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Mr. Forth: Does my hon. Friend know whether that company, or another in a similar position, could make political donations before it was dissolved, which also could not be tracked? Does he not think that that is also an important consideration?

Mr. Chope: That is an incredibly important consideration. That abuse--I submit that that is what it was--having been uncovered, it is incumbent on the Government to take immediate action to prevent it from happening again. As my right hon. Friend implied, the more we are concerned with transparency in politics and donations to political parties, the more important it is to prevent people from setting up such a company and using it as a means to change public opinion with the support of large sums of money. As I said, £1 million was involved, although some press reports suggest that the sum was larger.

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2.45 pm

We do not know how many donations were given or what was received, if anything, for the £5 subscriptions. All that we know is that no creditor complained, which meant that the company was able to disappear in the circumstances that I described.

It is worth reminding ourselves that People's Trust Ltd. was not a small, insignificant company. It must have had a turnover of more than £1 million, because it had a starting donation of £1 million from Mr. Fayed. It also had prominent public figures on its board. Apart from Mr. Fayed, the board contained Mr. Michael Cole, Mr. Fayed's then press officer; Mr. Andrew Neil, a former editor of The Sunday Times and still a distinguished journalist; and Mr. Robert Fallowfield, one of Mr. Fayed's accountants. Lord Alton of Liverpool was also on the board, as was Mr. Alex Carlile, a former hon. and learned Member of the House. Hon. Members will recall that none other than Mr. Carlile was the first to raise in the House the story in The Guardian involving the then hon. Member for Tatton. He did so on a point of order at about 10 pm when he had already been tipped off that The Guardian would run the story the next day, thereby enabling all the other newspapers to carry the story. He provided a service for--

Mr. Deputy Speaker: Order. The hon. Gentleman is straying wide of the mark. He has given details, at some length, about one company and its director, which is reasonable, but I hope that he will relate his remarks rather more precisely to the new clause.

Mr. Chope: I certainly will, Mr. Deputy Speaker. To conclude the point, the company secretary was a Mr. Christopher Graffius, a former researcher for Lord Alton.

Although I have not given examples of other companies, I submit that the case that I have described is sufficient to warrant Government intervention and the incorporation of the new clause in the Bill. One of the main responsibilities of directors, along with the privilege of incorporation, is the duty of full disclosure. Failure to deliver company accounts is a grave breach of directors' duty to make a full disclosure.

The Minister for Competition and Consumer Affairs responded to my argument in Standing Committee. He said that section 5 of the Company Directors Disqualification Act 1986

provides that a director who is prosecuted for not filing accounts can be disqualified on the basis of that single offence.--[Official Report, Standing Committee B, 7 November 2000; c. 124.]

In fairness to him, it then became apparent that the advice given to him by his officials, which led him to make that statement, was incorrect. He admitted that he was wrong and that, under the present company law, it is not possible to prosecute a director for a single failure to file accounts, however grave or mischievous that failure might be. He agreed that it might be better to table an amendment to section 3 of the 1986 Act. That is what the new clause represents. I hope that the Minister will agree to the new clause in its revised form, because it meets his concerns. There was general concern in Committee that the loophole needs to be closed.

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Mr. John Burnett (Torridge and West Devon): Hear, hear.

Mr. Chope: I am glad that the hon. Gentleman agrees. I formulated the new clause in such a precise way largely because of suggestions that he made in Committee. I am grateful for his advice and assistance.

Amendment No. 14 arises from debate in Committee--at column 120, on 7 November 2000--on amendments Nos. 5, 7 and 52, which would have made an agreed statement of facts a precondition of acceptance by the Secretary of State of a disqualification undertaking.

The Minister, in reply to that debate, said that it was for the Secretary of State to decide to accept the undertaking, and that it would be unduly restrictive and might lead to delay and increased costs if the Secretary of State could accept an undertaking only when there was an agreed statement of facts.

Amendment No. 14 deals with all the Minister's concerns, and thereby confines and limits the requirement to the production of a summary statement that will be a matter of public record. I hope that the Minister will agree that that is one way of partly satisfying concerns that have been expressed by the Select Committee on Trade and Industry and many other people. Does the hon. Gentleman also agree that the basis on which a disqualification order is made--or an undertaking for disqualification is accepted--should be set out in reasonably full terms, so that it is available to the public and on the public record should a director subsequently seek a variation in his disqualification undertaking or face disciplinary proceedings in any professional body. I hope that he will accept amendment No. 14, too.

