Company Law Bill [HL]

I take the point; one should never joke about these important issues. If I may, I will deal with Amendments Nos. A75, A75A, A76 and A76A first. The amendments appear to be designed to reformulate the ““principal purpose”” exemption. The concern is that the courts have interpreted the words ““principal purpose”” too narrowly and it is proposed that those words should be substituted by the words ““predominant reason””, in the case of Amendments Nos. A75 and A76, or ““dominant reason””, in the case of Amendments Nos. A75A and A76A. While I recognise that the formulation of words used in the 1985 Act has been the subject of judicial analysis at the highest level, it is difficult to see why the proposed amendments would make any difference. In particular, the Government are not convinced that the suggested wording means anything other than that which is intended by the current wording. Notwithstanding that, it is accepted that the substitution of one set of words with another could signal that the Government intended a different interpretation. If that is, indeed, the effect of the proposed amendments, it may lead to undesirable results. What would be needed is not the substitution of one pair of words, which, on the face of it, mean the same as another pair of words, but a reworking of the provision so as to have the intended effect. I am afraid that I am not clear what effect that should be. The first amendment in this group, Amendment No. A74, would prevent any common law rules on the maintenance of capital—for example, the rule in Trevor v Whitworth—from operating so as to prevent a private company from giving financial assistance for the purchase of its own shares. It would, as I am sure noble Lords would agree, be very odd to say that something is lawful or not unlawful unless there was reason to suppose that it might be unlawful. ““Financial assistance”” is a statutory concept and, as far as private companies are concerned, with very limited exceptions, it will no longer be unlawful, so there is no need to say, ““as far as financial assistance is concerned””. The concern as I understand it is that common law rules which may overlap with that concept should no longer apply. I agree that the effect is to leave those in place, and that they may apply. However, we see no reason to go further than repealing the statutory prohibition on the giving of financial assistance by private companies. I hope that the noble Lord will withdraw the amendment.