House of Commons Hansard Debates for 29 Jun 1993

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resolution procedure is saying that Northern Ireland Members will not be allowed an opportunity to discuss legislation for Northern Ireland.

Why is it in the Bill? It already makes substantial provision for Northern Ireland and additional provisions for Northern Ireland were included in Committee. The theft clause applies to merely half a dozen clauses. It does not make sense.

The amendment would require an affirmative resolution procedure in the normal way. That would at least be an improvement on the situation, but it would still be open to all the objections that we have to the Order in Council procedure. The amendment does two further things. The clause mentions provisions that correspond to drug trafficking legislation. Amendment No. 8 deals with the definition of conspiracy.

In Committee, I asked the then Minister of State why we were not making equivalent legislation for Northern Ireland, which in all respects is the same as that of England and Wales, because the Bill changes the definition of conspiracy in the law of England and Wales and in the law of Scotland. The then Minister replied :

"In the way that these matters are conducted, I transmitted his worries"--

those are my worries, which I had expressed to the Minister several days before the sitting--

"to my right hon. and learned Friend the Secretary of State for Northern Ireland, who is considering these matters. I hope that the hon. Gentleman will understand that at this stage I cannot go beyond that statement."-- [ Official Report, Standing Committee B, 27 May 1993 ; c. 57.]

I had assumed that I would subsequently hear the result of the consideration from the Minister or the Secretary of State for Northern Ireland. A month has passed, but I have heard nothing. I repeat the question that I asked on 27 May : why are no provisions being made for changes in the law in Northern Ireland equivalent to part I ?

I suspect that the answer is that the Northern Ireland Office is having great difficulty in doing anything.

Rev. Martin Smyth : My hon. Friend's concern is shared by many Northern Ireland Members. The Order in Council procedure and the tardy response of the Northern Ireland Office are exasperating. The children's order should have been published no later than today, but despite a delay of 10 years, it is still coming.

Mr. Trimble : I thank my hon. Friend for that comment, which is apposite to the present situation. Children legislation for England and Wales was enacted four years ago, and the Black report was published 10 years ago. I know that, throughout his time in the House, my hon. Friend the Member for Belfast, South (Rev. Martin Smyth) has pressed the Northern Ireland Office to do something about the Black report, but more than 10 years later, and four years after the enactment of equivalent legislation for England and Wales, nothing has been done.

That ties in with my second point about amendment No. 8, which would oblige the Northern Ireland Office to lay before the House an Order in Council identical to provisions in the Bill, which consequently would not require any detailed work and preparation, within three months.

There is no reason why that cannot be done. The Bill's passage through the House has taken some time. The draftsman has had plenty of time to consider its

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provisions. No great drafting is necessary to work out the equivalent Northern Ireland legislation. I am sure that it should be ready, yet it is not.

Similar problems have arisen before. Hon. Members may remember that I raised this matter on the Adjournment some time ago and cited a number of examples of where the Northern Ireland Office had not been able to get things done within a reasonable time. There had been delays of up to a year, when it had merely to copy the equivalent legislation for England and Wales.

The amendment has three purposes--to ensure, first, that we have a proper debate on Northern Ireland legislation ; secondly, that we have equivalent legislation to part I on conspiracy to keep our law in step with that, in England and Wales ; and, thirdly, that the Order in Council be laid within three months. Those are reasonable proposals. As the Minister has acknowledged a couple of times this evening, I have been reasonable, and I hope that he will now reciprocate.

Mr. Peter Bottomley (Eltham) : I support the spirit of what the hon. Member for Upper Bann (Mr. Trimble) has said : where there is no difference between Northern Ireland law and the law in England and Wales, it makes sense to keep in step. In the case of some areas of law in which Northern Ireland had different legislation, one could understand a delay. I hope that Ministers will adopt the hon. Gentleman's practical and sensible proposals.

10.30 pm

Mr. Maclean : To fulfil the United Kingdom's obligation to implement the terms of the European Communities directive on money laundering, it is essential that provisions corresponding to clauses 16 and 18 be enacted for Northern Ireland as quickly as possible after the Bill becomes law. My right hon. and learned Friend the Secretary of State for Northern Ireland intends to bring forward an Order in Council under the negative resolution procedure to achieve that end and to enact provisions in respect of other serious crime, similar to those dealt with in clauses 28 to 31.

