James
Brokenshire: I thank the Minister and the hon. Member for
Cambridge (David Howarth) for their
comments.
Vera
Baird: I owe the hon. Member for Hornchurch an apology, as
he asked me whether there was an example. There is not, because there
is no power to return capital at present without provision in the
articles so the situation never arises.
James
Brokenshire: I am grateful to the Minister for that
explanation of the rationale for this particular change in the law,
which did not come out as clearly as it might have in the reading of
the debate in the other place. I am also grateful for the clarification
provided by the hon. Member for Cambridge. We raised this point to
ensure that we were not entering into regulation where it was not
required, particularly, as the Minister rightly said, because we are
talking about only 20 companies. I know that a small number only would
potentially be affected by this provision, but this is about ensuring
that, in dealing with this type of problem, we are not using a
sledgehammer to crack a nut. In light of the Minister’s
comments, I beg to ask leave to withdraw the amendment.
Amendment, by leave,
withdrawn. Clause
62 ordered to stand part of the Bill.
Clause
63Continuation
of existing exemption: companies limited by
guarantee
James
Brokenshire: I beg to move amendment No. 59, in clause 63,
page 25, line 26, after first ‘its',
insert ‘profits (if any) or
other'.
I shall be brief. Clause 63
tracks section 30(3)(b)(i) of the Companies Act 1985, except for the
words “profits (if any)
or other”. In another
place, Lord McKenzie said that he had received advice from officials
that the term “income” was sufficient to cover profits.
Even though I am a lawyer, I do not wish to promote arcane debates
unnecessarily, but there seems to be a difference. I think that there
was some doubt in the mind of Lord McKenzie at that stage. In Grand
Committee he said that he had doubts and would give the issue more
thought. I wonder whether the Minister has given the matter more
thought and come to a different conclusion.
Vera
Baird: It is true that the extra words are in the 1985
Act, but where appropriate the Bill uses clearer and more succinct
wording. The policy is that the companies to which the clause applies
should use all the money they have available in promoting their
objects, and it is our considered view—even our reconsidered
view—that the word “income” is sufficiently
general in the context to cover moneys received on the sale of assets,
for instance. Indeed, it is better, because on a sale of, say, land, we
would want all the money from the sale to be applied to a
company’s charitable or similar purposes, not just the capital
profit element. My
noble Friend Lord McKenzie wrote to Lord Hodgson on the subject. A copy
of the letter is in the House Library and I will supply one to the hon.
Gentleman if he would like. I apologise that that has not been done
already. Lord McKenzie
said: “A
company’s profit (or loss) for a financial year is the result of
deducting expenses and other losses from the income of the company,
i.e. it is a net figure. Take for example a profit on disposal of a
fixed asset. FRS 3 defines this as ‘...the difference
between the net sale proceeds and the net carrying amount, whether
carried at historical cost (less any provisions made) or at
valuation’. We do not think it is appropriate to restrict the
duty to use money to promote the company’s objects to this net
figure. The policy is that all the money from the sale should be used
to promote the objects of the
company”.
James
Brokenshire: I am grateful for the Minister’s
clarification and her offer to supply that letter. In light of her
comments, I beg to ask leave to withdraw the amendment.
Amendment, by leave,
withdrawn. Clause
63 ordered to stand part of the Bill.
Clause
64Exempt
company: restriction on alteration of
articles
James
Brokenshire: I beg to move amendment No. 126, in clause
64, page 25, line 36, leave out ‘section 62 or 63' and insert
‘section
61(1)(c)'. This is a
technical amendment relating to cross-referencing. In clause 64(1),
reference is made to exemption from using the name
“limited” being granted under clauses 62 or 63. From my
reading of the clause—I would be grateful if the Minister would
correct me if this is not the case—it would seem that
the operative clause is clause 61, as clauses 62 and 63 merely state
conditions that are required to be met in order to satisfy clause 61.
