Company Law Reform Bill [HL]

moved Amendment No. 396:"Page 252, line 26, leave out subsection (5)." The noble Lord said: My Lords, we have reached Part 17, which contains the prohibition on private companies offering their shares to the public. I am moving these amendments in response to the concerns raised in Grand Committee on the prescriptive nature of the remedies following breach of the prohibition. I will also explain why these amendments are preferable to the noble Lord’s related amendment. Under Clause 532, the court must make an order for the company to reregister as a public company unless it appears to the court that the company does not meet the requirements for reregistration and it is impracticable or undesirable to require it to take steps to do so. If the court does not make an order for reregistration, it must instead make an order for the compulsory winding-up of the company. The amendments provide the court with further alternatives if an order for reregistration is not made. The starting position remains that if it appears to the court that the company has acted in contravention of the prohibition on public offers, the court must order the reregistration of the company as a public company unless the company does not meet the requirements for reregistration and it is impractical or undesirable to require it to take steps to do so. Members cannot frustrate the company from seeking to comply with a reregistration order. The court will have all its usual powers available for the enforcement of its orders. Where the court does not order reregistration, the amendments give the court a choice. It might decide to make an order for the compulsory winding-up of the company, or the court may make a remedial order for the purpose of putting anyone affected by the breach of the public offer prohibition back in the position they would have been in if the breach had not occurred. In particular, under a remedial order, the court can order those persons knowingly concerned in the breach to offer to purchase the shares or debentures that were the subject of the offer on such terms as the court thinks fit, or the court has discretion to make no order at all. This might be appropriate, for example, where the company has breached the prohibition but has not allotted shares, has withdrawn the offer and has undertaken not to do it again. These amendments greatly widen the options available to the court following a breach of the public offer prohibition where reregistration is not appropriate. All the other government amendments in this group are consequential on the new options given to the court. Amendment No. 408 would allow the court to make such order as it thought fit. It would give the court a wide discretion but without any assistance as to how it might use it. The amendment goes unnecessarily far, moving away from the consistency of approach we have been aiming to achieve. The government amendments provide a framework for the court—one wide enough for the orders that may be made when reregistration is not appropriate, including the option of making no order at all. The government amendments address the concerns raised in Grand Committee and I hope noble Lords will not press Amendment No. 408. I beg to move.