Company Law Reform Bill [HL]

My Lords, in introducing his amendment, the noble Lord, Lord Hodgson of Astley Abbotts, rightly identified the starting point in Grand Committee. The Government believe that the requirements of Article 17 of the takeovers directive will not be satisfied simply by relying on the sanctions which the panel has at its disposal and is likely to be prepared to use. The noble Lord referred to what is happening in Ireland and Germany. I do not have details of that, so I cannot respond specifically to what he says. I certainly do not have details of, for example, the sanctions available to the pertinent bodies, or their practice in using them. There may be differences in practice that justify taking a different approach to the necessity of having a criminal offence. I shall briefly summarise the points I made in Grand Committee and then pick up those raised by the noble Lords, Lord Hodgson and Lord Patten. There has been detailed discussion of, and consultation on, this matter. It is not intended to prevent the panel exercising its own powers, but—this is an important point, dealing with the issue of compensation, raised by the noble Lord—my understanding is that the panel does not want to police breaches after the event. The panel operates, during the course of a bid, by calling somebody in, requiring them to change the terms of their document so as to comply with the rules, and so forth. That is why, in particular, the power to order compensation does not appear to be an adequate sanction. I can also envisage circumstances in which the power to order compensation would not, in itself, be adequate because it would be difficult to identify just what the compensation ought to be. Certainly, given the time involved, the panel would not want to police breaches after the event in this way. The second concern raised by the noble Lord was the possibility that the panel might, by changing the contents of the rules, enlarge the effect of a criminal offence. That theory is wrong because the offence relates to failures—I shall return to the terms of those failures—to comply with the rules about bid documentation. It identifies the relevant rules in Clause 635 by reference to the directive itself. ““Offer document”” means rules designated, or rules that give effect to Article 6.3 of the directive. ““Response document”” means a document required to be published by rules giving effect to Article 9.5 of that directive. The relevant documents, which are the subject matter on which a criminal offence can be founded, must meet the requirements of Articles 6 and 9 of the directive. No doubt, because these are directives, there is some scope for the precise content, but they still have to meet the requirements of Articles 6 and 9. They are limited by the boundaries of Articles 6 and 9, so it is not possible simply to extend them in that way. A further point I want to emphasise is that we have looked carefully at whether the scope and clarity of the offence is sufficient. When I come to government amendments relating to this clause, we want to refine those in light of comments made in Grand Committee. When that is done we should see two things. The first is an offence that is clearly defined. The second is a light-touch approach to a criminal offence. I say this because we have not focused on it before: breach of the only rule giving rise to an offence arises, as subsection (3) says, only where the person knows that the offer document did not comply or was reckless about compliance.