Company Law Bill [HL]

As has been explained by the noble Lord, Lord Razzall, the intention behind the amendment is that it should be clear in the body of the clause that the company may refuse to register a transfer of shares, and therefore provide reasons for the refusal to register the transfer, only if the directors of the company are permitted to refuse to register a transfer of shares or debentures under the company’s articles of association. New Section 183A, which is the subject of the amendment, replaces an existing provision in Section 183(5) of the 1985 Act, which states that if a company refuses to register a transfer of shares, the company shall within two months send to the transferee notice of the refusal. There is no similar qualification in that context stating that the provision shall apply only if the articles permit the directors to refuse to register a transfer. We are not aware that the provision has given rise to any legal uncertainty as regards its extent. I reassure the Committee that we do not intend in reframing the provision to grant companies the option of refusing to register a transfer of shares in circumstances where the articles do not confer such a power on the directors and thereby to override the company’s articles. We do not consider that the provision would be construed in this way. The thrust of the provision is that the company must act either way within two months, but the option of sending a refusal notice is open only to a company that has taken power in its articles to refuse to register a transfer. I trust that this reassures the noble Lord that the amendment he seeks is unnecessary.