Industrial and Provident Societies Bill

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Mr. Chope: Will the hon. Gentleman expand on the position in relation to sections 61 to 65 and the subsequent sections relating to general offences by societies, officers, members, proceedings and costs, as they may impact disproportionately on the very small industrial and provident societies? He has been so helpful in explaining all the other provisions that it would be a pity not to have a full list.

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Mr. Thomas: I am happy to oblige the hon. Gentleman. The sections to which he referred allow any necessary changes to the general provisions on offences and proceedings, and interpretation from them, that would flow from other possible changes that I have already set out.

New clause 5(3)(b) would allow the amendment of the Industrial and Provident Societies Act 1967 to bring the procedures for registering charges against societies' assets into line with the equivalent procedure applicable to companies. The type of charges that have to be registered obviously differ. For societies, it is only floating charges, but for companies, certain other charges are included. The details are entered on the register.

If a statutory instrument were made to bring about that change, and the provisions of the I and P Acts were consistent with those that apply to companies, societies obtaining finance would be facilitated because lenders would feel more secure. Again, that provision has been debated for building societies as well as for companies. Section 104A of the Building Societies Act 1986, inserted by section 42 of the Building Societies Act 1997, allows that change to be made for building societies by statutory instrument.

On the provisions for accounts, new clause 5(3)(c) would allow the amendment of the Friendly and Industrial and Provident Societies Act 1968, which governs the accounts and auditing requirements for societies. The purpose of permitting statutory instruments to do that is to apply a stricter regime, requiring the publication of more information, to larger societies as to larger companies, and to permit small and medium-sized societies to enjoy the exemptions and limited obligations that apply to companies of such size.

The hon. Member for Christchurch rightly made a virtue of recognising the differences between industrial and provident societies. The changes to accounts and auditing would mirror company law provisions and rightly introduce a stricter regime for the larger societies that compete with large companies but allow smaller societies to benefit from exemptions and limited obligations. I refer again to the analogy of the rugby club. Why should one rugby club, which is a company, have less rigorous auditing requirements than a rugby club of similar size that is an industrial and provident society?

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These changes have also been considered for building societies. Part VIII of the Building Societies Act 1986 achieved that for building societies, and section 104(2)(c) of that Act allowed for further updating by statutory instrument as company law changed. The equivalent legislation for friendly societies is part VI of the Friendly Societies Act 1992, and section 102(2) of that Act permits updating by statutory instrument. I hope that that gives the additional information needed.

I shall summarise the case for accepting new clause 5 and for not allowing clause 3 to stand part of the Bill. There has been substantial modification to the areas where the Treasury can act. All these areas have already been considered by the House of Commons for company law reform. In six of the eight areas, changes to building societies or friendly societies have also been considered. I therefore suggest that the new clause is a sensible tightening of the provisions, reflecting the concerns aired on Second Reading.

Mr. Chope: I am grateful to the hon. Gentleman for setting out so clearly the detail of new clause 5, which is eminently preferable to the provisions that it would replace. It goes some way to addressing the concerns that I expressed on Second Reading. However, he has not addressed the concern that I flagged up in my amendment about the creation of new criminal offences. I cannot understand why we should contemplate the introduction of new criminal offences by secondary legislation that cannot be subject to amendment.

Mr. Thomas: I am grateful for the opportunity to clarify that point. Crucially, only criminal offences that have been created by company law can be considered for industrial and provident societies. I give the hon. Gentleman the analogy of a Royal British Legion club, or better still a rugby club, which is a company. Criminal offences can be brought against the directors of such a rugby club, and a similar sized rugby club that is an industrial and provident society would currently be subject to the same offences. It is sensible to ensure that there is like provision across different sections.

Mr. Chope: Is not the hon. Gentleman getting into the dangerous area of unintended consequences of secondary legislation for small players and participants? At present, we are all familiar with lobbying from individual parish councils, the members of which are suddenly finding that they are subject to the same requirements for declarations of financial interests and keeping a register as councillors and Members. I am receiving information from my parish council that that may be appropriate for many councillors, but not for very small parish councils.

