§ Baroness Scotland of Asthal
asked Her Majesty's Government:
What steps they are taking to help companies to redenominate share capital to prepare for the euro. [HL3485]
§ The Minister of State, Department of Trade and Industry (Lord Simon of Highbury)
I am very keen to play a full part in helping UK business prepare for the euro. The DTI's consultation "The Euro: Redenomination of Share Capital" showed that companies are starting to consider whether to redenominate their share capital as the euro becomes widely-used in Europe. Existing Companies Act 1985 procedures for the reorganisation of share capital are not specifically designed for redenomination of shares, and can place an unnecessary burden on companies in terms of cost, and the requirement for formal court approval to any reduction in share capital.
I propose to seek amendments to the Companies Act 1985 to provide a specific mechanism for companies to use in redenominating their share capital. The new mechanism would permit companies to resolve that references in any document to share capital denominated in one currency would be to the equivalent amount in euro (or another currency). A resolution of each class of shareholders would be required (although a resolution of the board would suffice where the company was redenominating into euro during any transitional period to membership of the single currency).
The new mechanism would also permit companies to adjust the resulting nominal or par values of the shares to a more convenient figure in euro (or other currency), subject to shareholder approval and without the need for court approval. There would be no requirement for companies to issue new share certificates following redenomination.
The second part of my proposal relates to the requirement in Section 118 of the Companies Act 1985 that public companies should have a minimum amount of authorised and issued share capital of £50,000. Currently the Act requires this amount to be denominated in sterling, although companies can and do issue share capital in other currencies, over and above the minimum amount. Companies have told this department that they favour having the flexibility to denominate the whole of their share capital—including the minimum amount—in a foreign currency; and I propose to seek an amendment to the Companies Act 1985 to allow them to do so.
In preparing the new legislation the DTI will issue a further consultation document in the New Year with the detailed proposals for change.