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Company Law Reform Bill [HL]

In Clause 629 we wanted to give the panel a power to include provision within its rules for the payment of compensation where rules are breached, but it is limited to a case, as the Bill provides, where the relevant breach is a breach of a rule, the effect of which is to require the payment of money. We did not want the panel just to become a body to whom any party with a grievance about a takeover bid process could turn in search of financial recompense, so the clause has intentionally been drafted in quite restricted terms. The amendment would remove the ““just and reasonable”” criterion and prescribe instead, rather inflexibly, that the compensation should be designed to ensure that the shareholders should be in the same financial position as if the relevant rule had not been breached. That is not as satisfactory as the present clause on two grounds. For the panel to determine in what financial position the shareholder would have been could be quite difficult. What would the shareholder have done with the money if it had been paid? I have no doubt that is something someone claiming compensation would claim. They would say, ““If only this had been done, I would be in this position; I would have done this or that, and I would have had this asset, or this income””. We do not want to impose on the panel the obligation to make that sort of inquiry. Noble Lords opposite have referred to their experience, which is considerable. On the other side, with my experience as a lawyer, I know how complicated some people can make questions about what compensation ought to be. That is one disadvantage. The amendment would also take out the useful criterion that the panel could decide what compensation was just and reasonable, which seems a helpful way to ensure that the effect of the clause will be just, but will not require the sort of analysis I have identified. It may be that in a particular case the panel might decide it would be right for it to determine what compensation is just and reasonable and what financial position the shareholder would have been in, but it would not be right to impose on it the obligation to do that in all cases. That would be the effect of the amendment, which I therefore cannot accept.