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(b) any disposition of property made in enforcing a market charge. (5) However, if a person (other than the chargee under the market charge) who is a party to a disposition mentioned in sub-paragraph (4)(a) knows at the time of the disposition that a petition has been presented for the winding- up or bankruptcy of the party making the disposition, the value of any profit or benefit to him arising from the disposition is recoverable from him by the relevant office-holder unless the court directs otherwise.
(6) Any sum recoverable by virtue of sub-paragraph (5) has the same priority, in the event of the insolvency of the person from whom it is due, as if it were secured by a fixed charge.
12.--(1) No legal proceedings, execution or other legal process may be commenced or continued, and no distress may be levied against property which is, or becomes, subject to a market charge except with the consent of the person in whose favour the charge was granted or the leave of the court.
(2) The court may give leave subject to such terms as it thinks fit.
(3) Sub-paragraph (1) does not apply to proceedings to enforce any security over, or any equitable interest in, the property. (4) Sections 10(1)(c), 11(3)(d), 130(3) and 285(3) of the Insolvency Act 1986 (which restrict the taking of certain legal proceedings and other steps) have effect accordingly.
(5) In the application of this paragraph to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied shall be omitted.
Supplementary provisions 13.--(1) In this Schedule "default rules" means--
(a) in relation to a recognised investment exchange, rules which provide in the event of a member or designated non-member of the exchange appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts, for the settlement forthwith of all unsettled market contracts to which he is a party as principal, other than those whose performance is ensured by a recognised clearing house ;
(b) in relation to a recognised clearing house, rules which provide in the event of a member of the clearing house appearing to be unable, or likely to become unable, to meet his obligations in respect of any market contract, for the closing out of his position in relation to all market contracts to which he is a party.
(2) References in this Schedule to a "defaulter" are to a person in respect of whom action has been taken by a recognised investment exchange or recognised clearing house under its default rules, whether by declaring him to be a defaulter or otherwise ; and references in this Schedule to "default" shall be construed accordingly.
(3) In this Schedule "default proceedings" means proceedings taken by a recognised clearing house under its default rules.
14.--(1) The following are relevant office-holders for the purposes of this Schedule--
(a) the official receiver,
Column 1238(b) any person acting in relation to a company as its liquidator, provisional liquidator, administrator or administrative receiver, (
(c) any person acting in relation to an individual (or, in Scotland, a deceased debtor) as his trustee in bankruptcy or interim receiver of his property or as permanent or interim trustee in the sequestration of his estate,
(d) any person acting as administrator (or, in Scotland, as judicial factor) of an insolvent estate of a deceased person. (2) Sub-paragraph (1)(c) applies in relation to a partnership, and any debtor within the meaning of the Bankruptcy (Scotland) Act 1985, as it applies in relation to an individual.
(3) In this paragraph--
"administrative receiver" has the meaning given by section 251 of the Insolvency Act 1986 ;
"company" means a company within the meaning of section 735(1) of the Companies Act 1985 or a company which may be wound up under Part V of the Insolvency Act 1986 (unregistered companies) ; and "interim trustee" and "permanent trustee" have the same meaning as in the Bankruptcy (Scotland) Act 1985.
15.--(1) In this Schedule--
"clearing house" has the same meaning as in the Financial Services Act 1986 ;
"investment" and "investment exchange" have the same meaning as in the Financial Services Act 1986 ;
"recognised" means recognised under the Financial Services Act 1986 ;
"The Stock Exchange" means The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited.
(2) References in this Schedule to ensuring the performance of a transaction have the same meaning as in the Financial Services Act 1986.
(3) References in this Schedule to a market contract to which a person is a party include, unless the contrary intention appears, contracts to which he is party agent.'.-- [Mr. Redwood.]
.--(1) The Secretary of State shall designate a Takover Panel, (in this Act referred to as "the Panel") for the regulation of takeover bids and other general bids to the holders of securities or the securities of a particular class or classes of any United Kingdom public limited company.
(2) The Secretary of State shall choose the members of the Panel in consultation with the Governor of the Bank of England either as full time members or as a part time members.
(3) The Secretary of State shall publish a Code of Practice setting out general principles relating to the functions of the Panel and the status and terms of office of such members and staff as is considered desirable in the prevailing circumstances.
(4) No appeal shall lie from the final decision of the Panel save that such decision may be subject to judicial review.".'.-- [Ms. Quin.]
