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(a) the number of shares of each class held by each member of the company at the date to which the return is made up, and
(b) The number of shares of each class transferred since the date to which the last return was made up (or, in the case of the first return, since the incorporation of the company) by each member or person who has ceased to be a member, and the dates of registration of the transfers.'.
No. 129, in page 140, leave out line 28 and insert--
(f) section 363 (duty of company to make annual returns) ;".'. No. 130, in page 140, line 28, at end insert--
(5) In section 565(6) of the Income and Corporation Taxes Act 1988 (conditions for exemption from provisions relating to sub-contractors in construction industry : compliance with requirements of Companies Act 1985) in paragraph (d) for "sections 363, 364 and 365" substitute "sections 363 to 365".'.-- [Mr. Redwood.]
Clause 132
Abolition of doctrine of deemed notice
Amendments made : No. 131, in page 142, line 16, at end insert-- (a
(section 416 of this Act (under which a person taking a charge over a company's property is deemed to have notice of matters disclosed on the companies charges register), or)
(b
('.) No. 132, in page 142, line 22, at end insert--
(2) In Schedule 22 to the Companies Act 1985 (unregistered companies), in the entry for Part XXIV at the appropriate place insert--
Section 711A Abolition of doctrine of deemed notice Subject to section 718(3)".'.
-- [Mr. Redwood.]
Clause 133
Rights of inspection and related matters
Amendments made : No. 133, in page 142, line 45, at end insert-- (4A) Regulations under this section may make different provision for different classes of case.'.
No. 134, in page 144, line 11, at end insert--
(11) In Schedule 22 to the Companies Act 1985 (provisions applying to unregistered companies), in the entry relating to Part XXV at the appropriate place insert--
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"Section 723A Rights of inspection and related matters. To apply only so far as this provision has effect in relation to provisions applying by virtue of the foregoing provisions of this Schedule.".'.-- [Mr. Redwood.]
Clause 134
Disclaimer of property, rescission of contracts, & c.
Amendment made : No. 286, in page 146, line 39, at end insert-- (5) So much of section 23(3) of the Interpretation Act 1978 as applies section 17(2)(a) of that Act (effect of repeal and re-enactment) to deeds, instruments and documents other than enactments shall not apply in relation to any repeal and re-enactment effected by regulations made under this section.'.-- [Mr. Nicholas Baker.]
Schedule 18
Minor amendments of the Companies Act 1985
Amendments made : No. 135, in page 274, line 22, at end insert-- Correction of cross-reference 0A. In section 131(1) of the Companies Act 1985 (merger relief) for "section 132(4)" substitute "section 132(8)".
This amendment shall be deemed always to have had effect.'. No. 136, in page 274, line 26, leave out from directors)' to end of line 27 and insert- -
(a) in sub-paragraph (i) for "Christian name and surname" and in sub- paragraph (ii) for "Christian name or surname" substitute "name", and
(b) for sub-paragraph (vii) substitute--
"(vii) the date of his birth ;".'.
No. 137, in page 274, line 31, leave out (1)' and insert (1)(a)'.
No. 138, in page 275, line 4, leave out (twice)' and insert and "Christian name or surname" '.
No. 139, in page 275, line 6, leave out from beginning to end of line 7 and insert--
" (3) Section 289(2)(a) and (b) apply for the purposes of the obligation under subsection (1)(a) of this section to state the name or former name of an individual.".'.
No. 140, in page 275, line 26, at end insert--
3A.--(1) Section 686 of the Companies Act 1985 (documents to be delivered to registrar on registration of company not formed under companies legislation) is amended as follows.
(2) In subsection (1) (particulars to be delivered to registrar), for paragraph (b) (particulars of directors and managers) substitute--
"(b) a list showing with respect to each director or manager of the company --
(i) in the case of an individual, his name, address, occupation and date of birth,
(ii) in the case of a corporation or Scottish firm, its corporate or firm name and registered or principal office,".
(3) After that subsection insert--
"(1A) For the purposes of subsection (1)(b)(i) a persons's name' means his Christian name (or other forename) and surname, except that in the case of a peer, or an individual usually known by a title, the title may be stated instead of his Christian name (or other forename) and surname or in addition to either or both of them.".
