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‘(1) Subject to the provisions of this section, a company may make an application under this section to the Secretary of State where the condition in subsection (2) is satisfied.
(2) The condition referred to in subsection (1) above is that the company considers that the availability for inspection by members of the public of particulars of the names and usual residential or business addresses of the members of the company creates, or (if an order is not made under this section) is likely to create, a serious risk that a member of the company or a person who lives with or is an employee of a member of the company will be subjected to violence or intimidation (“a serious risk”).
(3) Where, on an application made by a company under this section, the Secretary of State is satisfied that the availability for inspection by members of the public of the particulars of that company’s members’ usual residential addresses creates or (if an order is not made under this section) is likely to create a serious risk that a member, or a person who lives with him, or an employee of his will be subjected to violence, intimidation or criminal activity, he shall make an order under this section (“a company member’s confidentiality order”) in relation to the company.
(4) Where the Secretary of State is not satisfied under subsection (3) he shall dismiss the application.
(5) At any time when a company member’s confidentiality order is in force in relation to a company, the name and address of any individual in the register of members of the company that is the subject of the confidentiality order, shall not be disclosed to any person who may request either company or Companies House disclosure of such names and addresses save in prescribed circumstances.
(6) The Secretary of State shall give the applicant notice of his decision under subsection (3) or (4); and a notice under this subsection shall be given within such period and shall contain such information as may be prescribed.
(7) At any time when a company member’s confidentiality order is in force in relation to a company, the company must pass on to all of its members any lawful message or documentation that a member of the company or a member of the public wishes to send to the company’s members.
(8) The company may charge a reasonable fee for sending a message or documentation under subsection (7).
(9) Where the company has become bound to act under subsection (7) and has failed to so act, an offence is committed by—
(b) every officer of the company who is in default.
(10) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(11) In the case of any such refusal or default as set out in subsection (9) the court may by order compel an immediate inspection of the register or, as the case may be, direct that a copy of the register be sent to the person to whom the undertaking was made.
(12) The Secretary of State may at any time revoke a company member’s confidentiality order if he is satisfied that such conditions as may be prescribed are satisfied.’.— [Mr. Djanogly.]
Brought up, and read the First time.
Mr. Djanogly: I beg to move, That the clause be read a Second time.
Madam Deputy Speaker: With this it will be convenient to discuss the following:
New clause 17— Names and addresses of members of companies: individual application—
‘(1) Subject to the provisions of this section, an individual may make an application under this section to the Secretary of State where the condition in subsection (2) is satisfied.
(2) The condition referred to in subsection (1) above is that the individual—
(a) is or proposes to become a member of a relevant company; and
(b) considers that the availability for inspection by members of the public of particulars of his name and usual residential or business address creates, or (if an order is not made under this section) is likely to create, a serious risk that he or a person who lives with him or an employee of his will be subjected to violence, intimidation or criminal activity (“a serious risk”).
(3) Where, on an application made by an individual under this section, the Secretary of State is satisfied that the availability for inspection by members of the public of the particulars of the individual’s usual residential address creates or (if an order is not made under this section) is likely to create a serious risk that the individual, or a person who lives with him, or an employee of his will be subjected to violence, intimidation or criminal activity, he shall make an order under this section (“an individual member’s confidentiality order”) in relation to him.
(4) Where the Secretary of State is not satisfied under subsection (3) he shall dismiss the application.
(5) At any time when an individual member’s confidentiality order is in force in relation to an individual the name and address of the individual in the register of members of the company which is the subject of the confidentiality order shall not be disclosed to any person who may request either company or Companies House disclosure of such name and address save in prescribed circumstances.
(6) The Secretary of State shall give the applicant notice of his decision under subsection (3) or (4); and a notice under this subsection shall be given within such period and shall contain such information as may be prescribed.
(7) At any time when an individual member’s confidentiality order is in force in relation to a company, the company must pass on to all of its members any lawful message or documentation that a member of the company or a member of the public wishes to send to the company’s members.
(8) The company may charge a reasonable fee for sending a message or documentation under subsection (7).
(9) Where the company has become bound to act under subsection (7) and has failed to so act, an offence is committed by—
(b) every officer of the company who is in default.
(10) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(11) In the case of any such refusal or default as set out in subsection (9) the court may by order compel an immediate inspection of the register or, as the case may be, direct that a copy of the register be sent to the person to whom the undertaking was made.
(12) The Secretary of State may at any time revoke an individual member’s confidentiality order if he is satisfied that such conditions as may be prescribed are satisfied.’.
Amendment No. 758, in clause 113, page 51, line 22 , at end insert
‘to whom the beneficial rights and obligations of membership belong’.
