1 A White Paper setting out the Government's proposals was published in July 2002: Modernising Company Law (London, DTI, Cm 5553, 2002). The Government's assessment of the changes needed to update company law had been informed by the work done under the auspices of an independent Steering Group of company law experts. Between 1998 and 2001 the Steering Group conducted a wide-ranging review of company law. It published a series of consultation papers and a final report. All of the Steering Group's publications were published under the title: Modern Company Law for a Competitive Economy. Of these publications, the ones that are most relevant to the issues discussed in this article are: Company Formation and Capital Maintenance (London, DTI, 1999, URN 99/1145); Developing the Framework (London, DTI, 2000, URN 00/656); Completing the Structure (London, DTI, 2000, URN 00/1335); Final Report (London, DTI, 2001, URN 01/942).

2 77/91/EEC.

3 Simplification and modernisation of the 2nd Directive has a high position in the European Commission's proposed Company Law Action Plan: Modernising Company Law and Enhancing Corporate Governance in the European Union—A Plan to Move Forward (Brussels, European Commission, 2003). The CLAP, which is still in the process of development represents the Commission's response to the Commission's own independent review conducted on its behalf by a high level group of European company law experts and which reported its views in A Modern Regulatory Framework for Company Law in Europe (Brussels, European Commission, November 2002).

4 [2002] EWCACiv 1999, [2003] 1 B.C.L.C 675.

5 [2003] EWCA Civ 494, [2003] 2 B.C.L.C. 117, affirming [2002] EWHC 1628 (Ch.), [2002] 2 B.C.L.C. 688.

6 At para. [42].

7 Regal (Hasting) Ltd. v. Gulliver [1967] 2 A.C. 134n is the classic company law case on the point. The leading article on the complex policy issues raised by such cases remains G. Jones, “Unjust Enrichment and the Fiduciary's Duty of Loyalty” (1968) 84 L.Q.R. 472.

8 Questions about quantification of damages or other remedial consequences were not, however, considered by the Court of Appeal.

9 At para. [27].

10 Charterhouse Investment Trust Ltd. v. Tempest Diesels Ltd. [1986] B.C.L.C. 1; Barclays Bank plc v. British & Commonwealth Holdings plc [1996] 1 All E.R. 381. Lord Hoffmann's speech in the tax case MacNiven (HM Inspector of Taxes) v. Westmoreland Investments Ltd. [2001] UKHL 6, [2003] 1 A.C. 311 explores the broad implications of the use of commercial concepts in legislative drafting. According to Lord Hoffmann this means that the phrase in question must be taken to refer to a concept which Parliament intended to be given a commercial meaning capable of transcending the juristic individuality of its component parts.

11 At para. [38].

12 This was Arden L.J.'s interpretation of the ratio of the Barclays v. British and Commonwealth, note 10 above.

13 Sterileair Pty Ltd. v. Papallo (16 November 1998, unreported Fed. Ct. of Aust.).

16 Break fees—i.e., fees payable to a bidder if a merger or takeover does not succeed for certain specified reasons—in practice tend to be capped at 1% of net assets, this practice reflecting practitioners’ assessment that a court would regard this as immaterial. This practice has acquired a degree of regulatory endorsement in that Rule 21.2 of the City Code on Takeovers and Mergers allows inducement (break) fees subject to certain safeguards, one of which is that the fee must be de minimis (defined as “normally no more than 1% of the value of the offeree company calculated by reference to the offer price”). The Panel explicitly warns, however (Note 2 to Rule 21.2) that its views in relation to such fees relate only to the Code and do not extend to requirements of the Companies Act 1985 such as s. 151.

17 At para. [56].

18 At para. [64].

19 At para. [30] Mummery L.J. found the point “less persuasive” but decided that it was unnecessary to express a final view on it.

20 The payment would still be caught by s. 152(1)(a)(iv) (assuming a material reduction in net assets or no net assets).

21 Armour Hick, note 14 and cases cited therein

22 At para. [23].

23 Chaston at para. [31] per Arden L.J.

24 Arden L.J.'s judgment makes plain that she is unconvinced by the strained (desperate?) argument that a buyback is somehow not an “acquisition” of shares for the purposes of s. 151: at para. [47]. There is plenty of support for Arden L.J.'s commonsense view that a buyback is indeed an acquisition: see, e.g., the recent regulations permitting treasury shares (The Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003, S.I. 2003/ 1116) which, as the title indicates, assume that a share buyback is an acquisition of shares. That a buyback is an acquisition of shares was also assumed by the Steering Group that conducted the general review of UK company law between 1998 and 2001: see, e.g., the consultation document Company Formation and Capital Maintenance (see note 1 above) paras. 3.41-3.48.

25 This assumes (although the contrary is sometimes (rather implausibly it is suggested) argued) that a reduction of capital is not an acquisition of shares and that ss. 143(3)(b) and 153(3)(c) (which applies to limited companies only) are for the avoidance of doubt.

26 Considered recently in Thakrar v. Ciro Citterio Menswear Plc (in administration) [2002] EWHC 1975 (Ch.).

27 At para. [31].

28 Developing the Framework (note 1 above), paras. 7.18-7.25.

29 Companies Act 1985, s. 430A.

30 Developing the Framework, paras. 7.18-7.25.

31 In Company Formation and Capital Maintenance (note 1 above), paras. 3.42-3.43; Developing the Framework (note 1 above), paras. 7.18-7.25; Completing the Structure (note 1 above), paras. 7.12-7.15; Final Report (note 1 above), para. 10.6.

32 Suggested in Completing the Structure para. 7.13.

33 CLAP mentioned in note 2 above.

34 E.g., the development of the Market Abuse Directive, 2003/6/EC, owed a considerable debt to the market abuse regime enacted by the UK in its Financial Services and Markets Act 2000: J.L. Hansen, “The New Proposal for a European Union Directive on Market Abuse” (2002) 23 University of Pennsylvania Journal of International Economic Law 241.