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Company Law Reform Bill [HL]

I welcome the noble Lord to this afternoon’s Committee sitting. He will have a success with his first contribution, I can tell him now. I am glad that he associated himself with what the noble Lord, Lord Hodgson, said about the Takeover Panel; he might have added that I said the same thing too. We come back to the implementation of Article 17 of the directive and the need to put in place sanctions which shall be ““effective, proportionate and dissuasive””. We need to meet that obligation, but we do not want to impose unjustified potential liability on those involved in takeover activities. This is a balancing exercise and we need to test the amendments the noble Lord has tabled and also government Amendment No. A154 in this group, which I shall speak to. Amendment No. A149 would make it clear that the offence will apply only to takeover bids for companies traded on a regulated market in the United Kingdom. By reason of a slightly complicated route, we believe that already to be the effect of the clause because of the jurisdictional provisions of the directive, and so forth. I do not think I need to go through that. Although the amendment does not substantively change the effect of the clause, it makes it clear and transparent, which seems to us a good thing, so I can accept Amendment No. A149. However, I am afraid that I have to take a different position on Amendments Nos. A150 and A151. They are more substantial in their effect and would narrow considerably the coverage that the offence is intended to have. With regard to Amendment No. A150, the offence is trying to make sure that those associated with the preparation of bid documentation and offer and response documents take that job seriously. They have to take care to ensure that the information provided is accurate, complete and complies with the minimum requirements the directive sets out. It is important that the duty should extend beyond the person named as taking responsibility for it, which is what it would be limited to by Amendment No. A150. The directors, the officers and so forth of the offeror and offeree company should be capable of being subject to the offence where the bid documentation does not meet the required standards. If this is to work, it means that the responsible senior players in the bidder and target company need to have regard to whether the document is fit for purpose and meets those minimum legal requirements. It is not enough to limit the duty just to the person named in the offer document as taking responsibility for it, as suggested by Amendment No. A150. Amendment No. A151 seeks to remove Clause 628(4). That would enable directors and officers in default to hide behind the shell of a company to avoid liability where an offence in relation to bid documentation is committed by that company. Given that the bidder will often be a company, it seems important to keep that provision, so we cannot accept Amendment No. A151 either. As I said at the outset, we want to make sure that the overall approach is balanced. That is why Amendment No. A154 has been tabled, in the name of my noble friend Lord Sainsbury. As drafted, Clause 628 would apply not only in relation to bid documentation relating to takeover bids within the scope of the takeovers directive, but to other types of bids. We do not think that necessary, so the amendment would limit the ambit of the offence to documentation related to takeovers directive bids—that is, bids for companies governed by the laws of a member state and whose shares are traded on a regulated market. We think that that will make the offence, the scope of it and those covered by it, proportionate in ensuring that there is an adequate sanctions regime in place and that it does not unduly impede honest directors, advisers and others in the proper exercise of their duties, but gives a proper incentive to make sure that the bid documentation and the response documentation are accurate and provide the minimum requirements. In due course, I will move government Amendment No. A154, for those reasons.