My Lords, I thank the noble Lord. As I outlined in Committee, the Government have overseen a number of changes to the takeover code that have made the takeover regime stronger and more robust. Amendment 56A deals with the disclosure of compliance with directors’ duties. As I set out during that debate, Section 172 of the Companies Act 2006 makes it clear that directors have a general duty to promote the success of the company. Directors must comply with their duties at all times. That includes actively considering how they comply with their duties during takeovers, mergers and any other transactions that affect the ownership or control of the company of which they are a director. The question before us is how best to ensure that they do so.
The takeover code already requires offeree companies to provide the board’s opinion on the offer’s effect on,
“all the company’s interests, including, specifically, employment”.
If a company is listed on the London Stock Exchange, the listing rules will also require the company to make an announcement or send an appropriate circular to shareholders and obtain their prior approval for the most significant class 1 transactions.
As I know from personal experience, that covers a considerable amount of the ground suggested by the amendment. As I am sure the noble Lord will agree, significant policy changes need to be underpinned by clear evidence and supporting analysis. Requiring all companies to make disclosures in the broad way proposed would place a heavy burden on business and stifle innovation and entrepreneurship. This is partly because we believe that this amendment could be read as covering not only transactions for publicly traded companies, such as those regulated by the takeover code, but all purchases and sales of private companies. There are 3.3 million private companies in the UK, so the potential for business burden is substantial.
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We would also need to consider the possibilities of unintended consequences. This includes considering whether the introduction of such a measure would impact on the overall competitiveness of the UK as a place to do business or as a place to list. It also includes whether a new reporting requirement might result in boiler-plate disclosure, which I think we all agree tends to be better avoided.
The takeover code is overseen by the Takeover Panel, which is independent of government. It is not for government to suggest changes to the code. That said, the panel may wish to reflect upon whether the provisions on disclosure in the code are as effective as they could be in providing shareholders with all the information that they need. I am therefore happy to commit to write to the panel to outline the issues raised during debate in the House today and to seek its view. If the noble Lord feels that it would be helpful, I can write in similar terms to the FCA, which is responsible for the UK listing rules and which dealt, for example, with acquisitions such as that of ABN AMRO by RBS. I hope that the noble Lord feels reassured by these comments and will agree to withdraw his amendment.