Company Law Reform Bill [HL]

Where a company changes its status from a public to a private limited company there can be important implications for the shareholders. Such a re-registration may, for example, affect the marketability and transferability of a company’s shares. Where such an application for re-registration is made, it is clearly right that there should be stringent conditions as to the consent of the shareholders before this happens. This serves to protect minority shareholders. The Bill, like the 1985 Act, provides this, along with a mechanism for a dissentient minority to appeal, so to speak, if they believe that the conditions have not in fact been met. Twenty-eight days are allowed for any dissentient minority to apply to the court to cancel the resolution for re-registration, and the question is what action, if any, the registrar should take during this period to register the change formally. While on the face of it, it may appear that the notice period could be waived if certain conditions are met—for example, if it appears that the shareholders have given their unanimous consent—it is not difficult to think of reasons why such a practice might produce unfortunate results. There is a possibility that a company may mislead the registrar and the proposed change might allow an unscrupulous director to rush the re-registration process through, to the disadvantage of minority shareholders. More commonly, it is not unheard of for companies to make mistakes when filing documents with the registrar. It would, therefore, be wrong to waive the notice period unless sufficient safeguards are in place. I have, however, listened to what the noble Lord has said and will reflect upon this further, not least in the light of the present practice of the registrar in this area, to which he has referred. I will come back on this matter.