Company Law Bill [HL]

The amendment addresses the possibility that we might retain the current clause but restore words in subsection (4) of Section 207 of the Companies Act 1989, which would otherwise be removed by Clause 587(2)(a). If we are to replace Section 207 in its entirety, as proposed by the noble Lord, Lord Hodgson, that may be a somewhat academic proposition. There is a broader point at stake here, which potentially applies whether Section 207 survives as a separate provision. The question is what provision should be made to safeguard users of the proposed new arrangements. Our understanding is that in 1989, when electronic contracts were new and unfamiliar to many, the words that the amendment would restore were intended as a way of pegging the new paperless procedures to the supposed gold standard of certificated holding and transfer of securities. But much has changed over the past 16 years and we do not believe that paper-based holding and transfer still provides an appropriate comparator. It matters simply that the new processes should be no less secure than what they replace and as secure as they can reasonably be. If the Government are not satisfied that this is the case, legislation in respect of the new arrangements will simply not be made. The only rights and obligations from the paper-based system that should be explicitly guaranteed under the new arrangements are those secured by Clause 586(4), which we have discussed in relation to Amendment No. A109. At present, a further statutory requirement as broad and in some respects as vague as the second sentence of Section 207 of the 1989 Act would not serve any useful purpose.