Company Law Reform Bill [HL]

The exemptions set out in subsections (3) to (5) are not exhaustive. This means that an offer will not necessarily be an offer to the public even if it does not fall within one of those exemptions. But the exemptions provide comfort that an offer falling within them will not be regarded as an offer to the public. Offers which might otherwise be prohibited are excluded from the public offer prohibition as long as the requirements imposed under the various subsections are met. Subsection (3), which is the subject of this amendment, is derived from Section 742A of the Companies Act 1985. In order to fall within the exemption in subsection (3) all the circumstances need to be taken into account. Under subsection (3)(a), the shares or debentures must not be calculated to become available to persons other than those to whom the offer is made. This imposes an objective test of the intentions of the company. The words ““directly or indirectly”” capture offers of shares or debentures by whatever means they are made. Subsection (3)(b) expands the exemption to include any other offers that are the private concern of the persons involved. The exemption is not available where the intention is that the shares are to become available to other persons. Of course, the shares may be transferable, but the transfer to other persons should not be part of the arrangements or motivation for the offer by the company. Subsection (3) emphasises that if an offer is private in nature, it will not be an offer to the public—for example, where an offer is made to particular individuals and the company does not intend anyone other than them to take up the shares. In contrast, if an offer is made to an investment manager with the intention that he will sell the shares to a range of investors, that could involve an offer to the public. We believe that this subsection is necessary and I hope that the noble Lord will not press his amendment. Specifically in relation to an IPO with an exit strategy in the short to medium term, we believe that that is capable of being an offer to the public. As ever, the easy answer is to have a public company to start with or to convert to a public company, as these issues would not then arise. Again, obviously it depends on the specific circumstances but, if there is a clear exit strategy at the point of the offer, there has to be a clear risk.