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Company Law Reform Bill [HL]

The reason for the change is so that we can bring within the terminology that we normally use in Companies Act legislation things that are necessary as a result of the takeovers directive. The takeovers directive refers to ““securities”” in defining the types of instruments to which various provisions of the directive apply. ““Securities”” is defined by Article 2 of the directive as,"““transferable securities carrying voting rights in a company””." That definition is important in both scoping the breakthrough provisions at Article 11 and laying down squeeze-out and sell-out rights at Articles 15 and 16. In Chapter 2, we are concerned with the Article 11 breakthrough provisions. But clearly, for consistency, we need to ensure that what we do in defining directive-driven provisions is on all fours throughout the Bill and the Companies Act 1985. Whereas the directive uses the term ““securities””, our legislation does not generally use it. Instead, we nearly always refer to ““shares””. We sought by this specific definitional provision to use the word ““shares”” as we normally do, but bring it into line with the takeover directive. That happens in one or two places in the Bill—and Clause 646(2) is one such provision. For the purposes of squeeze-out and sell-out, Section 430F of the Companies Act specifically includes ““convertible securities”” within the ambit of the current squeeze-out and sell-out regime. We concluded that what may be termed ““convertible securities”” fell within the meaning of ““securities”” as defined by the directive. There was a ready-made definition of such instruments at Section 430F of the Companies Act. Consistency between the approach in relation to breakthrough, squeeze-out and sell-out would be assured by borrowing that definition. So, that is what we have done. I expect that the noble Lord and his advisers will want carefully to consider whether that satisfies them. I hope that they will, because although this is an unusual formulation, there is a good reason for it and it reaches the right result.