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3B. In section 691 of the Companies Act 1985 (documents to be delivered to registrar on registration of oversea company), for subsection (2) (particulars of directors and secretary) substitute-- "(2) The list referred to in subsection (1)(b)(i) shall contain the following particulars with respect to each director--(a) in the case of an individual--
(i) his name,
(ii) any former name,
(iii) his usual residential address,
(iv) his nationality,
(v) his business occupation (if any),
(vi) if he has no business occupation but holds other directorships, particulars of them, and
(vii) his date of birth ;
(b) in the case of a corporation or Scottish firm, its corporate or firm name and registered or principal office.
(3) The list referred to in subsection (1)(b)(i) shall contain the following particulars with respect to the secretary (or, where there are joint secretaries, with respect to each of them)
(a) in the case of an individual, his name, any former name and his usual residential address ;
(b) in the case of a corporation or Scottish firm, its corporate or firm name and registered or principal office.
Where all the partners in a firm are joint secretaries of the company, the name and principal office of the firm may be stated instead of the particulars required by paragraph (a).
(4) In subsections (2)(a) and (3)(a) above--
(a) "name" means a person's Christian name (or other forename) and surname, except that in the case of a peer, or an individual usually known by a title, the title may be stated instead of his Christian name (or other forename) and surname, or in addition to either or both of them ; and
(b) the reference to a former name does not include--
(i) in the case of a peer, or an individual normally known by a British title, the name by which he was known previous to the adoption of or succession to a title, or
(ii) in the case of any person, a former name which was changed or disused before he attained the age of 18 years or which has been changed or disused for 20 years or more, or
(iii) in the case of a married woman, the name by which she was known previous to the marriage.".'.
No. 141, in page 275, line 29, after directors)' insert-- (a)'. No. 142, in page 275, line 30, at end insert
; and (b) for the words from "and, in the case" to the end substitute "and his date of birth".'.
No. 143, in page 275, line 33, leave out 3(a)' and insert 3(1)(a)'.
No. 144, in page 275, line 36, leave out 1 and 3' and insert 1(a) and 3(1)(a)'.
No. 145, in page 278, line 46, at end insert--
Meaning of "officer who is in default"
13A. In section 730 of the Companies Act 1985 (punishment of offences), in subsection (5) (meaning of "officer who is in default"), after "company" (twice) insert "or other body".
Offences committed by partnerships and other unincorporated bodies
13B. In section 734 of the Companies Act 1985 (criminal proceedings against unincorporated bodies), at the end add
"(5) Where such an offence committed by a partnership is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, a partner, he as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.
(6) Where such an offence committed by an unincorporated body (other than a partnership) is proved to have been committed with the consent or connivance
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of, or to be attributable to any neglect on the part of, any officer of the body or any member of its governing body, he as well as the body is guilty of the offence and liable to be proceeded against and punished accordingly.".'.No. 146, in page 279, line 21, column 2, after sections' insert 261(2)'.
No. 147, in page 279, leave out line 26 and insert--
balance sheet and balance sheet date sections 261(2), 262(1) and 742(1)'.
No. 148, in page 280, line 31, column 2, leave out section 258' and insert sections 258 and 742(1)'.
No. 149, in page 280, leave out lines 36 to 38 and insert profit and loss account sections 261(2), 262(1) and 742(1)'. No. 150, in page 281, line 3, column 2, leave out section 258' and insert sections 258 and 742(1)'.-- [Mr. Redwood.]
New Clause 12
Merger references
. In section 76 of the Fair Trading Act 1973 (functions of director in relation to Merger Situation), leave out paragraph (b) and insert--
"(b) to recommend to the Secretary of State to make a merger reference to the Commission unless he is satisfied that such arrangements or transactions will not operate against the public interest.".'.-- [Mr. John Garrett.]
Brought up, and read the First time.
Mr. John Garrett : I beg to move, That the clause be read a Second time.
