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Companies Bill [HL]

My Lords, I am grateful to the noble Lord, Lord Hodgson, for tabling his amendments, because they give us an opportunity to discuss Amendments Nos. 105 and 106 in more detail. The new clause introduced by AmendmentNo. 105 gives the member the right to split his holding and exercise rights attaching to shares in different ways. This is to accommodate members who hold shares on behalf of more than one person, each of whom may want to exercise rights attaching to those shares in a different way. For example, the member could, on behalf of those for whom he is holding shares, put 50 per cent of his shareholding towards a requisitioning resolution. The new clause introduced by Amendment No. 106 deals with four situations where the shareholder threshold required to trigger a right is 100 shareholders holding £100 each on average of paid-up capital. The clause allows indirect investors to count towards the total provided certain conditions are met. The condition is intended to ensure that only genuine indirect investors are allowed to count towards the total, but the same shares cannot be used twice, and that an indirect investor can use the procedure only if his contractual arrangements with the member allow the former to give voting instructions. The effect of the noble Lord’s amendments would be to limit the types of company to which these two new clauses apply. This goes entirely against the principle of facilitating the exercise of shareholders’ rights on behalf of others. We understand the concern that some private companies may have shareholder agreements containing provisions that are not consistent with the provisions of Amendment No. 105, but the clause applies to statutory rights and the rights attached to shares by the terms of allotment or the articles. Rights under shareholders agreements should not be affected, because they would not be transferred with the shares as a matter of law. It has also been represented to us that some private companies’ articles provide for pre-emption rights to operate on an all-or-nothing basis. When the company wants to issue new shares, it will offer the shares to existing members in proportion to their shareholding. The articles would stop a member taking just some of the shares. We agree that Amendment No. 105 would cut across articles like this where the member holds shares on behalf of more than one person. However, that is not sufficient ground for exempting private companies from the general requirement. After fully reconsidering the policy in this area over the summer we want to go as far as we can towards recognising the rights of underlying shareholders. Unless the potential cost burdens are prohibitive, and we do not think that they are in this case, we do not see why a right that is available in relation to public companies should not be available in relation to private companies as well. After all, some companies that are taken as private are left with a number of nominee shareholders that hold shares on behalf of others. It is also possible, although rare, to have a private company that is quoted. For that reason, we cannot agree to the noble Lord’s amendment, but I hope that he realises that we have considered this matter thoroughly and have given it the attention that he was looking for. I hope that he will not press his amendment. On Question, Motion agreed to.