Company Law Reform Bill [HL]

moved Amendment No. 398:"Page 252, line 36, leave out ““calculated”” and insert ““intended””" The noble Lord said: My Lords, I rise to move Amendment No. 398 and to speak to Amendments Nos. 399 to 403. These amendments go back to an issue we raised in Committee. The amendments, all in Clause 530, deal with the intention behind the issue of shares. The purpose is to ensure that a test should be one of intent, rather than an objective test of whether the securities are likely to get into the hands of the public at some stage in the future. Amendments Nos. 398, 401 and 403 propose that ““calculated”” be replaced by ““intended””. In Grand Committee, the noble Lord, Lord McKenzie, rejected these arguments by giving us an explanation from the Oxford English Dictionary—the meaning of ““calculated to”” was ““designed or suitable, intended””. He went on to say that,"““if it came to court, an objective assessment would be required of whether the motivation or purpose behind the offer was to make the shares . . . available””." He added:"““it is not a question of how likely or probable it was that the shares would become available to other persons””," and that,"““we want the provision to provide an objective test of intentions””.—[Official Report, 14/3/06; cols. GC 462-63.]" However, I am advised that there is judicial authority to the effect that ““calculated to”” means ““likely to”” and not ““intended to””. That is apparent from the judgment of Dyson J in Norweb plc v Dixon. There is clearly therefore a conflict between the view of the courts and the view of the Oxford English Dictionary as interpreted by the noble Lord. To clarify the position, we feel that the Bill should be amended to use ““intended”” rather than ““calculated””, since this is the meaning that the Government intend. Amendments Nos. 399, 400 and 402 are to address the effect of shares or debentures becoming available to third parties outside the arrangements relating to the offer. Again, in Grand Committee the noble Lord, Lord McKenzie, accepted that a company should not be held responsible for what the recipients of shares or debentures do with them after they have received them, as long as part of the arrangements or understanding reached at the time the offer was made was not that the shares or debentures would be passed on. These amendments are proposed in order to give effect to that view. We are concerned that the clause, as now drafted, goes further than the existing law—under Section 724A of the Companies Act 1985—and adds further restrictions on the ability of a private company to make a rights issue or to offer shares under an employee share scheme. I have said enough on that, but if no law is intended, we are too restrictive in what we have. I beg to move.