Brought up, and read the First time.
Ms. Quin : I beg to move, That the clause be read a Second time. The new clause is along the lines of a new clause tabled in another place when the Bill began its passage though the House. It was also referred to in Standing Committee. The arguments are well known, but we believe that it is an important issue and therefore do not apologise for bringing it to the attention of the House now. The new clause would put the takeover panel on a statutory footing. We know that the panel is very attached to its present status as a non-statutory body. I know, too, that the director-general of the panel has written to
Column 1239Members of the Standing Committee making his views clear. Nevertheless, it is interesting that the director-general of the takeover panel acknowledges that our new clause preserves the essential characteristics of the panel's method of working and its freedom from tactical litigations, and we understand the panel's attachment to flexibility. However, the panel has been in existence for 21 years and there is no doubt that economic conditions have changed considerably during that time. That is certainly true of the increase in takeover activity of recent years.
There was an interesting debate on this matter in another place, when it was clear that some of their Lordships who had previously supported the non -statutory panel had become less convinced as time went on. Lord Rippon of Hexham said in an interesting contribution that he did not feel that we had a system in which the interests of shareholders and the public interest were best protected. He was concerned, as were others, about the deterioration of standards in takeover bids, and he referred to the aggressive tactics of some merchant banks which seemingly encourage bids. He was worried, too, by the behaviour of some institutional shareholders who increasingly regard share certificates, in the words of the noble Lord, as "casino chips to be used to secure short-term capital gains rather than long-term investments"-- [Official Report, House of Lords, 6 March 1989 ; Vol. 504, c. 1295.]
Since we have been anxious about the problem of short-termism and the lack of long-term industrial strategy in this country, we have great sympathy with his words.
It was interesting to note that another noble Lord, Lord Lucas of Chilworth, said that he had been swayed by events in the last few years into believing that something stronger and with more force was needed.
In the debate in the other place it was said that a working party of the takeover panel was looking at its operation in regulating takeovers. I do not know whether the working party has reached any conclusions or, if it has, what they are, but it would be interesting to know if it has come to any firm conclusions. Perhaps the Minister could tell us about that.
There is undoubtedly a European Community dimension to all this because of the negotiations presently taking place, of which I know the Minister is aware, about the formulation of the 13th company law directive. We think that some of the matters that concern us would be given statutory force by that directive, although it is obvious that, as negotiations are continuing, the form of the directive is not clear. However, article 6 seems to give the force that interests us. As I have said, we are not out to destroy the flexibility of the takeover panel but simply to give it the weight, importance and extra effectiveness that we think statute would give it. My hon. Friend the Member for Norwich, South (Mr. Garrett) said in Committee that it is anomalous that the Securities and Investments Board draws its authority from the Secretary of State while the takeover panel does not. The new clause restates our view that the takeover panel should have statutory force.
Mr. Cousins : I agree with my hon. Friend the Member for Gateshead, East (Ms. Quin). With the Financial Services Act 1986, the Government created a mixed economy of regulation in which there are statutory bodies
Column 1240operating in a way that is not quite free. So far, at any rate, that has proved a successful format. The new clause seeks to put other matters of regulation of financial matters on a similar basis. The Government should be flattered that we recognise and have such a good opinion of the 1986 mixed economy regulation formula. The present system of regulation is rather inchoate. It is not so much a mixed economy as a car boot sale. In different parts of the system, regulation is achieved on different principles and by different methods. The new clause simply seeks to extend to the work of the takeover panel the same principles and formula of regulation as those applied more narrowly in the more specific financial markets by the Financial Services Act. I hope that the new clause is acceptable to the Government. The fact that we are prepared to extend that formula to other areas should commend itself to the Government.
Mr. Hanley : The hon. Member for Gateshead, East (Ms. Quin) is absolutely right to say that the takeover panel wrote to members of the Standing Committee when this matter was raised earlier. Because of that approach, I decided to look at the takeover panel, to study the way in which it does its work, and to see those who work therein. I do not think that I was suborned by my visit. I came away with a much greater appreciation of the work of the takeover panel and of the people who work in it, especially those on secondment. The vast majority of the consultants on the takeover panel come from major financial and business institutions. They are extremely dedicated and act independently. In hardly any cases has the takeover panel been accused of anything by any of the parties to the activities that it has helped to regulate, because it is utterly fair. The other reason why it is so successful is that because it is non-statutory, the advice that it gives is not subject to being decided in the courts because it exists within the market by the consent and agreement of all those various parties, which respect it thoroughly.
