Posted on Corporate Business
on 19 December 2005
Approved by the Chair of the Company Law Committee
THE COMPANY LAW COMMITTEE
Minutes of the meeting of the Company Law Committee held on Tuesday
13 December 2005 at 113 Chancery Lane, London
Present:
Peter Graham (Chair)
Chris Arnheim
Oliver Barnes
Mark Carroll
John Cone
Jonathan Coppin
Harriet Creamer
Vanessa Knapp
Richard Paton
Dan Prentice
Jonathan Rushworth
Martin Scott
Helen Shilling
Annabel Sykes
Richard Ufland
Janice Wall
Andrew Ward
Stuart Weinstein
David Wisbey
In attendance:
Steven Durno, Shona Ferrier, Jonathan Newman,
Richard Schofield
Apologies:
Rt. Hon. Lady Justin Arden, Messrs, Beattie, Bohm, Gibbon,
Hanton, Levy, Lucas, Macaulay, Palmer, Stilton, Thomlinson,
Turnbull, Yates and Sir Thomas Stockdale.
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PART A – LAST MEETING
1.
MINUTES OF THE LAST MEETING
The minutes of the last meeting were approved for signature by the
Chairman.
2.
MATTERS ARISING FROM THE MINUTES
UNCITRAL Model Law on Cross Border Insolvency: the memorandum had
been submitted to the Insolvency Service which had indicated that it would
arrange a meeting to discuss the Committee’s concerns in due course.
PART B – MATTERS FOR DECISION OR DISCUSSION
3.
COMPANY LAW REFORM BILL
The Committee had received copies of the briefing for the Second Reading
debate in the House of Lords and a note of the meeting with the Conservative
and Liberal Democrat spokesmen on 8 December 2005. Contact details for
the working party leaders had been provided to the spokesmen and they
might be contacted for additional briefings or further information. In the event
of such contact, members of the Committee were requested to advise the
Chairman and the Law Society.
A lobbying strategy drafted by the Parliamentary Unit was tabled for
discussion at the meeting. The Second Reading briefing would be sent to 200
peers identified as potentially interested in the Bill by the Society’s
Parliamentary monitors. The Unit had already been approached by Labour
peers including Professor Lord Wedderburn and if appropriate could arrange
a meeting to brief Labour and cross bench peers early in the New Year. The
Parliamentary Unit would be happy to arrange further meetings to brief peers
as requested as the Bill proceeded.
The provisional date for Second Reading was 11 January 2006 with the
Committee stage likely to start in the week commencing 23 January 2006.
The Bill would be considered in detail in Grand Committee rather than on the
floor of the House, entailing twice weekly sessions until the Easter recess.
While amendments could not be put to the vote, Opposition parties would still
appreciate briefing materials and draft amendments as soon as practicable.
The Society’s amendments would be distributed to party spokesmen, all
solicitor peers and all of those who spoke on the Second Reading or in
Committee.
The suggested strategy included the organisation of a lobby meeting with
other bodies to brief peers and the media on particular issues of concern, for
example, to seek the deletion of the clauses on directors’ duties. However,
this suggestion was not endorsed by the Committee. Subject to availability,
members would be willing to attend a further meeting with peers to explain
the issues. The Committee would in any event remain in contact with DTI
officials during the passage of the Bill.
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The Parliamentary Unit would provide a tabulated summary of the Hansard
reports identifying the outcome of debates on amendments to help the
Committee identify whether to press amendments at the Report stage when
votes could be taken.
Committee members asked how best to deal with generic issues which
recurred throughout the Bill such as the provisions on offences. The
Committee was advised to recommend a probing amendment to delete the
clause when such a provision first appeared in the Bill and including the
deletion of all other similar clauses. Briefing on the principle at issue and the
reasons for deletion should be provided. Where an amendment would have
consequential effects on other clauses, the Committee was recommended to
identify all of the necessary amendments to enable the Minister to respond,
hopefully, that he would need to give the issue further consideration and
would report back at a later stage.
The Committee did not consider there to be much scope for media interest in
the Bill. However, it was suggested that an article by a member of the
Committee might be published by the Financial Times. The Chairman would
discuss this possibility further with Harriet Creamer.
The DTI had requested a meeting on the Bill which had been arranged for 21
December. The DTI had identified the public/private split, capital maintenance
and the takeover provisions for discussion. Members were agreed on the
desirability of harmonising the definitions of offer to the public for the
purposes of prospectus law and the public/private split but were unable to
identify an appropriate solution. Members were requested to direct any
thoughts on a suitable solution to the Chairman ahead of the meeting with the
DTI. The Committee’s views at the time of the implementation of the
Prospectus Directive would also be reviewed. On maintenance of capital, the
DTI was expected to raise the deregulation of the payment of dividends by
private companies and comments in Jonathan Rickford’s 2004 BIICL report of
Reforming Capital would be reviewed.
4.
FSA QUARTERLY CONSULTATION ON AMENDMENTS TO THE
HANDBOOK
The Committee agreed to approve the working party paper submitted to the
Financial Services Authority in response to those parts in the Consultation
Paper 05/14 dealing with changes to the Collective Investment Schemes
Sourcebook and the New Collective Investment Schemes Sourcebook
subject to typographical corrections and the provision of definitions of the
acronyms used in the paper; likewise on behalf of the Bar Law Reform
Committee.
PART C – MATTERS FOR CONSIDERATION OR REPORT
5.