With regard to part I and the rest of the Bill, my right hon. and learned Friend will be considering the extent to which other provisions ought to be reflected in Northern Ireland legislation and will bring forward proposals in due course. I can do no better than communicate to my right hon. and learned Friend the hon. Gentleman's exhortation that the legislation be introduced as soon as possible. However, I cannot accept the hon. Gentleman's condition that there should be placed on other Ministers and myself a duty to lay legislation within a certain time. I ask him to accept the assurance of our good intention. We wish to take this step as soon as possible. I hope that the good spirit in which the hon. Gentleman spoke in Standing Committee and in which he has spoken in the House today will be continued by his withdrawal of the amendment.

Mr. Trimble : I must first correct a very serious mistake on the part of the Minister, who, I appreciate, is a comparative newcomer to the awful shambles created by the way in which the House of Commons deals with Northern Ireland business. We are not talking here about secondary legislation. Orders in Council made under this procedure will be primary legislation.

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In addition, the Minister's case is contradictory. He said that legislation complying with the European directive must be enacted as soon as possible, yet he cannot accept a requirement that this be done within three months.

But there is another point. As the European directive requires us to keep in step, the obvious step to take is to make provision in the Bill, and thereby avoid any worry about time limits. The Bill contains provisions relating to Scotland, which has a separate statute book. There would be no difficulty in including, after clauses relating to England and Wales and to Scotland, a provision relating to Northern Ireland. All that is required is a little effort on the part of the draftsmen and a little imagination on the part of Ministers, as well as a little willingness to exercise legislative powers responsibly.

I should like to direct the Minister's attention to a very valuable report published a couple of weeks ago by the Standing Advisory Commission on Human Rights. I refer in particular to the appendix, in which the author, setting out the case in great detail, says that, in effect, the squalid procedure adopted by the Government amounts to their saying that they are not required to exercise the legislative function in respect of Northern Ireland either fairly or willingly and responsibly.

The Minister may not be fully aware of it, but the implication of what he is saying is that he will not make the effort to handle Northern Ireland business fairly, willingly or responsibly. As for what he said about part I, he is repeating what his predecessor said more than a month ago, which was that he would be writing to the Secretary of State for Northern Ireland, who would presumably communicate with me and my right hon. and hon. Friends. I wonder when the Secretary of State will make the effort to read the communications and reply to us.

Nevertheless, as I said in relation to an earlier amendment-- [Interruption.] I hear the blandishments and suggestions of Conservative Members that we press the amendment to a vote. If they can assure me that they will support us, we shall willingly give them the opportunity to do so. Will they rise and confirm that? I see, however, that it is nothing but words. I have no desire to keep the House longer than necessary, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made : No. 38, new schedule--

Schedule

--Extensions and Exemptions

The Drug Trafficking Offences Act 1986 (c.32)

1. The following section shall be inserted in the Drug Trafficking Offences Act 1986, after section 36A--

"Extension of certain offences to Crown servants and exemptions for regulators etc.

36B.--(1) The Secretary of State may by regulations provide that, in such circumstances as may be prescribed, sections 23A, 24, 26B, 26C and 31 of this Act shall apply to such persons in the public service of the Crown, or such categories of person in that service, as may be prescribed.

(2) Section 26B of this Act shall not apply to--

(a) any person designated by regulations made by the Secretary of State for the purpose of this paragraph ; or

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(b) in such circumstances as may be prescribed, any person who falls within such category of person as may be prescribed for the purpose of this paragraph.

(3) The Secretary of State may designate, for the purpose of paragraph (a) of subsection (2) above, any person appearing to him to be performing regulatory, supervisory, investigative or registration functions.

(4) The categories of person prescribed by the Secretary of State, for the purpose of paragraph (b) of subsection (2) above, shall be such categories of person connected with the performance by any designated person of regulatory, supervisory, investigative or registration functions as he considers it appropriate to prescribe. (5) In this section--

"the Crown" includes the Crown in right of Her Majesty's Government in Northern Ireland ; and

"prescribed" means prescribed by regulations made by the Secretary of State.

(6) The power to make regulations under this section shall be exercisable by statutory instrument.

(7) Any such instrument shall be subject to annulment in pursuance of a resolution of either House of Parliament.".

