Company Law Bill [HL]

A redenomination of share capital requires an ordinary resolution of the company’s members, and such a resolution may be conditional or unconditional. I should explain that where a company has passed a conditional resolution, the redenomination of share capital will not take effect unless, and until, all the conditions specified in the resolution are met. Under subsection (6) of Clause 578, a resolution to redenominate a company’s share capital will lapse if it does not take effect within 15 days of the date on which it is passed. The issue behind Amendments No. A87 and A88 is what period of time should a company be given in order to comply with the terms of a conditional resolution. While I appreciate that it may not always be possible for a company to comply with any conditions that it has attached to a resolution to redenominate its share capital in 15 days, there is clearly a balance to be struck between providing companies with the flexibility to pass such resolutions and the need to protect creditors and shareholders. This issue is central to the provisions of Clause 578, which, in addition to providing that the resolution will lapse after 15 days, provides that the spot rate used for the conversion must be a rate prevailing on the day when the resolution is passed, or a rate determined by taking an average of the spot rates that applied in a specified period, which must be within a period of 28 days ending on the date that the resolution is passed. The Government consider it important that there should be reasonable proximity between the date on which the redenomination takes effect and the relevant rate of exchange on which it is based. We consider that the period of 15 days is reasonable in this context. Furthermore, if a resolution to redenominate a company’s share capital expires, it is not generally a particularly onerous requirement for the company to obtain another resolution of the company’s members, specifying the same conditions that applied in the first resolution. In the circumstances, I hope that the noble Lord will agree to withdraw his amendment.