INSOLVENCY
Clause 868 of the Bill amended the Insolvency Act 1986 so that where
necessary assets subject to a floating charge would be available to fund the
general expenses of liquidation. The Insolvency Service would have the
power to introduce rules providing a mechanism for the floating charge holder
to agree the quantum of general liquidation expenses recovered by a
liquidator on which there were to be consultations. The amendment would
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reverse the judgment in Leyland Daf Ltd on which the Committee had no
particular stance.
6.
FINANCIAL SERVICES AND MARKETS ACT
(a)
Financial Services Authority: the FSA’s Better Regulation Action Plan
indicated that in future it would move away from detailed prescriptive rules
towards more high level guidance and that in 2006 it would be consulting on
simplifying the requirements applying to firms issuing financial promotions.
(b)
Financial Services & Markets Act: the Treasury had published a consultation
on proposed changes to the Act to be implemented by a Regulatory Reform
Order. They were mainly tidying amendments which were being considered
by the financial services working party.
7.
SECURITIES MARKET
(a)
Listing Rules and the Implementation of the Market Abuse Directive: LIST! No
11 for November 2005 dealt with practical issues relating to the Prospectus
Directive and raised the issue of conflict of interests in competitive initial
public offers. The FSA’s Better Regulation Action Plan indicated that there
would be consultations in 2006 on simplifying the Listing Rules applying to
investment entities.
(b)
Takeover Panel: the Committee noted Panel Consultation Paper 2005/5 on
the implementation of the Takeovers Directive, Practice Statement No 14 on
the application of the Code to schemes of arrangement, Practice Statement
No 15 which had clarified Rule 21.2 on agreements between the offeror and
the offeree company and reports that the Panel was taking initial soundings
on whether institutional investors with stakes in companies involved in
takeover bids should be required to disclose their voting intentions on a
regulated news service instead of piecemeal through the media.
8.
LIMITED LIABILITY PARTNERSHIPS
A meeting to discuss the Committee’s paper on LLPs and section 235 FSMA
had been held with the Treasury on 25 November 2005. The Treasury had
responded positively to the suggestion of the need to amend secondary
legislation to remove uncertainty and the Chairman and Antony Thomlinson
were in the process of drafting appropriate amendments.
9.
COLLECTIVE INVESTMENT SCHEMES
The Government had issued its response to the Treasury consultation on the
regulation of investment trust companies, concluding that it was not
necessary to change the structure of their regulation by the FSA which was
looking at including them within the Listing Rules. In the pre-Budget report the
Chancellor had announced that draft legislation on the introduction of real
estate investment trusts would be published in January with a view to
inclusion in the Finance Bill 2006.
10.
GENERAL COMPANY LAW
(a)
The Reform of Company Law: on 28 November 2005 the Chancellor of the
Exchequer had announced that the mandatory requirement for public
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companies to produce Operating and Financial Reviews from 1 April 2006
had been abandoned and would be replaced by a simpler “business review”,
to be included in the Directors’ Report, in line with the requirements of the EU
Accounts Modernisation Directive. The Committee noted the press release
giving the reaction of the Financial Reporting Council.
(b)
Law Commission: the Commission had circulated a request for preliminary
views on legal issues concerning the ownership of investment securities as
the first stage in a project on the ownership and transfer of securities,
particularly those held indirectly on behalf of investors. On balance it had
been decided that this was not an issue that the Committee needed to
consider as the issues raised related in the main to title rather than
shareholder participation and the matter was being dealt with by the Banking
Law Sub-Committee of the City of London Law Society.
(c)
Companies House: the next meeting of the London Focus Group would not
be until March which would be too long before raising the difficulties of
registering court orders in Cardiff. However the issue had been dealt with in
the Bill. Richard Paton would discuss with Vanessa Knapp the separate issue
of companies assuming that there were no applications in the absence of a
notice from a minority shareholder that he was applying to the court.
Companies House and H M Revenue and Customs had issued a consultation
document on proposals for aligning the filing dates for company accounts to
Companies House and tax returns which would be included in the Finance
Act 2007. The Tax Law Committee would be taking the lead with input from
this Committee on accounting and reporting issues.
11.
EU MATTERS
The Committee noted the Company Law and Financial Services Update
prepared by the Brussels Office; the adoption by the Commission of a
Regulation endorsing the amended International Accounting Standard 39 on
Financial Instruments: Recognition and Measurement, the Fair Value Option
which would eliminate the previous fair value carve out; the support of
Ministers for the draft Directive amending the Second Directive; publication by
the Commission of the White Paper on Financial Services Policy 2005-2010;
a report on the meeting of the CCBE Company Law Committee on 29
November; the agreement of the Commission’s Accounting Regulatory
Committee on the standard reference for accounts prepared in accordance
with International Accounting Standards; and legal opinion obtained by the
Commission that any IFRS adopted by the date a company’s accounts were
signed (rather than the end of the financial year) could be used in the
preparation of the accounts for that financial year (as long as the standard did
not prohibit early adoption).
At short notice the Chairman had written to the Commission criticising the
provisions in a proposal for a Directive on shareholders’ rights that companies
should give 30 days’ notice of an EGM and that shareholders should have the
right to add items to the agenda and table resolutions at all general meetings.
A further letter to the Commissioner would be considered.
12.
ACCOUNTING MATTERS
There were no developments to report.
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PART D- MISCELLANEOUS
13.
LAW SOCIETY REORGANISATION
A prospectus for a new Law Society would be circulated to all members of the
profession in the New Year with a consultation questionnaire to be returned
by 21 April 2006. Maureen Miller was unable to join the Committee to provide
a presentation on the ‘sections’ model but would be invited to a future
meeting.
SIGNED……………………………………….
Chairman
DATE…………………………………………..
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