Company Law Reform Bill [HL]

The amendment would delete subsection (4) from Clause 113 and thus remove the obligation on the company to enter in the register of members details of the amount and class of stock where shares have been converted to stock. The power to convert shares into stock is to be repealed under the Bill. This means that the requirement for the register to provide the information required under subsection (4) will apply only to conversions effected prior to that repeal. Since the 1948 Act removed the practical advantages to conversion, it has rarely taken place over the past 50 years. So we are not talking about an onerous obligation to enter information into the register of members, but we are talking about whether information that is already recorded should continue to be held. For companies limited by shares, the register of members also includes information on each member’s shareholding. That is essential as, depending on the company’s articles, it determines each member’s voting power and entitlements. Where shares have been converted into stock, it makes sense to require the register to be updated to reflect that fact, as it is arguably misleading for the register to continue to record the member as holding shares when he does not. Subsection (4) continues to be needed as the information is evidence of the voting rights of the members in question. I am confident that the affected companies would continue to keep the information even if it were not required but, if this subsection were deleted, information about stock conversion would have a different status under the Data Protection Act from the information required by this clause. It is arguable that even without subsection (4) this information would be required to be entered in the register in any event because the definition of ““shares”” in Section 744 of the Companies Act 1985—which applies for the purposes of the Bill—includes stock, so the noble Lord’s deletion would not achieve its intended purpose. Notwithstanding that, we regard it as helpful to companies to state expressly the extent of their obligations in this regard. Only fully paid shares can be converted into stock, so one has to be a member before one becomes a stockholder. The current Act merely requires the register to be updated to reflect that.