Clause 102

Part of Company Law Reform Bill [Lords] – in a Public Bill Committee at 2:30 pm on 22nd June 2006.

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Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions) 2:30 pm, 22nd June 2006

The hon. Gentleman is right to suggest that in Grand Committee Lord Hodgson tabled a similar amendment. It was withdrawn, but it prompted us to look again at the conditions in subsection (2), and we put a marker down in Grand Committee that we intended to return to the issue. We subsequently amended the subsection on Report in the House of Lords to remove what amounted to a superfluous condition. If people can understand this one, they will be doing very well. The condition was that a private limited company could not re-register as unlimited if it had previously re-registered from unlimited to limited. Such a condition is unnecessary, as it is not possible for that eventuality to occur, given that clause 105(2), which is concerned with the re-registration of a company from unlimited private to limited, prevents a company that has previously re-registered as unlimited from reverting to limited status. However, we left in place the condition in the amended clause 102(2) which prevents a private limited company from re-registering as unlimited if the company has previously re-registered as limited. The amendments that we are debating would remove that subsection.

Subsection (2), as amended, carries forward the provisions of section 49(3) of the 1985 Act. Like its predecessor, it prevents companies from changing their status successively between limited and unlimited and back again. As the hon. Gentleman said, the issue was examined by the company law review, and it was concluded that it was necessary to keep the bar in place. The company law review did not accept that in practice the bar prevented legitimate market developments, nor are the Government aware of any evidence to that effect. That is why we support the review’s conclusion that the bar should remain in place.