders. Has the Minister considered that? Put simply, the amendment says that an application for an order under the clause may be made by a member or creditor of the company, but that the creditor should not be of less value than £5,000. Thus the level is set to provide companies with the confidence that they otherwise would not have.

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

The procedure is new, and the reason for the clause is to provide civil enforcement procedures to back up prohibition on private companies making public orders. It is a real improvement on continuing to rely on criminal penalties, as in the 1985 Act. There are court procedures for claims brought vexatiously, as the hon. Gentleman undoubtedly knows.

If a company appears to be about to breach the prohibition, it should be restrained. Any member or creditor should be able to apply for an order, and we see no reason why creditors owed less than £5,000 should not be able to apply to the court. There is no  risk of small creditors making frivolous or vexatious applications, given their risk of having to pay costs. If the application is justified, the court will make an order preventing the company from making the offer to the public, which it should not do in any case.

Jonathan Djanogly (Shadow Solicitor General (Also Shadow Minister for Trade and Industry), Law Officers (Assist the Home Affairs Team); Huntingdon, Conservative)

I have to say that the figure of £5,000 has been included only on a probing basis to make the point that a level should be set to put people off making vexatious claims. I hear what the Minister has to say and I beg to ask leave to withdraw the amendment.