Company Law Reform Bill [HL]

My Lords, I recall the debate in Grand Committee and the reaction when I answered the question in the way that the noble Lord quoted. I will try to explain where the difficulty lies. Article 11.4 of the takeover directive uses a concept unfamiliar to English company law in terms of its language; that is, it talks of the offeror holding 75 per cent or more of the capital carrying voting rights. It is the concept that the noble Lord wants to insert by way of amendment, but it is not in itself a concept that is presently familiar to the English companies market, if I may put it that way. So we have tried to use an expression that will be familiar to the English company market rather than using that phrase. If one is looking to see what is 75 per cent of the capital carrying voting rights, I stand by saying that in the majority of cases normally one would find that by looking at the nominal value of the shares and seeing whether they hold 75 per cent or more. Plainly in the case where we have only one class of share, no difficulty at all arises. In the situation where one has more than one class of share, no real difficulty may arise; there may be some difference in the market value of the shares at a particular stage but the voting rights may still appear to be broadly comparable to the nominal value. What will the court make of it? The words in the Bill do not say ““nominal value””; they say, ““value””. It has been left in that sense so that it will be for the court to interpret what is meant. I answered the question because I was asked and it is right that we should indicate what we think. How will the court interpret it? The court will need to interpret this provision in the same way as it would interpret other provisions in a statute where it is plain that the intention has been to implement a directive. So I have little doubt that they will look at the directive and say that in understanding it they need to understand that it is intended to implement the requirements of Article 11.4 I doubt whether it will make much difference in many cases. There may be some cases—this is where the concern may have arisen over what I said—where the structure of the company is such that the court would say that if we are really looking at 75 per cent of capital carrying voting rights, it is not appropriate on this occasion just to look at the nominal value because the structure of the company is extraordinary: someone has 90 per cent of the nominal value for virtually nothing and the rest of the shareholders, who have only 10 per cent of the nominal value, have the real bulk of the company. I can see that one could have such a company and in those circumstances the court may say that 75 per cent of value in that context is to be interpreted in a different way. But in many cases—perhaps the majority—75 per cent in value of all the voting shares would be taken to mean the nominal value for the reasons that I have given. So it is not straightforward: we do not know what the European Court of Justice would make of capital carrying voting rights, or 75 per cent of those in any event. That could influence what the English court ultimately made of any of this. In most cases, whether the breakthrough provision is calculated on the basis of nominal or market value, the result would be exactly the same. The point is that the amendment proposed by the noble Lord does not add any greater clarity because it uses an expression that does not mean much in itself. The provision as we have it in the Bill will have to be interpreted against that background. So the noble Lord can feel reassured that when it comes to interpreting what is meant by value, what is going to matter is not what I have said about it but what the court makes of the clause against the background of the directive.