Company Law Reform Bill [HL]

moved Amendment No. A7:"Page 250, line 28, leave out from ““526”” to end of line 29 and insert—" ““(6)   In this Chapter ““securities”” means shares or debentures.”” The noble Lord said: In moving the amendment, I shall also speak to Amendments Nos. A22, A23 and A225 and give notice that I shall oppose Clause 527 stand part. The government amendments put Clause 525 back into line with the approach currently taken in Section 81 of the Companies Act 1985 by applying the prohibition on public offers to shares and debentures as defined in Section 744 of the Companies Act 1985. The amendments delete the definition of securities in subsection (5) and insert a new subsection (6) that defines securities as meaning shares or debentures for the purposes of this chapter. This is to replace the wider definition of securities in Clause 527. Our intention in expanding the definition of securities beyond shares and debentures had been to prevent private companies from offering to the public any security which gave the holder rights in relation to the company which were equivalent to those conferred by a share, or which entitled the holder to acquire shares in the company. Therefore, Clause 527 adopted the wider definition of securities used in Section 228(6) of the Companies Act 1985. Subsequent feedback suggests that this change was not helpful and could create uncertainty. It was suggested that the current law already provides sufficient protection. The amendments do not mean that companies can simply avoid the prohibition on public offers by issuing such things as warrants, options, or convertible debt. These kinds of securities may confer an entitlement on the holder to acquire shares indirectly. The prohibition may apply if they are calculated to result indirectly in shares or debentures becoming available to the public. That is because the prohibition applies to offers of shares or debentures, and allotments or agreements to allot shares or debentures, by whatever means this is done. That can include where the offer, allotment or agreement to allot shares or debentures is done indirectly by way of warrant, option or otherwise. We have concluded that this is sufficient, and it would not be helpful to have a wider definition of securities than currently applies. So these government amendments reverse this change. On the amendments tabled by noble Lords at lines 24 and 31 of Clause 526, the extension in the definition of securities beyond shares and debentures made a good argument for amendments widening the definition of, ““person already connected with the company”” set out in subsection (6) of Clause 526. However, as we are now reversing this change so that securities are defined as shares and debentures, I hope the noble Lords will now feel able to withdraw those amendments. Holders of shares and debentures are already included in the definition of, ““person already connected with the company””, whether they are directors or not. I beg to move.