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4 Apr 2003 : Column 1180—continued
10.30 am
The 21-day period arose because of a habit that developed in Lancashire. The north-west has a fine tradition of co-operatives, and I am fortunate enough to represent a seat in Cheshire, whose co-operatives are combined in the United Co-op. The co-operatives in Lancashire had a thing called wakes week, when, in the old days, almost everyone used to go off on holiday. Sometimes that week's holiday would extend to a fortnight. Some companies were choosing to give notice of these meetings just as people were going on holiday, so the 21-day provision was introduced to ensure that people had got back from their holiday and had the opportunity to see the notice. Otherwise these things could all have been nicely stitched up while they were away. That is the historical explanation, and it shows that there was a good reason for the provision. The normal practice of taking a fortnight's holiday has not changed much since then, so there is a reasonable practical basis for the period being not less than 21 days.
Mr. Levitt: I thank the hon. Gentleman for giving way. I recall that the outcome of the 1970 general election might have been different if it had not been held in wakes week. He talked about sending out letters; in this day and age, would he regard the posting of a notice on a website, or the sending of e-mails to members of a meeting, as suitable ways of announcing a meeting?
Mr. O'Brien: One could get exceptionally excited about what constitutes a proper notice. It might be
appropriate to ask the promoter of the Bill to bear that question in mind, so that he can answer it later. It is a well established practice that notices are either written or communicated by advertisement. I have not been involved in these technical matters in recent years, but I would be surprised if some form of letter—sent either by fax, e-mail or posting on a website—were not deemed to be a proper notice. That would seem to be a proper expectation, but all sorts of regulations and laws will be developed as our experience of these matters increases.The 21-day provision is important because, when dealing with these serious matters, time must also be allowed in which to marshal the advice as well as the people. These matters can often involve quite technical legal and accounting issues, and it is important, for example, if people have an objection to what is taking place and wish to exercise their democratic right, that they have the chance to take proper legal advice on the matter. That can be difficult because they often have to go on a fundraising exercise first, to ensure that they can afford the legal bill. That happens in relation to popular objections to planning applications just as it does to members of a co-operative society who might feel that they have not been properly served by those in executive charge. Those are remote circumstances, but we must give people every opportunity, in the process that we enact, to get the best possible advice.
We must also bear in mind that the 21-day provision will provide the opportunity for a number of meetings to take place in which the matter could be resolved in a rather less flamboyant way. That is often the best way to resolve these issues, and the meeting could always be withdrawn if they had been resolved in a satisfactory manner. Sometimes that can be better for the society. Seven or 14 days would not be enough. I do not think it necessary to have a maximum period, because there would be serious objections from those who wanted to exercise their rights if the matter were not resolved with sufficient dispatch. There is nothing like adverse publicity to make people act rather fast. I am happy to add to some of the arguments that the hon. Member for South Derbyshire has already made in support of the amendment, and I am happy to give our support to it at the same time.
Mr. Gareth Thomas: I rise simply to ask the Minister to clarify the point that I made in interventions on my hon. Friend the Member for South Derbyshire (Mr. Todd) and the hon. Member for Eddisbury (Mr. O'Brien) about why a 21-day notice period is so important in regard to a special resolution but not to other ordinary resolutions or to what is surely the most important resolution that can come before a co-operative or a community benefit society, namely, a resolution to transform the organisation into a company or some other corporate structure. I should say that I do not intend to go to the barricades over this issue. Clearly, that would be daft. I recognise already that my point is not accepted by my hon. Friend the Member for South Derbyshire or by the Conservative Front Bench. I fear that it would probably not be accepted by my own Front Bench either. Nevertheless, I must ask whether this is Treasury prudence gone too far, whether a lawyer has run amok while giving advice to my hon. Friend the member for
South Derbyshire, or whether there is some other genuine reason, which I have missed, that a 21-day notice period is so important in this instance yet not in the instance of any other general meeting or resolution process for a co-operative.
Mr. Allan: The hon. Member for South Derbyshire (Mr. Todd) made a persuasive case for his amendment in the face of some vigorous cross-examination, which he was bold enough to invite on himself at the beginning of his speech. He seems to be adopting a belt and braces approach, in that the rules of a society should anyway allow a decent period of notice to be given before a meeting to discuss an issue of such importance, but some may well not do so. He is trying to prevent a board from bouncing the membership into accepting an action that it has taken that is outside its terms of reference, and it is entirely proper that he should do so.
Comparisons have been drawn with the period of time allowed for a company to hold such a meeting. A better comparison would be with the time that we allow for an election to take place. The hon. Gentleman made the point very effectively that it is the democratic nature of the society that is important, and that there has to be a decent period of time for the democratic debate to take place. I accept that that supports the point that was made about demutualisation—
Mr. Allan: I give way to the hon. Gentleman.
Mr. Thomas: I was merely trying to make a full round by taking on the Liberal Democrat Front Bench on this issue at the same time as every other Front Bench. If the hon. Gentleman fears that a board might seek to bounce members on this issue, why might it not seek to do so on a demutualisation issue? That was certainly a feature of building society demutualisations in the 1980s. Why should there be a 21-day notice period for this issue and not for others?
Mr. Allan: Speaking personally, I have every sympathy with the hon. Gentleman's argument. Sadly, we are not able to debate demutualisation today. Instead, we are debating the more specific requirements of the Bill. In that context, the hon. Member for Eddisbury (Mr. O'Brien) made the important point that this provision relates to a very important special resolution because it deals with contracts made with third parties and with powers being exercised ultra vires. He built a persuasive case for the 21-day notice period.
Mr. Stephen O'Brien: The hon. Gentleman rightly points out that this measure is important—to answer the question posed by the hon. Member for Harrow, West (Mr. Thomas)—because it affects third parties, not because they would find that their contract had been voided, but because the executives could have a personal liability. In demutualisation cases, those who have an interest determine the interest for themselves and each other. There is, therefore, a difference between a third-party interest and a mutual interest.
Mr. Allan: That point is well made. It is open to the membership of an organisation to change its own rules
so that any demutualisation vote would be able to take place only after a specified period of time. The fact that one can set one's own rules covers many of the potential difficulties that have been mentioned today—the way in which notices are sent out, the conduct of the campaign of notification ahead of a meeting, and the issue of a maximum notice period, for example. One would hope that all those issues would be covered by the general rules of the society. Indeed, one would hope that it would not have been registered as a society if its rules did not cover such issues. The membership should ultimately have the power to take action if they feel that the board is behaving inappropriately by, for example, causing excessive delay. The essential point, however, which has been well put, is that we are dealing with third-party contracts and liability of board members. That means that there is a reason to specify the minimum period, and 21 days seems entirely appropriate to allow the democratic debate that must take place before such a meeting should occur.As I read the proposal, I imagined the scenario at a special meeting when the vote had been lost. What would occur in a society then? It could face meltdown, although we would have set out rules to allow the process to take place properly. That is outside the scope of today's debate, but, all those thresholds having been set, a board would clearly have to be careful in terms of undertaking the procedure. There is no sense in the clause that we are trying to give the green light to people saying, "Go outside your powers and simply go through the procedure to get support." That would be risky, so we are trying to make the procedure as empowering as possible for the members so that they do not feel, at any point, that they have been bounced through it.
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