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Company Law Reform Bill [HL]

On the question about plan B—which, in view of the time, is inevitably plan A, as we shall have to move to implement the directive in another way before the Bill has completed its passage through both Houses—that will be done by putting in place an interim regime by means of regulations under Section 2(2) of the European Communities Act 1972. A copy of guidance notes is to be found on the DTI website. An interim regime will be put in place under the European Communities Act, which we can do because that Act permits the implementation, among other things, of Community obligations, by way of secondary legislation. I turn to the amendment. The Committee may find it helpful if I explain a little more about the intentions in relation to proposed rule-making powers. The rule-making power itself is entirely new but, in practice, we expect its effects to be reassuringly familiar, because since 1968 the panel has laid down rules in what we know as the blue book—The City Code on Takeovers and Mergers—and the SARs, the rules governing the substantial acquisition of shares. The blue book has been a great success and is widely respected and abided by and we have no intention at all of undermining a system of rule-making that has operated so effectively. But in implementing the takeovers directive, it is necessary to give formal statutory backing to rules made by the panel, which is the intention behind Clause 618. In prescribing the rule-making power, it is necessary to provide certainty in two respects. First, we needed to ensure that the relevant provisions of the takeovers directive were implemented. That is achieved by Clause 618(1), which specifically provides that the panel must make rules giving effect to those articles in the takeovers directive. Secondly, we wanted to map out in broad terms the existing territory over which the panel rules apply—and that goes wider than the takeovers directive; it includes matters such as takeovers of public companies whose shares are not traded on a regulated market and mergers, and the rules governing the substantial acquisition of shares, the SARs, which are the subject of the amendment. There has been a deliberate policy choice that the whole of the panel’s regulatory function should fall within the new legal framework. If we did not do that there would be a two-tier regulatory regime, part of it falling within Part 22 and part of it outside. That approach has been supported during the consultation. That is why Clause 618(3) is drafted in this way. Of course it is right to note that the panel has issued a consultation paper on the continuing relevance of the SARs with a proposal to abolish them. The consultation has closed, but the panel has not yet reached a decision on that. But it is a power, not an obligation. If the panel decided that it was no longer appropriate to regulate matters contained in the SARs, it simply would not use the power to continue to regulate—indeed, it could abolish them. It seems right to leave with the panel the freedom to make that choice and it would not be right to delete the SARs in the description of the powers. I hope that that is an adequate explanation of the purpose behind the clause as a whole and this part of it.