Madam Deputy Speaker : With this we shall discuss new clause 11-- Merger references --
. In section 64 of the Fair Trading Act 1973 (merger situation qualifying for investigation) after subsection (2) insert-- "(2A) The Secretary of State shall make a merger reference to the Commission unless he is satisfied that the merger situation will not operate against the public interest.".'.
Mr. Garrett : These two new clauses deal with the onus of proof in merger cases. Under the Fair Trading Act 1973, if a proposed merger involves net assets of a value of more than £30 million or a 25 per cent. product market share it is scrutinised by the Director General of Fair Trading, who recommends to the Secretary of State whether the merger should be referred to the Monopolies and Mergers Commission. This new clause accepts these arrangements but establishes new guidelines that a merger shall be referred unless it is clear that it will not operate against the public interest.
According to the Government, mergers are generally a case of market forces successfully at work for the benefit of the economy as a whole. Mergers are good because they are good management driving out bad ; because they yield economies of scale ; and because the threat of a takeover serves to keep managers on their toes. It is argued from this that on the whole the only reason for a proposed merger to be referred to the Monopolies and Mergers Commission is the possibility of its having anti-competitive, monopolistic implications. This doctrine was first publically announced in 1984 by the right hon.
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Member for Chingford (Mr. Tebbit), then the Secretary of State for Trade and Industry, in the so-called Tebbit doctrine.During the Second Reading debate of the Companies Bill in the House of Lords, the subsequent Secretary of State, Lord Young, stated : "In the vast majority of cases, decisions on mergers should be left to shareholders It is normally only when a merger threatens the interests of customers by reducing competition that the law should intervene."-- [Official Report, House of Lords, 16 January 1989 ; Vol. 503, c. 7-8.]
We believe that that approach is deficient. Lord Young retained a reserve power to make a reference on wider public interest grounds when, for example, he referred the Kuwait Investment Office shareholding in BP. The practice of retaining golden shares in privatised industries also represents a recognition of public interest issues beyond the promotion of competition. We therefore have ad hoc intervention in the merger process without any coherent public interest criterion.
A survey in February this year by Channel 4's "The Business Programme" showed the incoherence of the Government's policy--the way that it varies from one specific case to another. The survey covered the top 20 financial advisers in the United Kingdom mergers and acquisitions field, and 19 of the 20 experts agreed that the Government's mergers policy was neither consistent nor clear-cut. The survey cited confusion over the referral ofs such as Elders' bid for Scottish and Newcastle, where analysts felt that there was no threat to competition, and the decision not to refer the Nestle takeover of Rowntree in spite of concern over Swiss non-reciprocity.
11.15 pm
The Director General of Fair Trading has supported the idea that the onus of proof should change. In December 1986 he suggested that the reversal of the onus of proof, perhaps on mergers above a certain size, could be a way of tackling the problem of financial markets taking an excessively short- term view which could be against the public interest.
The scale of merger activity has been on an upward trend during the 1980s. In 1988, the total value of mergers and acquisitions exceeded a record £22 billion involving 1,200 companies. Mergers are generally reckoned to be an inefficient means of growth compared with new investment in plant and equipment, yet total spending on acquisitions is twice the level of manufacturing investment and over half the level of investment in all companies. All the research evidence is that more than half of all mergers lead to a decline in or, at best, a neutral effect on performance, as measured by profits and the return on assets.
Mr. Tim Smith (Beaconsfield) : If mergers are an inefficient means of securing growth, why did the Labour Government go out of their way in the 1960s to promote huge mergers through the Industrial Reorganisation Corporation?
