Clause 77

Company Law Reform Bill [Lords] – in a Public Bill Committee at 1:45 pm on 22nd June 2006.

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Change of name

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

I beg to move amendmentNo. 142, in clause 77, page 33, line 35, leave out from ‘78)' to end of line 36.

Photo of Eric Illsley Eric Illsley Labour, Barnsley Central

With this it will be convenient to discuss the following: Amendment No. 143, inclause 77, page 33, line 41, at end insert

‘or section 74 (Appeal from adjudicator's decision)'.

Clause 79 stand part.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

We come to the change of name and the mechanism by which a company is able to do that.

In essence, clause 79 provides a new means by which a company can change its name, rather than by the customary means of a special resolution passed by the members of the company. I acknowledge that we considered a further example during our earlier discussions of a slight change in relation to the ability of directors to change a name where the Secretary of State has given a direction. That is a fairly narrowly defined arrangement, which is reflected in the 1985 Act.

The Bill appears to establish an entirely new mechanism that allows for a company to change its name in other ways, however. I am concerned that if the mechanism is allowed, the shareholders—who would normally be notified by virtue of the fact that their consent would be required through a special resolution—might be cut out of the process if, for example, a right existed in a company’s articles of association for the directors to change the name of the company by board resolution. Although that would give the company flexibility, it is important that shareholders should know the name of the company of which they are shareholders. Such a right, buried deep in a thick pile of articles, might not be picked up on by members of the company, but I would want to ensure that their rights were protected.

It is in that context that I seek the deletion of clause 79 and subsection (1)(b), because of the clarification needed and the lack of real feel about what the position of members is or precisely what situations the Government are contemplating. A very different step change is proposed and, although I recognise the need for flexibility and deregulation, it is also important that the interests of shareholders should be maintained and that they should be properly informed of any changes that might occur to the company of which they are members. That is the underlying reason for my amendment, which would delete subsection (1)(b), and my proposal that clause 79 should not stand part of the Bill.

Amendment No. 143 touches on a slightly different point. It proposes that companies’ names can be changed by order of the court, under clause 74, given that the court is given the power to make any order that the adjudicator might have made on appeal, which could include requiring a company to change itsname. Amendment No. 143 contemplates that circumstance—it does not block it off—and would ensure that the issue was properly addressed.

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

May I deal with amendment No. 143 first? We agree that it would be better if the relevant clause contained a complete statement of the various ways in which a company’s registered name can be changed. I therefore agree to consider amendmentNo. 143, which is helpful, and we are grateful for it.

Amendment No. 142 would limit how a company could change its name, but the point of the provisions is to be deregulatory. The amendment would inhibit that purpose by removing part of subsection (1)(a) and all subsection (1)(b). Under subsection (1)(a) as drafted, a company will be able to decide for itself how to change its name. The current position—under which a special resolution is required, except in the circumstances that the hon. Gentleman mentioned, but which the Bill addresses—is unnecessarily regulatory. There is no statutory control on how a company changes the name under which it trades, so why do we need controls on how it changes its registered name?

What is important is that the registered name enables the public to find whatever information there is about the company on the public record, and that they are not misled. Other provisions ensure those desired outcomes, so there is no public need for restrictions on how the company changes its name. I confess that I struggle to understand the injustice that would be done to members who would not know that the name had been changed. I am not sure how realistic that is.

The deregulatory purpose of the Bill is best served by the clause as drafted. I am sure the hon. Gentleman agrees that all unnecessary regulation should be removed, so I hope he will withdraw the amendment.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

I hear what the Minister says about amendment No. 142, clause 79 and the deregulatory nature of the measure. As I said in my opening remarks, I am not against that deregulation and the requirement for flexibility. My concern is to ensure that there are no unintended consequences and that people are clear about which company they are a member of.

I listened carefully to the Minister and I note that she does not necessarily believe that there is an evil that needs curing. However, this is a matter that we should keep under review to ensure that no prejudice arises.

I am grateful to the Minister for her comments on amendment No. 143, which were most helpful in ensuring that matters are as clear as possible. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 77 ordered to stand part of the Bill.