Amendment No. 383, in clause 116, page 53, line 35 , at end insert—
‘(5) Notwithstanding the foregoing provisions of this section, a shareholder in a quoted or publicly traded company who is an individual shall have the right to require that his home address is not set out in the register of members available for inspection or in the copy of the register supplied by the company pursuant to a request, nor in any record of the register of members supplied to the Registrar of Companies for the public file maintained by the Registrar.’.
Amendment No. 384, in clause 117, page 53, line 38, leave out ‘five’ and insert ‘fifteen’.
Amendment No. 683, in clause 9, page 4, line 28, at end insert—
‘(d) a statement setting out and verifying the identity of the initial shareholders.’.
Mr. Djanogly: I congratulate my hon. Friend the Member for Putney (Justine Greening) on her succinct and expert introduction at the Dispatch Box. She gave an excellent presentation and her experience showed through in the quality of her remarks.
We move on to the rights of shareholders and non-members to inspect and require copies of the register of members of a company. Although we believe that the Government have made good progress on protecting shareholders, we would like the Bill to be bolstered further. The initial Bill that was presented in the House of Lords contained little on the matter. However, after several thousand shareholders in GlaxoSmithKline, the pharmaceutical group, started to receive threatening letters from animal rights terrorists, Lord Sainsbury, on direct orders from above and urged on by a chorus of vocal peers, suddenly promised on Report to reconsider the Government’s position before Third Reading in the Lords, when amendments were indeed tabled and slipped into the Bill.
3.30 pm
We have been demanding increased protection for shareholders for several years. The Government rejected amendments that we tabled to the Serious Organised Crime and Police Bill that would have achieved that, so we are pleased that the matter is being addressed. My hon. Friends and the public wish to ensure that shareholders are protected from violence and intimidation.
Paul Farrelly (Newcastle-under-Lyme) (Lab): We have been round the houses on this in our six or seven weeks in Committee. I understand that the hon. Gentleman is interested in the matter as a constituency issue, principally because of Huntingdon Life Sciences. Does he agree that he is perhaps not the right person to front this debate—maybe the hon. Member for Putney (Justine Greening) should be doing so—because he is in danger of confusing a constituency problem about which he is rightly worried with measures that would have a broad-ranging effect on companies legislation affecting business as a whole, to which I hope to refer later?
Mr. Djanogly:
I am pleased that the hon. Gentleman has given me the opportunity to put on record the fact that, although Huntingdon Life Sciences is in my constituency and I have been following its ongoing problems with animal rights terrorists, that introduction to the subject has probably given me an expertise that other hon. Members might not have, not least because I have seen at first hand what can happen and have spoken to the police and the companies affected—not only HLS, but dozens of its suppliers. I would say that my experience helps my cause, rather than gives me a problem. I appreciate that the hon. Gentleman was an investigative journalist in his previous career and some
of his remarks might come from that perspective. However, I would not say that it is any worse to make them because of that. Perhaps that balances out the situation.
In any event, this is about more than protecting companies that practice animal testing, although that is the matter on which I have direct experience, as I explained to the hon. Gentleman. This is about the kind of environment that we offer for people who invest in business in this country. Just as the protection of the person must be a priority for the Government, the protection of companies and their shareholders must also be a priority. Without that protection, business will simply pick up and go.
I point out, with some irony, that several speakers in the Lords debate and several journalists have made out that the GSK letter incident was a new and dangerous development. That was not the case. Attacks on shareholders have become an established theme of anti-corporate activism. Although direct action, sometimes slipping into terrorist activity, is emanating from animal rights activists today, the same methods could be used tomorrow by other groups. If drug manufacturers, animal testing companies and furriers are affected now, meat importers, road builders, handbag manufacturers, furniture makers or mining companies could be affected tomorrow.
I emphasise the fact that countering criminal activity using shareholders’ registers goes much further than dealing with extremists. Another significant example of such activity is the growth of foreign-based so-called boiler rooms. They harvest the personal details of individuals from members’ registers and approach those shareholders to try to persuade them to buy investments that are often worthless, regularly by implying that there is a connection with the company concerned.
A court case recently revealed that fraudsters had been using registers to steal shares from overseas investors. The Financial Times reported in May that the company secretary of Balfour Beatty wrote to the company’s 20,000 shareholders after receiving a significant number of complaints. I received a separate letter from Balfour Beatty that outlined the company’s concerns about the situation. Diageo wrote to 110,000 shareholders after similar calls were made to its members.
Mr. Douglas Hogg (Sleaford and North Hykeham) (Con): I have a great deal of sympathy with the point that my hon. Friend is making, but I have a reservation about new clause 16. As far as I can tell, if the Secretary of State decided to grant the request of the applicant, there would be no process whereby his decision could be reviewed, say by judicial review. Does my hon. Friend think that, if new clause 16 were accepted, it should have an appeal mechanism against the decision of the Secretary of State?
Mr. Djanogly: My right hon. and learned Friend makes his important point well, although it is related not to new clause 16, but to the clause per se.
