Companies (Reduction of Share Capital) Order 2008

I thank the Minister for explaining the order. I declare an interest as a Fellow of the Institute of Chartered Accountants in England and Wales, on whose briefing I will draw in a moment. Before I do so, I should say that we strongly support anything which reduces the regulatory burden on business. On the transitional provisions, I understand that, even after implementation of the order, a surplus which has arisen on a reduction of capital which took place before 1 October this year will not become distributable. Is there any logic for this? I hope your Lordships will forgive me if I take this opportunity to probe the wider context of the Government’s position on the possibility of more fundamental reform of the capital maintenance and distributions regime, both at United Kingdom and EU levels. For example, it appears from a recent KPMG study into the costs of the capital maintenance regime, and the commission’s reaction thereto, that the UK has over-implemented the second directive regime, resulting in much higher costs in the UK compared to other member states. This appears to be caused by the UK’s realised profits test, which, as I understand it, is not required in other member states. Do the Government propose to consult urgently and widely, with a view to reforming these rules? If not, why not? The interaction between IFRS or converged UK GAAP and the current capital maintenance and distribution rules can mean that the payment of dividends can become an extremely and unnecessarily complicated process. Can the Minister explain what action the Government are taking to press the EU for changes to the second directive in relation to public companies and to alleviate the problems faced by private companies?