Company Law Bill [HL]

Amendment No. A69B is also concerned with Clause 562 of the Bill. It removes the express provision, contained in subsection (4) of new Section 135A—which is inserted into the 1985 Act by clause 562—that a resolution to reduce capital using the new solvency statement procedure will remain valid notwithstanding any failure to comply with the procedural requirements relating to the circulation of the solvency statement to members. The process requirements are there for good reason and it is important that they are complied with. But I believe that other measures in the Bill will help to ensure this—for example, the new offence under new Section 135C(7) of delivering to the Registrar of Companies a solvency statement that has not been properly circulated to the members. I am not sure that it would be right for a process failure to be capable of undermining the validity of the resolution itself, as the resolution would already have been passed and would be a matter of public record. In particular, the resolution may be of interest and importance not just to the members of the company, but to third parties such as creditors. It would not be helpful for the resolution to be capable of being negated as a result of procedural irregularities which would not be apparent to those third parties from an inspection of the public register. This would lead to uncertainty, which is why we chose to expressly provide, in new Section 135A, that the validity of the resolution to reduce share capital is not affected by a failure to circulate the solvency statement or make it available for inspection at the meeting. If the directors choose to propose a resolution for a reduction of capital without making the solvency statement available, they would, of course, run the risk of the resolution being vetoed by members who wished to satisfy themselves that the solvency statement had been duly made. In our view, this risk—together with the penalties that flow if directors make a false declaration regarding the making available of the solvency statement—should act as a sufficient deterrent in this regard. I therefore hope that noble Lords will understand why the Government are not minded to accept this amendment. There are good reasons why directors would give serious thought to this matter, but equally we need to make sure that there is no uncertainty for people such as creditors.