Mr. Garrett : That policy was unsuccessful but it must be put in the context of the management ideology of the time. I was a manager in industry at that time and it was generally thought that large conglomerate organisations were the appropriate way to growth. Management has changed since then, partly as a result of the greater ability to manage smaller companies through the development of inflation technology, about which the hon. Gentleman will know as well as anybody else. It was generally thought at
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the time that what we now call "gigantism" but was then thought to be "economy of scale" were widely appropriate. The Labour Government of the day was as wrong about that as most of the great industrialists. At that time Lord Weinstock was putting together GEC. One can remember the growth of large conglomerates in the private sector which are now no doubt being unbundled as management fashions change. The hon. Gentleman has, as so often, made a valid point. In other mergers, improvements in efficiency tend to be no greater than what would have been expected in the absence of a merger. Such findings are supported by the Government's 1978 Green Paper, Cmnd. 7198--the Leisner report on mergers policy. That considered several studies but attempted to evaluate the benefits of mergers by looking at post-merger profitability and before the mergers took place. Those studies produced the finding that in roughly half the cases examined the merger had resulted in an unfavourable or a neutral effect on the profitability of the companies concerned.The Department of Transport's 1988 report on mergers policy referred to later studies, on the same lines as the Leisner study, which on other criteria
"reinforced the findings of poor post-merger performance." The growth of virtually unregulated mergers led to defensive management, what we called in Committee "short-termism", rather than risk-taking management which makes a company vulnerable to takeover. It also means that companies aim for size rather than
competitiveness. Managers are preoccupied with short-term survival and a cautious attitude to investment, training and research and development, because any drop in short-term profits will be translated into falls in the share price and increase vulnerability to takeover.
As the--I was about to say the present Chancellor of the Exchequer, but that is wrong. He was the Chancellor of the Exchequer until 5 or 6 o'clock this evening.
Mr. Tim Smith : It is rather an old speech.
Mr. Garrett : I wrote it yesterday. Things change so fast. In June 1986, the right hon. Member for Blaby (Mr. Lawson) said : "The big institutional investors nowadays increasingly react to short-term pressure on investment performance They are unwilling to countenance long-term investment or a sufficient expenditure on research and development."
Incentive schemes for pension fund managers, for example, are based on short-term horizons--quarterly and annual performance--so that their tendency is also to favour the short term.
We have had the example of virtually bid-proof companies in Switzerland, but much the same is true elsewhere in Europe, and certainly in Japan. In Germany and France, the equivalents of the Monopolies and Mergers Commission are much less likely to allow control of domestic companies to move abroad. I remember that, when I was a manager in industry, German law- -or German convention or practice--laid down that what was called "mind and management" of a company operating in Germany should reside there. In 1988, European acquisitions in the United Kingdom were at nearly twice the value of United Kingdom acquisitions in Europe.
Lately we have seen the effects of an import from the United States--the colossal highly leveraged or "junk bond" bid--in the £13.4 billion Hoylake bid for British American Tobacco, which the Minister has refused to refer
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to the MMC, although the potential victim is one of our largest companies. We discussed the possible effects of that bid with him late one night. But for the late Chancellor's constant increases in interest rates, there would no doubt have been many more bids based on the issuing of high-interest bonds on very little security, which can be redeemed only by the break-up of the victim company and the consequential loss of jobs.We think that it is time that a brake was applied to this merger mania by our putting the public interest first, and that is the purport of the new clauses. By "public interest" we mean not only competition but consumer interest, innovation and development, the balanced distribution of industry, and the international competitive position of British producers. If those criteria sound familiar, it is because they are all in the Fair Trading Act 1973.
Mr. Cousins : The two new clauses do not require us to take a view about whether mergers are right or wrong ; they simply require the reference of a merger for considerations of public interest. What the judgment of public interest would be in any particular case would be a matter for the relevant regulatory body. I do not feel that we need to debate the values or otherwise of mergers, as such.
My hon. Friend the Member for Norwich, South (Mr. Garrett) referred to the takeover bid for BAT by Hoylake. One of the things that I find most objectionable about that attempt is the fact that a pleasant seaside resort on the Wirral peninsula should have its name flung into the centre of a debate of this kind : I think that the good name of Hoylake the town will suffer considerably for a long time, to the disadvantage of its inhabitants.
That bid may be right or it may be wrong, but it raises very relevant questions of public interest. The stated purpose of a great many of the major acquisitions of the past few years has been to deconcentrate and demerge ; the purpose of the takeover of BAT is to dismember it, to liberate brand names, asset values or public good will--the particular aspects of a company's operation--and to put them on the market and find buyers for them.
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