Company Law Reform Bill [HL]

This group of amendments deals with the protection for the company in the unlikely event that shareholders use this new right not for its intended purpose—that is, to raise concerns about the audit—but to get publicity for some other purpose of their own. The ability of the company to go to court to avoid having to publish such material on its website is important, particularly if the material could be damaging to the company or to a third party. At present, the test is whether the rights conferred on shareholders by this clause ““are being abused””. Amendment No. 334E would change that to ““are being seriously abused””. I am sure that we can rely on the courts to take a proportionate view of the abuse and the extra word is therefore unnecessary. Subsection (6) enables the court to award costs against shareholders who have made an abusive request, even if the shareholders are not involved in the court proceedings. That may arise, for example, if a third party who is being defamed in the statement takes an action against the company to prevent it publishing, or continuing to publish, the material on its website. It may not happen often but, if a minority of shareholders behave in that way and involve the company in unnecessary costs, it is important that those shareholders pay rather than the company as a whole. I therefore believe that it would be a mistake to remove subsection (6), as proposed in Amendment No. 334F. Finally, Amendment No. 334G would make the court’s power to award costs against the shareholders conditional on their having seriously abused their rights. This is really unnecessary. The courts will consider awarding costs against the shareholders only if they have abused their rights, and there is no point in adding words to spell that out.