I ask my hon. Friend the Minister to resist the new clause for the important reason that if the panel were statutory, it would be susceptible to litigation. Then, the parties of a contested takeover, trying to use every tactic available to them, might resort to the courts and perhaps for no other reason than delay for tactical advantage. That would be most undesirable. A company with the resources and the tenacity of a Lonhro could extend the takeover bid for many months. The advice given honestly and independently by the members of the takeover panel and its staff would be put to question. While I am sure that they would be supported in any decision, many takeover bids would be put in jeopardy for the wrong reasons. I ask all my hon. Friends to resist the new clause.
Mr. Nicholas Baker : I have appeared before the takeover panel, and I have found it quick, cheap, efficient and independent. Opposition Members have argued in favour of tidiness and said that they do like such bodies to be regulated by different systems. I am not interested in tidiness for the sake of it in the regulation of companies. I want a system of regulation which works, and this does. It is flexible, and members of the Committee were presented with examples of the different changes that the takeover panel has accommodated in changing its rules. I
Column 1241will not go over them now, but it is impressive how, in 21 years, the panel has adapted to new problems that have arisen, and new situations that have to be met.
Furthermore, the panel has avoided litigation. I plead guilty to being a lawyer. The hon. Member for Norwich, South (Mr. Garrett) wants more work for lawyers. I came to Parliament to try to reduce the work for lawyers, but I have been unsuccessful. The takeover panel is a good example of how to avoid litigation by being non-statutory and not giving rise to litigation. This is an example of where the self-regulation system works, so let us allow it to do so and resist the new clause.
Mr. Redwood : The hon. Member for Gateshead, East (Ms Quin) provided two of the best reasons why the new clause should be resisted. She agreed that the director-general wants the takeover panel to stay as it is, and she accepted that it is doing good work. She recognised that freedom from tactical litigation is an important part of its method of operation. Its flexibility is what makes it so successful and widely accepted by all those participating in the market place for control and in need of rules and a guiding hand to ensure fair play between the parties. She asked me what had emerged from the panel working party looking at its operations. That work has led to proposals for rule changes which I hope will be welcomed on both sides of the House.
It has been requested that a model section 212 notice of disclosure should be issued, and I am happy to see that happen. It has been suggested that a cash alternative in a bid should be required if a company has bought 10 per cent. of the shares of the target company in the previous 12 months, rather than 15 per cent. That may help hon. Members who have been worried about certain kinds of bid using paper rather than cash.
There is another requirement that there should be no purchase above 30 per cent. of the shares until it is clear that the Secretary of State does not intend to refer the matter to the MMC. This shows the takeover panel at work responding to changing conditions, which it can do speedily and flexibly as a result of its structure. I am grateful to my hon. Friends the Members for Richmond and Barnes (Mr. Hanley) and for Dorset, North (Mr. Baker) for urging the House to reject the new clause, and I must do the same.
We have a successful panel system. It achieves the important objective of protecting shareholders' interests while maintaining an open and efficient market for takeovers. Compliance with the code is high and the panel continues to exercise authority over those it regulates. It is difficult to understand why we should tinker with a system that operates so effectively. It is not enough to be motivated by a vague desire to establish all regulation in statute. There must be a real and perceived need for improvement before legislation can be justified, and there is no such need in respect of the panel. Nor do I think that there is a need for the Secretary of State to have a role in appointing the members of the panel. It is already the position that the chairman, two deputy chairmen and one further individual are independent lay members appointed by the Governor of the Bank of England. The remaining member organisations represent the full range of those who have a interest in the proper market conduct of takeovers. We are
Column 1242continuing to discuss the effect of the takeover directive in Brussels. It would be premature for Parliament to be considering at the same time as the new clause the implementation of the directive as none of us has any idea what exactly the directive will provide. Its existence as a proposal is no argument for legislating before the final text is agreed. We are still at the Council working party stage. There is a long way to go before a satisfactory directive is finally agreed.
The new clause is potentially damaging in the effect that it might have on the status of the panel and the code. That is where I think that the hon. Member for Gateshead, East is in some difficulty. We regard the maintenance of the panel's current relationship with the courts as essential to the proper conduct of takeovers. As the code is not legally binding, the panel can be flexible in the setting and interpretation of its rules. It is also able to make rulings quickly during the course of takeovers. Broadly speaking, the panel is the final arbiter in its rulings. Takeovers cannot be delayed or frustrated through tactical litigation during their progress. The measure of discretion that is available to the panel affords that combination of flexibility and speed which enables it to be successful.