The Criminal Justice (Scotland) Act 1987 (c.41)

2. The same section as is inserted in the Act of 1986 by paragraph 1 shall be inserted in the Criminal Justice (Scotland) Act 1987, after section 46, as section 46A, but with the substitution-- (a) in subsection (1), of "sections 42 to 43B of this Act" for "sections 23A, 24, 26B, 26C and 31 of this Act" ; and

(b) in subsection (2), of "43A" for "26B".

The Criminal Justice Act 1988 (c.33)

3. The same section as is inserted in the Act of 1986 by paragraph 1 shall be inserted in the Criminal Justice Act 1988, after section 93F, as section 93G, but with--

(a) the substitution in subsection (1), of "sections 93A, 93B, 93C(2) and 93D above" for "sections 23A, 24, 26B, 26C and 31 of this Act" ; and

(b) the omission of subsections (2) to (4).

The Prevention of Terrorism (Temporary Provisions) Act 1989 (c.4)

4. The same section as is inserted in the Act of 1986 by paragraph 1 shall be inserted in the Prevention of Terrorism (Temporary Provisions) Act 1989, immediately after section 19, as section 19A, but with the substitution--

(a) in subsection (1), of "sections 9 to 11, 17 and 18A above" for "sections 23A, 24, 26B, 26C and 31 of this Act" ; and

(b) in subsection (2), of "18A" for "26B".

The Criminal Justice (International Co-operation) Act 1990 (c.5) 5. The same section as is inserted in the Act of 1986 by paragraph 1 shall be inserted in the Criminal Justice (International Co-operation) Act 1990, after section 23, as section 23A, but with-- (a) the substitution in subsection (1), of "section 14(2) above" for "sections 23A, 24, 26B, 26C and 31 of this Act" ; and (b) the omission of subsections (2) to (4).

The Northern Ireland (Emergency Provisions) Act 1991 (c.24) 6. The same section as is inserted in the Act of 1986 by paragraph 1 shall be inserted in the Northern Ireland (Emergency Provisions) Act 1991, after section 55, as section 55A, but with the substitution--

(a) in subsection (1), of "sections 53, 54(2) to (6) and 54A above" for "sections 23A, 24, 26B, 26C and 31 of this Act" ; and (

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(b) in subsection (2), of "54A" for "26B".'. -- [Mr. Maclean.]

Schedule 3

Financial penalties

Amendment made : No. 25, in page 88, line 47, leave out from 1989)' to the end of line 48 and insert

(a) section 18(1) above, and section 35(4)(a) of the 1973 Act, shall not apply ; and

(b) section 18(3) above shall apply as if the words from "including" to the end were omitted.'.-- [Mr. Maclean.]

Schedule 4

Consequential Amendments

Amendments made : No. 26, in page 93, line 45, leave out section 93F' and insert sections 93F and 93G'.

No. 27, in page 94, line 24, after 54A' insert , 55A'.-- [Mr. Maclean.]

Bill read the Third time, and passed, with amendments.

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Shares (Disclosure of Interest)

10.36 pm

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Neil Hamilton) : I beg to move

That the draft Disclosure of Interests in Shares (Amendment) Regulations 1993, which were laid before this House on 27th May, be approved.

The motion stands in the name of my right hon. Friend the President of the Board of Trade, whom I am sure we all wish a speedy return to the House.

The regulations will, if Parliament approves them, be made under section 210A of the Companies Act 1985. They will amend part VI of the 1985 Act, which contains the law on the disclosure of interests in the shares of public companies.

The basic rule in part VI is that anyone who acquires or disposes of an interest of 3 per cent. or more in the vote-bearing share capital of a public company must disclose that fact to the company. In addition, the stock exchange rules--the so-called yellow book--require listed companies to inform the exchange of disclosures made to it under Part VI ; the information is then made public. The regulations are needed to take account of the EC Directive on the information to be published when a major holding in a listed company is acquired or disposed of--known as the major shareholdings directive. Our domestic legislation and the directive share a common purpose--greater transparency concerning concentrations of interests in companies. The directive will introduce transparency in other member states comparable to that which exists already in the United Kingdom. We supported it for that reason, and the directive has already been implemented in nine member states.

