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Companies Act 2006 (Commencement No. 3, Consequential Amendments, Transitional Provisions and Savings) Order 2007

rose to move, That the Grand Committee do report to the House that it has considered the Companies Act 2006 (Commencement No. 3, Consequential Amendments, Transitional Provisions and Savings) Order 2007. The noble Lord said: The Companies Act 2006 will bring major benefits to business by modernising and simplifying company law. This commencement order represents an important milestone in its implementation. It will commence some of the key provisions of the Act, including those relating to part of the statutory statement of directors’ general duties, derivative claims and proceedings, the business review, and resolutions and meetings. Provisions being commenced by the order will play a major part in meeting two of our key objectives for the Act: ensuring better regulation and a ““think small first”” approach, and enhancing shareholder engagement and a long-term investment culture. Let me first look at our aim of better regulation. The provisions in Part 13 on resolutions and meetings will deliver some of the most important benefits for business in the Act. In particular, they will simplify decision-making for private companies by making it easier for decisions to be taken by written resolution and by making annual general meetings opt-in rather than opt-out through the abolition of statutory AGMs for private companies. Other parts being commenced on 1 October 2007 will deliver deregulatory benefits for business. It will, for example, be possible for holding companies to seek authorisation of political donations and expenditure in respect of the holding company and one or more subsidiaries through a single approval resolution. Companies will be permitted to make loans to directors, subject to member authorisation. The other objective at the heart of the provisions to be commenced by the order relates to effective shareholder participation and a long-term investment culture. We believe that it is vital that there is a good understanding and effective engagement between those who own companies and those who run them on their behalf. The Act will therefore provide better guidance for directors on their duties and responsibilities and make it easier for shareholders, including investors who hold indirectly through nominees, to exercise their rights of ownership. It is essential for this country’s long-term prosperity that company decisions are based on the longer-term view and not only the medium term. The length and complexity of the 2006 Act and its phased implementation have resulted in an order which is itself long and complex. I should make it clear that the Government decided to implement the Act in stages so that companies could take advantage of some of the deregulatory benefits as soon as possible. I apologise to noble Lords, especially members of the Joint Committee on Statutory Instruments, that it was necessary to take up and re-lay the order. In view of its complexity, it may help if I briefly outline its structure. Schedule 1 contains transitional adaptations of the provisions of the Companies Act 2006 brought into force by this order, which are needed because the order brings only some of the provisions of the Act into force. Schedule 2 brings some of the repeals in the Act into force. Schedule 3 makes traditional provisions and savings. Schedules 4 and 5 make consequential amendments and repeals. The transitional provisions are essential to ensure that the Act operates in a reasonable way for existing companies and for ongoing activities or arrangements in which they might be involved around the time of commencement. One of the key areas of interest in respect of transitionals has been that relating to derivative claims and proceedings in Part 11 of the 2006 Act. These are claims and proceedings brought by shareholders of a company, on behalf of the company, against its directors. Under the transitional provisions, the new derivative procedures must be used for all claims started on or after 1 October 2007, but the courts must ensure that the outcome of any claim based on acts or omissions by a director before 1 October 2007 will be what it would have been under the old common law that applied at the time. The Companies Act 2006 is, by any standards, major legislation of great importance to corporate life in this country. The order will, as I have said, deliver some of the key benefits introduced by the Act. I beg to move. Moved, That the Grand Committee do report to the House that it has considered the Companies Act 2006 (Commencement No. 3, Consequential Amendments, Transitional Provisions and Savings) Order 2007. 23rd report from the Statutory Instruments Committee.—(Lord Evans of Temple Guiting.)