Mr. Cousins : I am trying to follow the Minister's argument. Would he regard the implications of the DTI inspector's report on the County NatWest affair, especially the recommendations for future legislation contained in paragraphs 10.35 and 16.41, as being potentially threatening to the integrity of the takeover panel as he is presenting it this evening?
Mr. Redwood : No, I do not find it so threatening. I think that the panel has proved its worth in many situations in recent years. I believe that the new clause could jeopardise the satisfactory operation of the panel and could lead to some legal difficulties. I urge the House to reject it.
Ms. Quin : At least one positive result of tabling the new clause and discussing the issue in Committee was to encourage the hon. Member for Richmond and Barnes (Mr. Hanley) to visit the takeover panel.
In tabling the new clause we were aware of the danger of promoting too much litigation, and I felt that we had responded to it, especially when I had introduced the clause to the House. We do not believe that everything in the garden is rosy in the way that has been described by the Minister. The fact that the panel has been carrying out an examination and has recommended some changes shows that certain changes were felt to be necessary. I refer again to the debate which took place in another place, during which specific concerns were expressed about the panel's ability to deal with takeovers in the special climate that we have seen develop over the past few years. For those reasons, I shall press the new clause to a Division.
Question put, That the clause be read a Second time :
The House divided : Ayes 22, Noes 115.
Division No. 358] [12.19 am
Barnes, Harry (Derbyshire NE)
Bennett, A. F. (D'nt'n & R'dish)
Carlile, Alex (Mont'g)
Fields, Terry (L'pool B G'n)
Garrett, John (Norwich South)
Hughes, John (Coventry NE)
Jones, Martyn (Clwyd S W)
Michie, Bill (Sheffield Heeley)
Powell, Ray (Ogmore)
Column 1243Quin, Ms Joyce
Ross, Ernie (Dundee W)
Steel, Rt Hon David
Wareing, Robert N.
Welsh, Michael (Doncaster N)
Tellers for the Ayes :
Mr. Frank Haynes and
Mr. Alan Meale.
Arnold, Jacques (Gravesham)
Baker, Nicholas (Dorset N)
Bennett, Nicholas (Pembroke)
Bowden, A (Brighton K'pto'n)
Brooke, Rt Hon Peter
Brown, Michael (Brigg & Cl't's)
Browne, John (Winchester)
Carlisle, John, (Luton N)
Carlisle, Kenneth (Lincoln)
Channon, Rt Hon Paul
Clark, Dr Michael (Rochford)
Clark, Sir W. (Croydon S)
Clarke, Rt Hon K. (Rushcliffe)
Coombs, Anthony (Wyre F'rest)
Davis, David (Boothferry)
Fenner, Dame Peggy
Forsyth, Michael (Stirling)
Fox, Sir Marcus
Glyn, Dr Alan
Goodson-Wickes, Dr Charles
Greenway, John (Ryedale)
Griffiths, Peter (Portsmouth N)
Hamilton, Hon Archie (Epsom)
Hamilton, Neil (Tatton)
Howarth, G. (Cannock & B'wd)
Hughes, Robert G. (Harrow W)
Hunt, Sir John (Ravensbourne)
Johnson Smith, Sir Geoffrey
McNair-Wilson, Sir Patrick
Martin, David (Portsmouth S)
Meyer, Sir Anthony
Mitchell, Sir David
Morris, M (N'hampton S)
Onslow, Rt Hon Cranley
Pattie, Rt Hon Sir Geoffrey
Peacock, Mrs Elizabeth
Porter, David (Waveney)
Powell, William (Corby)
Ridley, Rt Hon Nicholas
Sackville, Hon Tom
Smith, Tim (Beaconsfield)
Soames, Hon Nicholas
Taylor, John M (Solihull)
Taylor, Teddy (S'end E)
Thompson, D. (Calder Valley)
Townsend, Cyril D. (B'heath)
Twinn, Dr Ian
Waddington, Rt Hon David
Wardle, Charles (Bexhill)
Tellers for the Noes :
Mr. Greg Knight and
Mr. Irvine Patnick.
Question accordingly negatived.