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Company Law Reform Bill [HL]

moved Amendment No. 17:"Page 9, line 8, leave out ““all”” and insert ““90 per cent of””" The noble Lord said: The amendment concerns the entrenched provisions of articles. The Bill introduces a recommendation of the Company Law Review that members of a company should be able to choose to entrench elements of a company’s constitution in the articles. However, as currently worded, the provision appears to be a lame duck. The Bill requires unanimous agreement by all members of the company, something which in practice may be extremely difficult to achieve. Under the wording an individual member could block the entrenchment, not even necessarily with any malicious intent. A member of the company may die and until probate has been granted, no one can give assent on behalf of his shares. The Companies Act 1985 provides that in the case of a takeover there may be a compulsory buyout of any remaining unaccepting shares if the purchasing company receives acceptances from more than 90 per cent of the shares. If a 90 per cent level of acceptances empowers compulsory buyout, a similar percentage should allow for the entrenchment of articles—arguably a less drastic measure. The amendment therefore lowers the threshold at which companies can entrench articles to 90 per cent of members agreeing. That sidesteps the problem of an obstructive and insignificant minority blocking such a motion while still providing security from abuse, in that a majority of 90 per cent must agree with whatever is proposed. I beg to move.