Mr. Thomas: I cannot comment on the hon. Gentleman's example of parish councils because I do not represent an area with them.

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Company law addresses different sizes of companies, which are as wide and various as industrial problems, if not more so, by drawing distinctions between those sizes. New clause 5 would allow, where appropriate, a read-across of those sections of company law for industrial and provident societies. To return to the rugby club analogy, provisions, and potentially criminal offences, are already in place for the directors of a rugby club that is a company. Those criminal offences are appropriate for rugby clubs that are similar in size but happen to use different models of industrial and provident society. The hon. Gentleman's concern has already been addressed by sensible differences in company legislation. We are simply seeking to read-across.

Mr. Mark Francois (Rayleigh): I use the opportunity to place on record the number of parish councils in the Rayleigh constituency that are equally unimpressed by the severity of the proposals.

Mr. Chope rose—

The Chairman: Order. We are not debating parish councils because they do not come under the Bill.

Mr. Chope: It is not my intention to debate parish councils, Mr. McWilliam, but there is an obvious analogy with the effect of secondary legislation on such organisations. In that instance, a power was given in primary legislation to the Government to introduce model rules. The implication of that primary legislation was that the model rules would allow flexibility, but in the end they did. My concern about the new clause is how can we contemplate what the implications of suddenly being liable for a range of new criminal offences might be for certain officers and committee members of friendly societies? At present, they are not liable because they are not directors of companies. If the hon. Gentleman wants to turn all friendly societies and industrial and provident societies into companies, that could be achieved through legislation.

There are important distinctions between industrial and provident societies and companies. I do not share the hon. Gentleman's belief that assimilation between industrial and provident societies and companies is, by definition, a good thing. The retention of the differences may be valuable.

Mr. Thomas: I entirely agree that the retention of the key differences between industrial and provident society law and company law is essential. Under new clause 5, certain areas of the 1965 Act have been deliberately excluded from the Treasury's power to change by statutory instrument because they are fundamental to the difference of the industrial and provident society legal form.

I want to recognise the limited differences in eight areas that would be appropriate for inclusion in industrial and provident society law. I refer to the example that I used earlier of a rugby club director who is a property developer, and might want to buy up a couple of acres at the end of the rugby club's pitch that are worth £150,000. At present, if the rugby club

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is a company, the director of that transaction would have to be reported to, and agreed by, the members of the rugby club. That is not the situation for a rugby club that is an industrial and provident society. There is no transparency for the members of the industrial and provident society rugby club, although there is for the club that is a company.

I will give the hon. Member for Christchurch an example of a new criminal offence that we envisage under the statutory instrument. If the property director of the industrial and provident society rugby club buys the property and does not report to the members of the society that the asset sale has taken place, a criminal offence would have been committed. That offence already exists for the rugby club that is a company. We are simply allowing a read-across from company law in a relatively narrow way.

The Chairman: Order. I assume that the hon. Member for Christchurch resumed his seat and that the hon. Member for Harrow, West was making an intervention. If that was an intervention, it must rate as the longest in parliamentary history, and it was completely disorderly.

Mr. Chope: I am grateful, Mr. McWilliam, for your flexibility. However, I am sure that the Committee is also grateful to the hon. Member for Harrow, West for expanding at such great length on that matter.

The Minister cites the example of the rugby club that is registered as an industrial and provident society, compared with one that is registered as a company. If there is a need to assimilate the criminal law relating to such circumstances, we can debate that in the House. We can introduce and discuss primary legislation. What has happened today is a demonstration of the House at its best. We have been able to amend primary legislation. In less than an hour and a half, we have considered and focused debate on a series of amendments.

If we had, instead, been discussing a statutory instrument dealing with a range of issues, we could have had a one-and-a-half-hour debate with no opportunity to amend the legislation. The many constituents and organisations concerned about the consequence of the change in the law would effectively not be heard and hon. Members would not have the flexibility to adjust to points made in the debate.

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