Company Law Reform Bill [HL]

moved Amendment No. 16:"Page 8, line 36, leave out paragraph (a)." The noble Lord said: My Lords, in moving Amendment No. 16, I shall speak also to Amendments Nos. 17 and 18, which are concerned with the entrenched provisions of the articles and notice to the registrar in case of entrenched provisions. The entrenchment of articles is a new provision that has been created with this Bill. We can see and appreciate how these may be of benefit to companies, but there are still problems with the mechanism as it stands. What concerns us is the lack of provision for amending entrenched articles. What happens where an entrenched article becomes unworkable because of changes in the company’s position over time or, more importantly, becomes suddenly inappropriate for any reason, for example after the takeover of a company? Will the company with entrenched articles have to be wound up to make that change? Surely that is not a satisfactory approach. The amendments together create a default provision, which would permit the alteration or repeal of an entrenched article, provided that there was unanimous approval of shareholders. Another concern with the current mechanism, which has been raised with us, is that a company could alter a provision for entrenchment under Clause 23(1)(b), say, with a resolution of 76 per cent of its members agreeing, and in doing so make such substantial changes that it effectively creates a new entrenchment provision. Has the company ““made”” a provision for entrenchment under Clause 23(2)? If so, would it be valid given that it is neither ““made”” on formation nor by a unanimous resolution? There are gaps to be addressed here. I beg to move.