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Mr. Andrew Mitchell: It would certainly appear that the generosity of spirit that characterised the tabling of the amendment, which was intended to give the House an opportunity to discuss the interesting new concept of community interest companies, has not attracted quite the support and interest from Members that might have been expected. The Minister and I have been left holding the baby, as it were—the CIC is an embryonic concept—in discussing the amendment this afternoon.
The Minister has answered several of the points I raised, and I am grateful to her for that. There were a couple of other points that she did not answer; her eagle-eyed officials will have noted them, and I shall be grateful if she could write to me about them, so that those outside the House who watch these matters and are interested in them can also see the answers.
My reservations about CICs are not about such companies per se. In isolation, CICs are fine, but when we consider them alongside all the other new changes—the industrial provident societies and the charitable incorporated organisation, currently included in the draft Charities Bill, which may, or may not, come before the House in the next Session—there is a daunting amount of confusion. The charitable and social enterprise sectors will find the proposals rather daunting, too.
In fact, the Minister tried to pre-empt my comments. In part of her speech, she was clearly responding to the points I made in Committee about the confusion that exists, although I was not especially trying to ventilate those issues today. She mentioned the fact that the DTI would shortly produce fact sheets on CICs. We welcome that and hope that they will be simple, clear and short; so I hope that the group of officials the Minister finds to draft them will be different from those who drafted the notes that accompanied the Bill.
I do not even remotely want to risk the wrath of the Minister's Parliamentary Private Secretary, the hon. Member for Edmonton (Mr. Love), by insulting
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industrial provident societies. Part of the reason why the CIC concept arose is because the Government did not consider that the aims of those societies, enshrined in the original legislation, were sufficiently broad. Indeed, part of my argument on Second Reading was that, with some tweaking of the industrial provident society legislation, it would be unnecessary to introduce this new form, but I accept that we have gone past that point.
I end on this note. By the middle of next year, we have the prospect that the social enterprise brand will be even less distinct than it is at present. We will have CICs with asset locks. There will be the CIO—unfortunately, a similar acronym—which must be a charity and thus cannot be a CIC, but could be a social enterprise. We will have industrial and provident societies, but they will be rebranded as community benefit societies, which can have an asset lock and may be charities. However, even though community benefit organisations—bencoms—may have exactly the same features as CICs and not be charities, they will not be able to call themselves CICs. Is there a need for that legal soup? That is my main concern, and it will be the main concern of other hon. Members.
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We want the proposals in part 2 to work—there is no question about that—and we all agree that they represent a way to improve and increase social enterprise. My warning to the Minister is that she may have to revisit the form of the CIC because, although nobly inspired, it may not achieve quite what she and her colleagues hope. I very much hope—my colleagues join me in this sentiment—that we are wrong in that, but I warn her that she may find that this is not the end of the legislation required to set up CICs, but merely the beginning of it. However, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2
Amendments made: No. 17, in page 60, line 16, at end insert—
'(9A) For the purposes of this section, information obtained by an investigator in consequence of the exercise of his powers under section 453A includes information obtained by a person accompanying the investigator in pursuance of subsection (4) of that section in consequence of that person's accompanying the investigator.'.
No. 18, in page 60, line 32, leave out paragraph 20 and insert—
'20 (1) Section 451A (disclosure of certain information) is amended as follows.
(2) For subsection (1) substitute—
"(1) This section applies to information obtained—
(a) under sections 434 to 446;
(b) by an inspector in consequence of the exercise of his powers under section 453A."
(3) After subsection (5) insert—
"(6) For the purposes of this section, information obtained by an inspector in consequence of the exercise of his powers under section 453A includes information obtained by a person
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accompanying the inspector in pursuance of subsection (4) of that section in consequence of that person's accompanying the inspector.
(7) The reference to an inspector in subsection (2)(b) above includes a reference to a person accompanying an inspector in pursuance of section 453A(4).".'.—[Jacqui Smith.]
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Jacqui Smith: I beg to move, That the Bill be now read the Third time.
This is a worthwhile and useful Bill. On Report and now on Third Reading, we have managed to retain if not the quantity, then the quality of those hon. Members who are present for the final stages. Of course, the process has enabled the Bill to be further improved during its passage through both Houses, and I am grateful to all hon. Members on both sides of the House who have contributed to the proceedings.
I am particularly grateful to the hon. Member for Old Bexley and Sidcup (Derek Conway) and my hon. Friend the Member for North-West Leicestershire (David Taylor), who jointly chaired the Standing Committee so effectively and expeditiously, and to all the right hon. and hon. Members who served on the Committee. In particular, the hon. Members for Sutton Coldfield (Mr. Mitchell) and for Weston-super-Mare (Brian Cotter) have done a very fair job in opposition, while recognising the important development that the Bill represents. I should also like to record my gratitude to my officials for the very hard work that they have done in preparing the Bill and during its progress.
