moved Amendment No. A67ZA:"Page 268, leave out lines 1 to 3 and insert—"
““(1A) Provided that the reduction is confirmed by the court in accordance with sections 136 to 139, any limited company may reduce its share capital by special resolution.””
The noble Lord said: With this amendment, we come to the reduction of share capital in Part 19. This is another technical area, but it has given rise to a good deal of comment and representation. There seems to be some confusion over exactly what the Government seek to achieve, so we have tabled a number of amendments to enable the Committee to hear, discuss and probe the Government’s thinking.
Amendment No. 67ZA concerns Clause 561, which is headed ““Circumstances in which companies may reduce share capital””. This issue was raised with by Rosalind Nicholson, a barrister from 4 Stone Buildings. The amendment would restore the wording of Section 135 of the Companies Act 1985. We hare two principal reasons for seeking to do that. First, if Parliament changes the wording, as the Minister and I have discussed several times in the past, it will be assumed that it intended to change the meaning of the section. If no change to the meaning is intended, the wording should be left as it is.
Secondly, the words as they have been altered suggest a change of emphasis. In their present form—that is, in the Companies Act 1985—the words emphasise, by the placement of the proviso, that a company’s power to reduce its capital is subject to the court’s sanction, which is clear from the way in which the current section of the Companies Act runs. In this case, the reduction takes place only when the registrar issues his certificate of registration of the order of the court. It is that—the very last step of the process—which gives effect to the reduction of the company’s capital.
The words of the clause as currently drafted reverse that emphasis and emphasise the special resolution of the company, which, although it is of course the start—the first and necessary step—of the process, it is not the effective part of the process. It is therefore misleading to state, as the clause currently does, that a company may reduce its share capital by special resolution. Because that is a very important and significant area of company law, the original wording should stand with the emphasis in its current place. Therefore, I beg to move.
Company Law Bill [HL]
Proceeding contribution from
Lord Hodgson of Astley Abbotts
(Conservative)
in the House of Lords on Monday, 20 March 2006.
It occurred during Debate on bills
and
Committee proceeding on Company Law Bill [HL].
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2005-06
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House of Lords Grand Committee
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