Company Law Reform Bill [HL]

The purpose of Clause 92 is to ensure that when a private company re-registers as a public company, its allotted share capital is backed up by assets. The most important part of Clause 92(1)(c) provides that the company’s auditor make a written statement that, in his opinion, the company’s net assets are not less than the aggregate of its called-up share capital and undistributable profits. When we discussed the amendments proposed to Clause 91, which covers requirements as to share capital, I said that the provision struck the right balance between the benefits of the public company status and the check required to minimise the misuse of this vehicle. The amendment would nullify that check, as a company could state that it fulfilled the requirements as to share capital without having to provide any evidence to support this claim. I had thought that the amendment argued that if Clause 92(1)(b) was satisfied—that an unqualified report by the company’s auditor be obtained—paragraph (c) was an unnecessary duplication. If it is just duplication, it is hardly a material duplication. But if that is a point of substance, whereby the balance sheet would not readily answer the question about net assets, it is important that the provision exists. I hope that I have dealt with the noble Lord’s concerns. If not, I am happy to have another go.