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Mr. Stuart Bell: I declare an interest as a barrister at law, as an adviser to Ernst and Young and as a contributor to Accountancy Age.
Amendment No. 6 is technical; it may seem minor, but it is important for those firms affected by the provisions and by those with whom they do business. It will mean that the British branch of an oversea limited liability partnership will be able to continue to use a name that concludes with the words "limited liability partnership", "LLP" or their Welsh language equivalents. As drafted, the Bill would make it an offence for people to describe themselves as a limited liability partnership or LLP unless they were incorporated in this country.
The pace of change in the global village is such that, sometimes, the drafting of legislation has difficulty keeping up. That is the case for the Bill. Its present wording would cause problems for all those LLPs that are registered in another jurisdiction, but have a place of business in the UK. It is to the credit of the Government, of Ministers and of the Department of Trade and Industry that they realised that such problems would be caused. I hope that they will look benevolently on my amendment.
It is thought that, for example, there are at least 30 United States law firms with LLP status that have an office in London. Their LLP status shows why the Bill is welcome; it allows British firms to compete on the same basis. The presence of such firms in London demonstrates the dynamism of the international market for legal services.
It must be right, however, that all those doing business with firms whose partners have limited liability should be aware of that fact. The thrust of the policy behind the Bill is that a firm's status should be disclosed, together with the fact that its liability is limited. Under clause 14, the Secretary of State will have power to regulate overseas LLPs. Furthermore, the DTI has suggested that, in due course, it will hold consultations on appropriate provisions.
It would be quite inconsistent with such powers and with such an intention to forbid the use of the LLP title from the outset. Fortunately, the solution is simple; it is to be found in the amendment. The amendment ensures that an oversea LLP will not be prohibited from describing itself as such. A definition of "oversea limited liability partnership" is to be found in clause 14(3): it is
- a body incorporate or otherwise established outside Great Britain and having such connection with Great Britain, and such other features, as regulations may prescribe.
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The amendment reflects the on-the-ground reality of international law practice and recognises the realities of the globalised economy. I am grateful to the Minister and to his Department for acknowledging that. The amendment also serves the public interest by communicating to the public
the status of business organisations. In those circumstances, I hope that the Minister and the whole House will welcome the amendment and further its passage onto the statute book.
Mr. Burnett: I speak to amendments Nos. 2, 3 and 11, tabled by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) and his hon. Friends. As the hon. Gentleman was kind enough to point out during his speech, Liberal Democrat Members deprecate the use of regulation to introduce so many of the provisions under the Bill; such power is utterly unsatisfactory. Most pernicious of all are new regulations that could deny individuals their liberty. They should not be incorporated in law except through primary legislation. That must be clear to all Members of the House.
Dr. Howells: I shall deal with amendments Nos. 2, 3 and 11, before dealing separately with amendment No. 6, proposed by my hon. Friend the Member for Middlesbrough (Mr. Bell).
In Committee, the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) expressed concern: first, that we were intending to apply to members of an LLP existing criminal offences that apply to company directors and are punishable by imprisonment; and, secondly, that those offences were to be imposed by secondary legislation. He expressed further concern that the power in clause 17 was wide enough to allow the creation in regulations of new offences that may also be punishable by imprisonment.
If I understand the hon. Gentleman correctly, amendment No. 2 is intended to probe why we have not included in the Bill all the offences punishable by imprisonment. Any alternative interpretation does not seem feasible. It is our intention to include section 458 of the Companies Act 1985 in regulations alongside other offences, and I cannot imagine that there is anything so special about that section that it should appear in the Bill when other sections--such as section 450, which makes it an imprisonable offence to destroy, mutilate, falsify, or alter documents--remain in regulations. Nor can I imagine that the intention is to place section 458 in the Bill as the only provision punishable by imprisonment. How would we justify providing that, in some circumstances, members of an LLP would face a lesser penalty than directors of a company for the same offence?
Why, then, have we not put imprisonable offences in the Bill? Because we do not consider it appropriate. As I have made clear, our intention is that the members of an LLP should face the same penalties as members of a company; that seems a reasonable policy objective. The offences arise from various provisions throughout the companies and insolvency legislation. We see no reason to place those provisions in the Bill while others are confined to regulations. In considering the legislation, Parliament concluded that the level of penalty was appropriate to a body corporate with limited liability and to its directors. We see nothing about the limited liability partnership to suggest that application of those penalties to members of an LLP is inconsistent with Parliament's intentions.
I shall now discuss amendment No. 3. I realise that the intention is to restrict our powers to imprison members of a LLP to those offences that are contained at present in
the Companies Act 1985 and the Insolvency Act 1986. The hon. Member for Bognor Regis and Littlehampton would prefer it if, every time that the Government wanted to legislate to make an offence punishable by imprisonment, they could do so only by introducing primary legislation. That is a reasonable case to make.I shall now discuss amendment No. 11. It is clause 17 which provides that regulations may, in particular, make provisions for dealing with non-compliance with any of the regulations, including the creation of criminal offences. However, amendment No. 11 would remove that provision in its entirety.
The House of Lords Select Committee on Delegated Powers, which the hon. Gentleman mentioned, drew the attention of the other place to the powers to create offences by regulations, and invited it to consider whether the Bill should be amended to provide that such offence should be punishable, on summary conviction, by a fine.
We explained in our response that it was our intention to apply to limited liability partnerships the same offences applying to companies. We noted that the creation of new offences would be subject to affirmative resolution, and our intention to apply existing offences for companies in the first set of regulations would mean that these would also be subject to affirmative resolution.
While we have no intentions at this stage to apply to LLPs anything other than the offences applying to companies, the power is wide enough to create new offences, as I think that our response indicated quite clearly. We believe this to be a prudent provision for the future, and consistent with similar provisions in existing legislation.
I cannot agree that amendments Nos. 2, 3 or 11 are either appropriate or necessary. In addition, if we look at their practical effect, we can see that they would be highly problematic. Amendment No. 3 is to clause 15, and to regulations made under subsection (1) of that clause, yet it is the power in clause 14 which provides for the Government to make regulations on the insolvency and winding up of limited liability partnerships or oversea LLPs. Were we to accept these amendments, we would be prevented from making any provision for non-compliance with regulations on the insolvency and winding up of LLPs. That cannot be right.
I shall now discuss amendment No. 6. I am very grateful to my hon. Friend the Member for Middlesbrough for raising this point. Our attention has been drawn very recently to the inconsistency between the drafting of this paragraph, and our statement to the Select Committee on Trade and Industry in June 1999. We told that Committee that company legislation which requires that oversea companies prominently display the company's name and the country in which it is incorporated will also be applied to oversea-registered LLPs by regulation, and that this includes the requirement to display that information on letterheads and on all notices and other publications of the LLP. That remains our intention.
The question then arises as to why we need additionally to prevent the use of the phrase "limited liability partnership" at the end of the title of an oversea-registered LLP. That would cause particular difficulties for existing oversea LLPs, many of whom will be required by the legislation of the jurisdiction in which they are registered, to include those words.
We have concluded that it is unnecessary both to restrict the use of the words "limited liability partnership" in the title of oversea LLPs and to require that they display their place of registration on all their publications. The latter should prove wholly sufficient to notify clients that they are dealing with an oversea entity.
Therefore, while I ask the hon. Member for Bognor Regis and Littlehampton to withdraw amendment No. 2 and not to press amendments Nos. 3 and 11, I will agree to amendment No. 6, tabled by my hon. Friend the Member for Middlesbrough--a rare event indeed in the progress of the Bill.
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