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Companies Bill [HL]

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 537 to 558. Part 21 is concerned with the certification and transfer of shares and other securities. I am pleased that there has been a broad measure of agreement on these clauses, which both restate existing statutory provision in respect of the certification and transfer of securities and extend the existing power under Section 207 of the Companies Act 1989 to require, as well as to permit, the paper free holding and transfer of company shares. I remind noble Lords of the background to this part. The Government have welcomed the work of industry groups, which are looking at options for greater use of paper free holding and transfer of shares. Responses to the Company Law Reform White Paper of March 2005 showed strong support for this initiative, but it is also clear that more information is needed on the costs and benefits of making a more extensive use of a paper-free approach. The Government do not wish to rule out any option at this stage and therefore propose to extend the existing power relating to evidencing and transferring securities without a written instrument under Section 207 of the Companies Act 1989, so that it could be used to require, as well as to permit, the paper-free holding and transfer of company shares. If the power were used in this way, the Government would wish to ensure that the new arrangements for paperless holding and transfer of securities did not deprive individual shareholders of existing rights which may be important to them. As the Economic Secretary to the Treasury made clear last month in replying to the recent consultation on this subject by the Institute of Chartered Secretaries and Administrators, a number of issues remain to be resolved before any decision can be reached as to how, or whether, the extended power should be used. I will place a copy of my honourable friend’s letter in the House Libraries. We are very grateful for the continuing work of the industry groups that are looking into the practical implications of greater use of paper-free holding and transfer of shares. Amendments were tabled earlier with a view to clarifying the relationship between Section 207 of the Companies Act 1989 and the provisions in Part 21 that extend and make further provision in respect of the Section 207 power. We said that we would give serious thought to addressing those concerns by some form of ““consolidating”” amendment to Part 21. This is achieved through Amendments Nos. 537 to 558. We are satisfied that Section 207 can be repealed, and the new clauses introduced by these amendments brought into force, without in any way affecting existing regulations made under Section 207 and the systems that rely on them. The new clauses introduced by AmendmentsNos. 537 to 551 restate provisions of Sections 183 to 189 of the 1985 Act relating to the certification and transfer of shares and other securities. The new clause introduced by Amendment No. 555 differs in two respects from the corresponding clause in the Bill as it left your Lordships’ House earlier this year. The clause now makes clear that, where regulations under the clause enable companies to adopt new-style paperless holding and transfer of shares arrangements, companies need not make it obligatory both to hold and to transfer their shares in this way: the new system could relate just to holding or just to transfer. This increases the potential flexibility of the regulation-making power, which is sensible while the precise shape of the proposed new arrangements remains somewhat unclear. Secondly, the new clause uses the language of ““exercising rights”” rather than ““giving instructions”” in respect of the preservation of existing rights. It is important to ensure that the existing rights of those who are beneficial, but not legal, owners of shares are not disturbed by the new arrangements; and the new wording achieves that better. We are grateful to the Law Society for making comments that have inspired these changes, and to noble Lords opposite who championed similar amendments in Grand Committee. On Question, Motion agreed to.