Clause 65

Company Law Reform Bill [Lords] – in a Public Bill Committee at 9:45 am on 22nd June 2006.

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Power to direct change of name in case of company ceasing to be entitled to

exemption

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

I beg to move amendment No. 127, in clause 65, page 26, leave out lines 44 and 45.

Clause 65 deals with a situation in which a company is no longer entitled to rely on an exemption permitting it to dispense with the word “limited” or an appropriate equivalent in its name. The clause gives the Secretary of State the right to give the relevant company a direction in writing—we shall return to this later—to change its name so that it ends with “limited”.

Subsection (3) states that a change of name to give effect to that requirement

“may be made by resolution of the directors.”

That is a departure from the normal approach, whereby a company changes its name by special resolution of its members, but reflects the existing regime under section 31 of the Companies Act 1985. However, the Companies Act did not see the need for the additional language that my amendment seeks to delete. The use of the words

“a change of name...may be made” makes it clear that it is not an exclusive route and that a change of name by other means would still be allowed. Accordingly, I think that the additional words are otiose and can be safely deleted with the intent of slimming down this very large Bill.

Photo of Vera Baird Vera Baird Parliamentary Under-Secretary, Department for Constitutional Affairs

The amendment would create uncertainty, and the sentence that it seeks to delete is necessary. The company will be able to comply with a direction to change its name more quickly if the directors can change the name, as clause 65(3) provides, rather than having to go through the rigmarole of a special resolution.

The words that the amendment would remove will prohibit the change from being made by a special resolution, for instance. The clause says:

“A change of name in order to comply...may be made by resolution of the directors”,

but that is

“without prejudice to any other method” of doing it. If we remove that, does it not become the case that it can only be done in that way? However, I see the argument that the word “may” is important in that context.

The amendment would remove the alternative methods of changing a name, and we want them to work for purposes of compliance with a direction. We shall come later, during debate on another amendment, to the point of principle whether a change of name should generally occur by special resolution, but the Government suggest that that part of the clause is important and that its removal would generate uncertainty. I invite the hon. Gentleman to withdraw the amendment.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

It sounds as though we are straying into a debate on “may” versus “shall”, which was debated in a different context in the other place. The word “shall” would have excluded other means of changing a name, whereas the word “may” is permissive and will not exclude, for example, the use of a special resolution. However, I hear what the Minister has said. In the interest of proceeding to other matters, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 65 ordered to stand part of the Bill.

Clause 66 ordered to stand part of the Bill.