In most respects, our own legislation is stricter than the directive ; the threshold for disclosure is lower--3 per cent. against 10 per cent. ; the time limit for disclosure is shorter--two days against seven ; our criterion for disclosure is that someone has an interest of any kind in the shares, whereas the directive requires disclosure only where there is control of voting rights ; and our domestic legislation applies to all public companies whereas the directive applies only to listed companies. Since the directive is a "minimum standards" measure, not a harmonisation measure, it is open to us to keep our stricter legislation, and we intend to do so. There are certain respects in which the directive goes further than our domestic legislation. In particular, it contains fewer exemptions from the obligation to disclose. We must bring those aspects of our law into line with the directive, and that is the purpose of the regulations. But we have taken the opportunity to make some other improvements not related to the directive. The regulations take the form of amendments to the present legislation, and in two cases, entire sections of the 1985 Act have been replaced.

The organisations most affected by the regulations are likely to be the banks and the major institutional investors. Those bodies often hold interests in the shares of individual companies in various parts of their organisations. They maintain procedures for aggregating those interests, so as to be able to disclose them under the legislation when required to do so. The removal of some current exemptions from disclosure will inevitably increase the regulatory burden on them to some extent, but we have

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minimised the increase through close consultation with those affected and have been able to reduce the burden of compliance in other ways.

I shall explain the contents of the regulations in more detail. They are somewhat complicated, mainly because we have gone to some length to preserve, so far as permitted under the directive, the substance of the exemptions provided for under our present law. I hope that the House will bear with me.

First, it has been possible, consistently with the directive, to preserve-- with modifications--the current exemptions for interests held by market makers and for interests held by banks and others by way of security. But whereas the current exemptions cover only British firms in those categories, the regulations extend the exemptions to their counterparts in other member states and the market-maker exemption has been extended to market makers in derivatives.

The relevant provisions are to be found in regulation 8, which substitutes a new section 209 for the present version. The new exemption for a security interest is in the new section 209, subsections (1)(c) and (2) and that for a market maker is in the new section 209, subsections (8) and (9).

Secondly, there are a number of categories of interest which are now exempt from disclosure for which the directive provides no specific exemption, but which will not normally be caught by the directive because they do not as a rule exercise voting rights. Those include interests of trustees, including unit trust trustees ; custodians ; a personal representative of an estate ; unit holders in unit trusts ; beneficiaries under a retirement benefits scheme ; and the interests of a takeover bidder whose offer has not yet succeeded or failed.

All those categories remain exempt from disclosure so long as they do not exercise or control voting rights. This "voting rights proviso" is in subsections (5) to (7) of section 209. In addition, we have widened the exemptions for trustees and custodians so that they benefit all persons in the relevant categories. The existing exemptions are limited by reference to United Kingdom law or to establishment in the EC. That change will benefit international groups active in the London market without compromising the purpose of the legislation.

Thirdly, there are the categories of interest which now enjoy exemptions but for which no equivalent exemption is provided in the directive and which do normally exercise voting rights. Those include two major groups of interest those of investment managers and unit trust managers, and a miscellaneous class of more specialised interests listed in the new section 209(10). For those categories, we cannot maintain a complete exemption, but we can minimise the burden by requiring disclosure only from the directive threshold of 10 per cent. instead of from the domestic threshold of 3 per cent., and that is what we propose.

The relevant provision is to be found in regulation 4, which replaces the present section 199(2) of the Act with a new and inevitably more complex set of provisions. I draw particular attention to the new section 199(2A)(d). This will ensure, among other things, that parent companies

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can take advantage of the 10 per cent. threshold in respect of interests held through their subsidiaries, in the same way as they may do so in respect of interests held directly.

The interests to which I referred as miscellaneous will retain a complete exemption as regards unlisted companies and are most unlikely ever to reach the 10 per cent. threshold in listed companies. So, for practical purposes, they are unlikely ever to be subject to disclosure.

Unit trust managers have considered themselves to be exempt under the present legislation, although that is, I am advised, not altogether free from doubt. There is no corresponding exemption under the directive, and the regulations will, therefore, require them to disclose from the 10 per cent. threshold. That requirement will apply to interests in both listed and unlisted companies. Disclosure of interests in unlisted companies is not a directive requirement, but unit trust managers are active and important investors and there is no good reason for a complete exemption for their interests in unlisted companies.

Investment managers now enjoy exemptiI understand that very few investment managers fall into that category and that the present exemption may therefore be something of a dead letter. The regulations will put investment managers in exactly the same position as unit trust managers, which, I am sure, is logical.

