Company Law Reform Bill [HL]

The proposed amendments relate to a clause that sets out the requirements relating to the share capital that a private company must have if it is to re-register as a public company. The clause, which is substantively the same as the existing provision, provides for a minimum monetary value for the share capital and specifies that each share must be paid up to a particular fraction of its nominal value. Those two variables are the subject of the amendment moved by the noble Lord, Lord Hodgson. The existing Companies Act provides that the two variables—the minimum monetary value and the paid-up fraction—are £50,000 and one quarter respectively. That was acknowledged. The Second Company Law Directive on Capital Maintenance obliges us to retain the requirement for a minimum allotted share capital of at least €25,000—about £17,000—with each share being paid up at least to one-quarter of its nominal value. The Company Law Review consulted on whether the level of the minimum allotted share capital should be maintained, increased or reduced. It noted that, although the original purpose of many of the capital maintenance rules was to protect creditors by preventing companies from dissipating funds subscribed for shares, today major creditors attach relatively little importance to the amount of a company’s share capital compared with other indicators of its creditworthiness. The Company Law Review received 29 responses to its consultation. Of those, six argued for an increase, five for a decrease, two had no opinion and, most significantly, 16 respondents believed that the minimum allotted share capital should be maintained at its present level. Consequently, the CLR recommended that the paid-up minimum allotted share capital of a private company that wishes to re-register as a public company should be maintained at its current level. We agree. We believe that the current level strikes the right balance between, on the one hand, the benefits of public company status and, on the other, the check that is required to minimise the misuse of this vehicle.