Company Law Bill [HL]

moved Amendment No. A70:"Page 268, leave out lines 40 to 43." The noble Lord said: With this group of amendments—Amendments Nos. A70 to A73—we are still winding our way through Clause 562. We have now managed to reach new Section 135B, on the solvency statement itself. These are probing amendments on an issue that has been raised with us by the Institute of Chartered Accountants in England and Wales. The proposed solvency statement required by this new mechanism for capital reductions for private companies is in two parts: a balance sheet solvency test, under new Section 135B(1)(a), and a forward-looking cash-flow solvency test, under new Section 135B(1)(b). We accept that some form of balance sheet solvency disclosure is necessary for capital reductions not involving the court, as in principle the directors need to be satisfied that the real value of a company’s assets, including the value of any goodwill attaching to its businesses, exceeds the amounts required to settle its liabilities at the date of a solvency statement. However, it is difficult to determine what the Government intend by the wording in subsection (1)(a). We would prefer to see any balance sheet test more clearly spelt out in the legislation. Hence, Amendment No. A70 is a probing amendment intended to elicit a statement of the Government’s intention as to the value measurement and timing of the balance sheet test. We hope that the Government can confirm that this test should take account of the real value—rather than the book value—of a company’s assets and the amount required to settle its liabilities at the date the statement is made. We also hope that, if the Government indicate in response to other proposed amendments that they intend to consult on a possible solvency basis for private company dividends, any consultation will also consider whether there is any need to make changes to the proposed solvency statement in Clause 562. Amendment No. A70 is a general probe and Amendment No. A72 would replace ““that date”” with"““the date of the statement””." I beg to move.