Companies (Share Capital and Acquisition by Company of its Own Shares) Regulations 2009

To answer the questions put by the noble Lord, Lord De Mauley, creditors will not be affected by the removal of the limit on treasury shares. Creditors have the protection that their own shares can generally be purchased only out of distributable profits. Once the shares are purchased, the creditors’ interests are not affected by whether the shares are cancelled or held. Shareholders’ agreement will still be needed to authorise the purchase of owned shares, and if and when treasury shares are resold, the shareholders will have a pre-emptive right to purchase shares pro rata to their existing holdings. With regard to manipulation, as the noble Lord, Lord Razzall, implied, companies are still required to comply with the insider dealing regime under the Criminal Justice Act, the market abuse regime under the Financial Services and Markets Act 2000 and requirements under the listing rules. We believe that these will be more than sufficient to deter any sensible company from attempting to use treasury shares in this way. The reduction does not affect the maximum period of notice for rights issues. The notice period is just one part of the rights issue process; for example, the company has to prepare and issue a prospectus. There was broad consensus that at the margin the reduction in the minimum notice period would be helpful. I shall write to the noble Lord, Lord De Mauley, on whether France and Germany have yet implemented the directive. The noble Lord, Lord Razzall, asked whether this is the appropriate time to introduce change. These changes are all deregulatory in nature, and there is no reason why introducing them now should cause problems for companies or their members. The majority of companies will not be affected immediately and may never be affected. They will apply only to companies that choose to do one of three things: raise capital through a rights issue, reduce their capital by application to court; or purchase and hold their own shares. None of these things is something that any company does every day, or even every year, so most companies will feel no immediate effect of these changes. However, any company that does one of these things may find that it has more flexibility after these changes are made. The noble Lord, Lord Razzall, was right when he said that shortening the rights issue period will make underwriting cheaper. Other things being equal, shorter exposure to changes in the market should reduce risk and should, in general, reduce underwriting costs. I am grateful to noble Lords on all sides for their contribution to this debate and hope that they will agree that this instrument will provide flexibility for companies when managing their capital. Motion agreed.