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31 Jan 2003 : Column 1121—continued

Huw Irranca-Davies (Ogmore): I wish the proposal well. Does my hon. Friend agree that a bencom with a regional or local aspiration should consider making that explicit in its terms of reference to ensure that the locked assets go back into the community?

Mr. Todd: I agree. It is critical at a society's inception that members carefully consider its then purpose and any future developments.

Mr. Gareth Thomas: Before my hon. Friend moves on to clauses 2 and 3, will he acknowledge the interest of the Women's Institute Country Markets, another body that sponsors industrial and provident societies, in clause 1? As he acknowledged, we could not get the provision through last year. Will he join me in paying tribute to Ruislip women's institute country market, an excellent organisation to which some of my constituents belong?

Mr. Todd: Clearly, my hon. Friend represents a colourful and thriving community, which contains many examples of industrial and provident societies. I join him in applauding women's institute country markets. A much more distinguished Member than me would counsel me not to give offence to the National Federation of Women's Institutes in any circumstances.

Clauses 2 and 3 would effect some modest changes in the way in which industrial and provident society law reflects company law. Clause 2 would bring industrial and provident society law into line with specific aspects of company law. The proposed change was effected for companies in 1989 and subsequently for building societies and friendly societies. Hon. Members will recognise its relevance in other transactions that relate, for example, to local government.

The proposed assimilation with company law relates to sections 35, 35A and 35B of the Companies Act 1985. Those sections are for the benefit of third parties that deal with companies in good faith and do not need to be concerned about whether, under a company's constitution, it has the capacity to enter into a transaction or whether the power of the board of directors to bind a company is subject to any limits. Such matters are important for third parties that enter into substantial transactions with societies, including trading and financial transactions.

For example, it would be a considerable bar to trading if a society had a track record of trading just outside its constitutional limits, thus placing the third

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party at risk of not having its contract honoured. The directors of such a society could say, "We made an error in following our constitution and we have therefore moved ultra vires." Clause 2 is intended to deal with that circumstance.

Company law reforms in 1972 and 1989 ensured that no question about the company's power to conduct specific business that was not mentioned in its constitution's "objects clause", or about how and whether power was given to the company's agents, could affect transactions as far as outsiders were concerned. It would be straightforward to apply the same solution to the problem of the capacity of an industrial and provident society or its agents to be questioned. I believe that the change would be consensual and mere common sense.

The only safeguard that an industrial and provident society can currently provide to anyone who trades with it is to offer a copy of its constitution and say, "Please read that if you have any concerns about whether we're trading with you legally." Clearly, that is a long-winded and deterring approach to doing business.

Mr. Love: Is my hon. Friend attracted to the recommendation in the recent strategy unit report that we should do away with the term "industrial and provident societies" because it is redolent of their Victorian origins, and change it to "co-operatives and community benefit societies"? Has he thought about including that in the Bill?

Mr. Todd: My hon. Friend will note that the Bill's title is precisely that. Until it completes all its stages and amendments have been discussed, the words "industrial and provident societies" remain relevant in English law. Although I am an admirer of the Victorian heritage, the terminology is off-putting. The strategy unit report refers to poor brand image. The brand of industrial and provident societies is scarcely enticing in a modern world.

Clause 3 relates essentially to the formalities of conducting a society's business. It proposes that societies execute documents in the same way as companies. At present, the method is old fashioned and cumbersome, requiring the application of the society seal to documents. The proposed assimilation with company law would introduce the ability for societies to execute documents by signature of officers rather than by seal. The relevant provisions of the Companies Act 1985 are—it tells us something about English law that there is such a profusion of them—sections 36, 36A, 36B, 36C, 37, 38, 39 and 41. The clause will assimilate the necessary company law provisions and it represents a gain by levelling the playing field. I am aware of one society that has a board sub-committee devoted entirely to the authorisation of the application of the society seal. Following a society name change, it was necessary laboriously to approve the use of the seal on many hundreds of documents. A similar company would have simply been able to execute the documents by signature of an authorised officer.

If the mutual sector is to develop, further sensible protection and reform of the rules will be needed. Many

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recognise the need to develop social enterprises. In the Prime Minister's foreword to "Private Action, Public Benefit", he drew attention to the

I shall not make wild claims for the Bill. It does not solve all the problems of the industrial and provident society model, but it does, I hope, provide an opportunity to make significant progress. The Bill seeks to strengthen our co-operatives and community benefit societies, and I hope that the House gives it a Second Reading.

10.13 am

Mr. Stephen O'Brien (Eddisbury): I draw attention to my entry in the Register of Members' Interests as the parliamentary adviser to the Institute of Chartered Secretaries and Administrators. As a former group company secretary of a FTSE 100 company, many of the issues raised touch on my direct experiences. I am also an honorary member, along with my spouse, of the Winsford Constitutional and Conservative club, which is the type of society covered by the Bill.

I congratulate the hon. Member for South Derbyshire (Mr. Todd) for doing so well in this Session's ballot and for endeavouring to reform an aspect of the law that will bring real benefit to communities across the country. I know that the hon. Gentleman has stated his desire to present a useful Bill that can be passed into law. This Bill is a good example of an hon. Member using the pole position granted through the ballot process to demonstrate that Parliament has a crucial role in aiding our local communities.

It is a particular pleasure to follow the hon. Gentleman. I noted that as my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) raised a point of order, the hon. Member for Bolsover (Mr. Skinner) suggested from a sedentary position that he and some other hon. Members should be stranded in Cambridge. The hon. Member for South Derbyshire and I shared years together at Emmanuel college, Cambridge. It is of interest, therefore, that although we are on different sides of the House, we can join forces today, just as we did in those days.

The hon. Gentleman's introductory history lesson, based on information gleaned from his father about his grandfather's experience in the House, was an interesting description of the way in which MPs' roles have changed over the years. I applaud him for thinking carefully about introducing a Bill that is permissive rather than restrictive. That is especially important in our day and age. The temptation in recent years has been to introduce Bills that curtail people's freedoms rather than to make them freer. That is why this Bill is to be welcomed. I was also extremely amused by, and rightly supportive of, the hon. Gentleman's sensitivity not to stray too far into falling on the wrong side of the WI country markets, raised by the hon. Member for Harrow, West (Mr. Thomas). The country markets in my constituency do an outstanding and critical community job.

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The Bill is closely defined in its scope, which is the right way to use private Member's Bills. It is clear that the hon. Member for South Derbyshire has worked closely with the co-operative societies. I extend my best wishes to them for helping to produce a timely, justifiable and broadly sensible Bill to sit within what is broadly defined as the voluntary sector. Although that term might give rise to some confusion, it is important to recognise that the historical context of the Bill, as set out by the hon. Gentleman, belongs to that fine tradition of people wanting to be part of the voluntary self-help mutually beneficial culture that served our country well for decades and, it could be argued, centuries.

The charitable and wider not-for-profit sector covered by the Bill is both economically important and extremely diverse. It encompasses organisations of widely varying scale, purposes and structure. It is estimated that there are between 500,000 and 750,000 organisations in the charitable and wider not-for-profit sector in the United Kingdom. My right hon. and hon. Friends and I believe in encouraging that immense resource to be used to the benefit of all, especially, although not exclusively, the vulnerable in society.

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