Paul Farrelly:
I was going to raise exactly the same point that the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg) made so well. The hon. Member for Huntingdon (Mr. Djanogly)
is speaking rather more widely than to just new clauses 16 and 17 because he is addressing amendment No. 383. That amendment would make the new clauses redundant because it would confer on any shareholder the right to remove his name from the share register that is made publicly available.
Mr. Djanogly: The hon. Gentleman pre-empts me because I have some way to go before I get on to amendment No. 383. The amendment was proposed by an outside body as an alternative suggestion. I thought that it was worth tabling the amendment so that we could hear the Minister’s response to it, given that it is a sensible suggestion. However, it does not tally with our approach in the new clauses, which I will support.
I thank the Institute of Chartered Secretaries and Administrators for the action that it is taking on boiler rooms. The institute recently announced that it had produced a warning notice to be used by companies to raise awareness of boiler rooms. The notice can be distributed to shareholders with other mailings or via websites. We feel that that is a positive move against operators of boiler rooms.
We need to appreciate that many, if not most, of the companies affected by the problem are far from large companies such as GSK. They are usually small family businesses for which a civil injunction costing thousands of pounds against illegality or terror would often be unaffordable. More to the point, such companies are saying, “Is it not for the Government to defend us against terrorist activity, rather than our having to pay for an injunction?”
Where do shareholders fit into all this? I have tried to explain that the debate is multifaceted and highly interconnected. Activists will often look for weak points—the points at which with the minimum number of people they can inflict the maximum damage, be that to property, people or the company’s economic prospects. Many companies will fold under such a concerted and multi-directional attack, but some companies that believe in what they are doing and refuse to be scared by intimidation will trade on—companies such as HLS and Montpelier, the company that is building the Oxford laboratories. In both those cases, the crisis was sparked by terrorists attacking the companies’ shareholders via the register of members. At that point, HLS, unable to survive as a company registered in this country because of the hate mail and death threats being sent to its shareholders, repatriated itself to Maryland, USA, and relisted on the US NASDAQ exchange. Why Maryland? Because in that state only holders of 5 per cent. or more of a company’s shares have to be disclosed, and then only to other shareholders. We are not advocating that approach for the United Kingdom, but the case does show what will happen if we do not get on top of the problem: other companies will leave the country.
To amplify the importance of the issue, let us examine the case of Montpelier in Oxford. The company bravely resisted the attacks of the terrorists, but finally stopped work when its shareholders started to be threatened and attacked. As a relatively small listed company, its share price was directly affected by that activity, so a direct link could be made between access to a register of members and impending disaster for the company. Roughly the same tactics were used in
the terrorist attack on GSK shareholders as in the HLS and Montpelier cases. The letters to GSK shareholders stated:
“The only way to hold GlaxoSmithKline to it's PROMISE”—
“is to target it's financial vulnerability. We are therefore giving you this opportunity to sell your shares in GlaxoSmithKline. If you have any doubts over the effectiveness of this action then keep a close eye on the GSK share price and watch it plummet.”
If we do not get on top of this problem, we will see many more Huntingdon Life Sciences—many more companies repatriating. We can have whatever tax regime we like; if a company’s shareholders are going to be attacked physically, the company will be forced to consider moving. To put the pharmaceutical sector alone into perspective, it contributes more than £6.5 billion a year to Britain’s GDP and £12 billion in exports, and employs 80,000 people directly and 250,000 indirectly. The issue is a serious one for this country.
I have attempted to explain the need to protect shareholders’ details, so how should we now proceed? My first point is that, as things stand, a coach and horses can be driven through the Bill’s provisions, because, in addition to the current register of members being accessible, copies of the register of members as at the return date need to be filed annually with the annual return, which is a publicly accessible document. In Committee in the Lords, Ministers said that they would consider introducing regulations to change that requirement, but why not simply add the relevant provisions to the Bill? We tabled an amendment for that purpose, which we hope to move when—or if—we reach part 25, which deals with annual returns, in the latter part of tomorrow.
Since that time, there has been Government confusion on the issue. In Committee, the Minister for Industry and the Regions suggested that our proposal on annual returns was too restrictive, but the Secretary of State has said that he intends to use regulations to ensure that a company need supply only details of shareholdings of 5 per cent. or more in its annual return. I shall be grateful if the Solicitor-General makes clear the Government’s intentions.
The formula chosen by the Government is for the company to initiate an application to the court if it objects to a request to see the register. One problem that we have identified is that, although it may be possible for a large company to instruct lawyers—probably solicitors and barristers—to take the matter to court within five days to comply with the Bill’s provisions, although it would probably be pushed to do so, it would be unrealistic to expect a smaller company to keep to such a tight and inconvenient timetable. That is why we tabled amendment No. 384, which would increase from five days to 15 the period in which a request that a person be deemed unsuitable to receive the register must be made.
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