Accordingly, amendment No. 126 confirms that exemption is granted by
virtue of clause 61(1)(c). Vera
Baird: I think that we can all agree that the Bill should
be as clear and accessible as possible. However, I do not think that
the amendment adds to the clarity because the drafting makes the
position reasonably clear. The restriction on changing the articles
imposed by the clause applies to companies of the kinds described in
clauses 62 and 63. I would venture to suggest that the existing wording
makes it rather plainer than the suggested alternative. However, I am
grateful that the issue has been raised as it meant that I read the
sequencing again. I am satisfied that it is right as it is
drafted.
James
Brokenshire: I am grateful to the Minister for that
comment. I think that she used the words “getting it nearly
right”, or something along those lines. I apologise if I
misquote her. I should like to get the clause as right as we possibly
can. Although I hear what she said about being satisfied that it
reflects the situation accurately, I ask her and her team to give it
further thought. I would rather not press such an issue to a Division,
but I should be grateful for some further reflection. I beg to ask
leave to withdraw the amendment.
Amendment, by leave,
withdrawn. Amendment
made: No. 101, in clause 64, page 25, line 40, leave out
‘alter' and insert ‘amend'.—[Vera
Baird.] Clause
64, as amended, ordered to stand part of the
Bill.
Clause
65Power
to direct change of name in case of company ceasing to be entitled
to exemption
James
Brokenshire: I beg to move amendment No. 127, in clause
65, page 26, leave out lines 44 and
45. Clause 65 deals
with a situation in which a company is no longer entitled to rely on an
exemption permitting it to dispense with the word
“limited” or an appropriate equivalent in its name. The
clause gives the Secretary of State the right to give the relevant
company a direction in writing—we shall return to this
later—to change its name so that it ends with
“limited”.
Subsection (3) states that a
change of name to give effect to that
requirement “may be made
by resolution of the directors.”
That is a departure from the normal
approach, whereby a company changes its name by special resolution of
its members, but reflects the existing regime under section 31 of the
Companies Act 1985. However, the Companies Act did not see the need for
the additional language that my amendment seeks to delete. The use of
the words “a change of
name...may be made”
makes it clear that it is not an exclusive
route and that a change of name by other means would still be allowed.
Accordingly, I think that the additional words are otiose and can be
safely deleted with the intent of slimming down this very large
Bill.
Vera
Baird: The amendment would create uncertainty, and the
sentence that it seeks to delete is necessary. The company will be able
to comply with a direction to change its name more quickly if the
directors can change the name, as clause 65(3) provides, rather than
having to go through the rigmarole of a special
resolution. The words
that the amendment would remove will prohibit the change from being
made by a special resolution, for instance. The clause
says: “A change
of name in order to comply...may be made by resolution of the
directors”, but that
is “without prejudice to
any other method” of
doing it. If we remove that, does it not become the case that it can
only be done in that way? However, I see the argument that the word
“may” is important in that
context. The amendment
would remove the alternative methods of changing a name, and we want
them to work for purposes of compliance with a direction. We shall come
later, during debate on another amendment, to the point of principle
whether a change of name should generally occur by special resolution,
but the Government suggest that that part of the clause is important
and that its removal would generate uncertainty. I invite the hon.
Gentleman to withdraw the
amendment.
James
Brokenshire: It sounds as though we are straying into a
debate on “may” versus “shall”, which was
debated in a different context in the other place. The word
“shall” would have excluded other means of changing a
name, whereas the word “may” is permissive and will not
exclude, for example, the use of a special resolution. However, I hear
what the Minister has said. In the interest of proceeding to other
matters, I beg to ask leave to withdraw the amendment.
Amendment, by leave,
withdrawn. Clause
65 ordered to stand part of the Bill.
Clause 66 ordered to stand
part of the
Bill.
Clause
67Name
not to be the same as another in the
index
James
Brokenshire: I beg to move amendment No. 129, in clause
67, page 28, line 16, at end
insert— ‘(6) Nothing
contained in this section shall prohibit or inhibit an objection under
section
70.'. 10
am
The
Chairman: With this it will be convenient to discuss the
following: Clause stand
part. Amendment
No. 130, in clause 68, page 28, line 22, leave out from ‘names,'
to end of line 23.
Clause 68 stand
part. Amendment No.
