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Companies Bill [Lords]

I beg to move, That this House does not insist on its amendment. The House will remember that the Bill as it was originally introduced in the other place contained a proposal for a general company law reform power. That proposal was dropped as a result of concerns about the breadth of the power, but we explained from the outset that there were a small number of areas where changes were expected to be needed in the short to medium term, including the area of capital maintenance, and where we felt that specific powers to reform the law in future would be appropriate. In considering the potential changes to the area of capital maintenance, our view at the time was that three separate but interrelated powers were appropriate, which would have enabled the Secretary of State to amend respectively the rules on share capital, on purchase by a company of its own shares, and on distributions. Powers of that sort were therefore agreed in this House. We have now had the benefit of consideration in the other place, and in particular the thorough and important report of the Delegated Powers and Regulatory Reform Committee. It expressed its concerns that those three powers, taken together, would permit the Secretary of State to amend, by regulations, provisions set out in more than 160 clauses of the statute, and that the powers might be seen as excessively wide. We have reflected on those concerns and discussed them with others. Our conclusion, which was fully endorsed in the other place, was that there is an important distinction that can be made between the three powers. The parts of the Bill that deal with share capital and with purchase of own shares, while of great importance, seem to us essentially technical in nature. They are of a sort where it might well be appropriate to cover matters in secondary rather than in primary legislation, and where the case for some reform in the medium term remains clear and strong. The power which would be removed by amendment No. 671A, however, is slightly different. It covers the area of distributions. The existing rules in this area are based on the second Company Law Directive, and have existed in much the same form since 1981. While there have been criticisms of them, there is as yet no consensus on whether, and if so how, they should be improved. In the circumstances, we take the view that it would be going too far, and is not necessary, to take a power to change the basic rules on dividends. If future reform is proposed in this area, it may be that it can be achieved by way of existing powers under the European Communities Act 1972. To the extent that that is not the case, we accept that it would be necessary to come back to Parliament with primary legislation.