Both new clauses and amendment No. 14 are developments from the very useful debate that we had in Committee. I hope that they will find favour with the Government.

Mr. Burnett: Liberal Democrat Members give qualified support to new clause 1 and complete support to new clause 2.

The hon. Member for Christchurch (Mr. Chope) was right to ask why a person who is unfit to run a limited company should be able, either alone or in partnership, to run a business. There is much force in that argument. I have examined in some detail the Company Directors Disqualification Act 1986, and my view is that, in most cases of disqualification under that Act--especially when they relate to criminal offences and the test of beyond all reasonable doubt has been met--the hon. Gentleman is correct in that assertion. Why should such individuals be able to run a service business either on their own account or in partnership with others?

I have nevertheless re-examined in detail section 3 of the 1986 Act. As the hon. Member for Christchurch said, in Committee, we discussed at length section 3, which could be said to be fairly draconian in its treatment of directors. It deals with persistent defaults, which it states can be

conclusively proved by showing that in the five years ending with the date of the application he--

the director--

has been adjudged guilty (whether or not on the same occasion) of three or more defaults in relation to those provisions.

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I know that there are other tests, but that one is pretty tough on directors--albeit rightly. Nevertheless, I do not think that, as a result of disqualification under section 3 of the 1986 Act, a person should be disabled from, for example, starting his own small business perhaps as a shopkeeper or a window cleaner.

As I said, Liberal Democrat Members give qualified support to new clause 1. Although I believe--for the reasons that I have given--that its terms are draconian and go a little too far, the new clause certainly has merit in dealing with those who have been found guilty of a criminal offence. I hope that the Minister will consider that.

New clause 2 has been tabled to overcome the problem with the word "persistent" in section 3 of the 1986 Act. I believe that, in some cases, the failure to deliver to the Registrar of Companies just one set of accounts can be extremely important and have far-reaching consequences. I therefore support the new clause, which is drawn wisely and subtly.

New clause 2 contains two tests, whereas initially, in Committee, we had only one--which was, as the hon. Member for Christchurch said, draconian. The first of the tests is that a person

has been a director of a company which was struck off the register of companies by reason of its failure to deliver company accounts.

The second important test which we are now able to debate is whether the person's

conduct as a director of that company makes him unfit to be concerned in the management of a company.

There are now, correctly, two hurdles. New clause 2 is sensible, and Liberal Democrat Members strongly support it.

Mr. John Butterfill (Bournemouth, West): I support my hon. Friend the Member for Christchurch (Mr. Chope) on both new clauses. I accept and very much agree with what he said about the spatchcock nature of particular proposals in the Bill.

My hon. Friend has been a distinguished member of the Trade and Industry Committee, on which I serve, and which considered the draft Bill in some detail towards the end of last year. In our report issued in December 1999 we broadly welcomed the general thrust of the draft Bill's proposals, but we felt very much that, on some matters, it was somewhat premature to legislate. We particularly felt that, as a general review of insolvency procedures was in progress, it might have been better to leave everything until we could have a more comprehensive Bill.

Nevertheless, the Committee felt that the draft Bill raised some important issues and that, on balance, it was probably right to go ahead with some restricted amendments, subject to various safeguards that we suggested. Although I regret to say that some of those safeguards have not appeared in the Bill, if I am able to catch the eye of the occupant of the Chair, I shall deal specifically with some of them in a later debate. Overall, however, it is right to introduce--as my hon. Friend the Member for Christchurch is seeking to do--the new clauses and amendments. It is very important that the public should be protected.

I must declare a personal position. I was a director of Maples Group Ltd, which went into liquidation a few years ago. Perhaps my experience as a non-executive

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director of that company will be helpful to the House. I was invited to join the board of Maples Group Ltd--the parent company of Maples Stores plc, the furniture retailer--by CinVen, which is the venture capital arm of the coal industry nominees who administer the coal industry pension fund.

At the time, the directors of CinVen said to me, "We have a company that we backed in a management buy-out and is well-advanced. Although it is not yet profitable, it is very much nearing profit, and it will be near market levels. We want to strengthen the board before the company is floated. Would you join the board, with your experience of general corporate governance and your particular experience of property matters?" I am a chartered surveyor, and the company's main assets were probably the shops that it owned or on which it had leases.

On that basis, I agreed to join the board of the company. Within a few months of doing so, I became very concerned about the figures that the executive directors were giving the board, because the cashflow figures did not match the trading figures that they were reporting to us.

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