131, in clause 69, page 28, line 42, after ‘be', insert
‘in writing
and'. Clause 69 stand
part. Amendment No.
132, in clause 70, page 29, line 18, after ‘name', insert
‘or incorporates a
name'. Amendment No.
133, in clause 70, page 29, line 19, after ‘goodwill', insert
‘in the United
Kingdom'. Amendment o.
134, in clause 70, page 29, line 22, after ‘applicant',
insert ‘provided that the applicant
was using such name in the United Kingdom at that
time.'. Amendment
No. 135, in clause 70, page 29, line 23, at end
insert ‘within twelve months of the
company's registration with the relevant
name'. Amendment
No. 252, in clause 70, page 30, line 2, after ‘upheld', insert
— ‘(i)'.
Amendment No. 253, in clause
70, page 30, line 5, at end
add ‘or (ii)
if the activities of the company using the registered name would be
likely to deceive members of the public or to cause loss or damage to
persons dealing with the
company.'. Amendment
No. 136, in clause 70, page 30, line 6, at end
insert— ‘(6A) Without
prejudice to the foregoing provisions of this section, in the event
that all of the circumstances contemplated in subsection (8) are
satisfied, an applicant may apply to a company names adjudicator for an
interim order under this
subsection. (6B) The
circumstances referred to in subsection (7) are
that— (a) the applicant
is a company whose shares are listed on a regulated
market; (b) the applicant has
published a circular to shareholders incorporating a resolution
proposing to change its name to a particular name (a “relevant
name”); and (c) a
company (the “respondent”) has been incorporated with the
relevant name or changed its name to the relevant name in either case
on or after the date of publication of the circular referred to in
subsection (8)(b). (6C) If an
application for an interim order is made and the adjudicator is
satisfied that the provisions of subsection (8) are satisfied, the
adjudicator shall make an order requiring the respondent to change its
name to a name specified by the
adjudicator. (6D) The
adjudicator must give notice of his interim
order— (a) to the
applicant; (b) to the
respondent; and (c) to the
registrar. (6E) Upon the
presentation by the applicant to the registrar of an official copy of
the interim order together with all other documents contemplated by
section 78 (Change of name by special resolution), and the registrar is
satisfied that— (a) the
relevant name complies with the requirements of this Part,
and (b) the requirements of the
Companies Acts and any relevant requirement of the applicant's
articles, with respect to a change of name are complied
with, the registrar must enter
the relevant name as the new name of the applicant and enter the name
set out in the interim order as the new name of the respondent on the
register in place of the former names of the applicant and respondent
respectively.
(6F) On the registration of the new names, the
registrar must issue a certificate of incorporation to each of the
applicant and the respondent altered to meet the circumstances of the
case. (6G) The making of an
interim order shall be without prejudice to any other legal rights of
the applicant or respondent or any application by the respondent under
subsection
(1).'. Amendment
No. 137, in clause 70, page 30, line 7, after ‘section', insert
‘and in section
73'. Amendment No. 60,
in clause 70, page 30, line 7, at end
insert— ‘(8) In this section
“start-up costs” shall be considered
“substantial” in relation to the annual revenue and
assets of the
company.'. Clause
70 stand
part. Amendment No.
138, in clause 73, page 31, line 20, after ‘application',
insert ‘other than an application
for an interim
order'. Amendment
No. 264, in clause 73, page 31, line 20, leave out subsection (1) and
insert— ‘(1) If an
application under section 70 is upheld, the adjudicator shall make an
order, either— (a)
requiring the respondent company to change its name to one that is not
an offending name, and requiring all
respondents— (i) to take
all such steps as are within their powers to make, or facilitate the
making of that change, and (ii)
not to cause or permit any steps to be taken calculated to result in
another company being registered with a name that is an offending name,
or (b) requiring the respondent
company to undertake to the applicant and to the Secretary of State not
to operate under the registered name in connection with such activities
as may be specified in the
order.'. Amendment
No. 139, in clause 74, page 32, line 6, at beginning
insert ‘Other than in the case of
an application for an interim
order,'.
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