The main provisions of the regulations are, as I have explained, to be found in regulations 4 and 8. Regulation 1 provides for a 60-day delay between the making of the regulations and their entry into force. That is to allow those affected a reasonable time to adapt their internal reporting systems so as to comply with the new requirements.

Regulations 2, 3, 5, 6 and 7 contain technical and consequential provisions ; regulation 9 contains a complete new set of definitions for the interpretation of part VI of the Companies Act ; regulation 10 revokes two statutory instruments now superseded by provisions to be inserted by the regulations into the body of the Act ; and regulation 11 makes transitional provisions so that once the regulations enter into force, any interests which become disclosable because of changes in the law will have to be disclosed within two days.

I commend the regulations to the House.

10.45 pm

Mr. Stuart Bell (Middlesbrough) : I am grateful to the Minister for taking us through the regulations in the way that he did. He mentioned the President of the Board of Trade. Opposition Members extended to the right hon. Gentleman our best wishes when he took ill. We welcome him back to our country and wish him a speedy recovery.

Ten years ago, we heard the former Minister, Alan Clark, present his first affirmative order. He was criticised at that time by the hon. Member for Lancaster (Dame E. Kellett-Bowman) for going too slowly, he was criticised by my hon. Friend the Member for Birmingham, Ladywood (Ms Short) for going to quickly, and he was then criticised further by my hon. and learned Friend the Member for Leicester, West (Mr. Janner), who could not understand what he was saying. Tonight, the Minister took us through the intricacies of the regulations in such a way that their

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purpose and the amendments are clear and, of course, we note that he is referring to amendments of the Companies Act 1985.

I have with me a copy of the Act and of the handbook on the 1985 and 1989 legislation. It is not surprising that the Minister has set himself the task of cutting through the red tape that those tomes have engendered and we wish him well in that task. He gave himself a deadline of July, which is approaching fast, and we look forward to hearing how he is progressing with cutting that red tape. Before he fell ill, the President of the Board of Trade said at a pharmaceutical dinner that the Department had carved through 3,500 regulations, but he had to admit that they were duplicate regulations, the same as 3,500 others on the statute book, so the Government still had a long way to go.

The regulations touch on a variety of amendments, some coming from European legislation and some being tidying-up measures. Although we want to cut through red tape and get rid of the regulations on small and medium-sized companies, we want an appropriate framework of corporate governance and regulation to cover the very shareholders to whom the regulations apply and also other shareholders.

Opposition Members embrace the principle of the share-owning democracy. We want to protect the small shareholder as well as the large company, subject to the terms of the regulations. With the Companies Acts that we are amending, a climate was created which set loose an orgy of profligacy in the City--an orgy of creative accountancy and of laxness which has culminated in a series of awesome corporate failures, the likes of which we hope never to see again.

The hon. Member for Norfolk, North-West (Mr. Bellingham), for whom I have high regard, mentioned last week that he was one of 61,000 small shareholders who lost their money, if not their shirts, on Asil Nadir's Polly Peck. Those small shareholders were seduced--if that is the right word--to part with their money in a dubious enterprise when the true owner, Asil Nadir, who had 24 per cent. of the shares, transferred £300 million from Polly Peck International to companies such as Unipac, operating not out of Northern Cyprus but, believe it or not, out of Jersey.

It is a fact, of course, that many of the small investors would not have been covered by these regulations tonight, for many of the investments were made by fund managers and they would be exempted from declaring their interest, as I understand it, by the amendment to section 199(2)(a).

Asil Nadir used the money to purchase his own shares, which kept the share price high, so that he could borrow more money--the share price stood at 418p in August 1990--but he also used it to finance his life style and, as we know, for donations to Conservative central office.

It is not my intention to broaden the debate, but to stay within the guidelines of the regulations. As we know, the declaration of political contributions is listed with charitable gifts under paragraphs 3, 4 and 5 of schedule 7 of the Companies Act 1985, which we are amending today. No political contributions ever appeared in the balance sheets of Polly Peck, however, not surprisingly they have not surfaced, so far as anyone can tell, in the financial statements of Unipac.

We are, of course, dealing with the changes that the regulations make in relation to the disclosure of interests in shares, and we have to ask ourselves where, in accordance with these regulations and this Companies

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