Company law is important. It constitutes the legal framework for nearly 2 million businesses, from one-person companies to multinational giants—companies that create the prosperity, jobs and investment on which we all depend. Given that companies are so important and diverse, Governments must pay particular attention to company law. That is why we set up the independent company law review to prepare the way for the major overhaul of company law that we shall introduce as soon as parliamentary time allows. It is also why the Bill has been the subject of extensive consultation.
The provisions in part 1 on company accounting and audit stem largely from the work of the co-ordinating group on audit and accounting issues. As the hon. Member for Sutton Coldfield has said, that group was jointly chaired by my predecessor as Minister with responsibility for corporate governance—now the Under-Secretary of State for Health, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson)—and the then Financial Secretary, now the Minister for the Cabinet Office, my hon. Friend the Member for Bolton, West (Ruth Kelly). I pay tribute to their work in setting the important foundations on which parts of the Bill are built.
The co-ordinating group on audit and accounting issues included senior members of regulatory bodies, such as the Financial Services Authority and the Financial Reporting Council. It published interim and final reports, the latter in January 2003. Its conclusions were clear. It said that we have
"a sophisticated and effective system of oversight in this country, to the extent that the UK can claim, with some justification, to be at the forefront of best practice."
"Nonetheless we believe that change is required . . . Though the recent problems have arisen in the US, their effect has been international and they required a response in the UK. The actions we recommend in this Report will, we believe, make a real difference and ensure that there is justified confidence in financial reporting, accounting and the quality of independent audit."
As I explained on Second Reading, much of the action recommended did not require legislation. The audit firms made changes to some of their practices and the combined code on corporate governance was revised following reviews by Sir Derek Higgs and Sir Robert Smith. However, some of the recommendations did require legislation, so we brought forward the Bill to implement them as quickly as possible in advance of the main reform of company law to which I referred and to which we remain committed.
The Government consulted separately in March 2003 on proposals for the reform of the regulatory regime of the accountancy profession and the responses to that process helped to shape the Bill. We also consulted between December 2003 and March 2004 on director and auditor liability. The responses to that consultation prompted amendments to the Bill to allow companies to indemnify directors in certain circumstances and led to the further work that we are now doing with auditors, investors and others to reach agreement on the best way forward on the difficult issue of auditor liability, which I mentioned on Report.
Part 2 of the Bill, on community enterprise companies, has also been the subject of extensive consultation. As I said earlier, the idea of community interest companies was first proposed in the strategy unit's consultative report "Private action, public benefit", which was published in September 2002. The responses were overwhelmingly supportive. My Department, working with the Treasury and the Home Office, developed the concept further through a more detailed consultation that was launched in March 2003.
The preparation of the Bill has been open and transparent with much expert input. Moreover, it was thoroughly debated in another place and the Government tabled many amendments in response to the points made there. That was seen most evidently in clause 9, which we completely redrafted.
Given the consultation process and the successful form in which the Bill has reached this stage, its measures deserve to be put in place as quickly as possible, so I shall outline how we intend to implement them. We expect to commence the Bill in three stages. We plan to commence the powers in the Bill to make subordinate legislation, together with the provisions on finance and liability for the Financial Reporting Council, in January. We shall then make the necessary implementing regulations and orders and bring them into force in parallel with most of the substantive provisions in part 1—on auditors, accounts and reports, directors' liability and company investigations—in April 2005, with the remainder of provisions coming into force in July 2005.
The provisions on directors' liability close what some regard as a current loophole under which parent or subsidiary companies may provide to directors
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indemnities that would be void if provided by the company itself. We want to close that loophole in the period between Royal Assent and the commencement of the provisions on directors' liability. We thus intend to provide in the commencement order that existing contracts that are currently permitted, but will become prohibited under the Bill, will remain effective only if they were made before Royal Assent. As I said earlier, we also intend to make the regulations on community interest companies by April and to appoint the regulator by then. We expect the first community interest companies to be able to register in July next year. Companies and individuals are already contacting us and showing the enthusiasm about the opportunities provided by the new legal form that will no doubt exist throughout the whole social enterprise sector.
The Bill is a model of good legislative practice. It focuses on specific and clearly identified objectives and is the product of extensive consultation, both formal and informal. It is proportionate and will be good for business, good confidence in business and good for social enterprise. It deserves the support of all hon. Members, and I commend it to the House.
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