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Government amendments Nos. 771 and 772.

No. 360, in page 128, line 22, after ‘company’, insert ‘not having a secretary’.

No. 361, in page 128, line 32, at end insert—

‘(3) In the event that a company is not entitled to the exemption conferred by section 485(1) (small companies conditions for exemption from audit) in respect of its last completed financial year, the company shall be required to appoint a company secretary within three months of the date that the directors first became aware that such exemption would not be available to the company.

(4) In the event that subsection (3) shall apply, the relevant company shall be required to have a company secretary until such time as the company satisfies the conditions contained in subsections (2) or (3) of section 485.’.

No. 363, in clause 272, page 128, line 36, leave out ‘public’.

No. 364, page 128, line 36, at end insert ‘section 270 or’.

Government amendment No. 773.

No. 365, in clause 274, page 130, line 7, leave out ‘public company’ and insert

Government amendments Nos. 366, 367, 776, 368, 304, 441, 369, 370 and 728.

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No. 24, in clause 281, page 132, line 29, at beginning insert—

‘( ) An authorised corporate signatory is a person who, by virtue of his office, is authorised to sign documents of any description on behalf of the company.’.

No. 371, page 132, line 31, leave out ‘in the case of a public company,’.

No. 25, page 132, line 34, leave out subsection (2).

Government amendment No. 729.

No. 372, in clause 282, page 133, line 3, leave out ‘, in the case of a public company,’.

Government amendments Nos. 373 and 731.

No. 374, in clause 284, page 133, line 28, after ‘company,’, insert—

‘(aa) in the case of a private company which has appointed a company secretary, that its secretary (or any of its joint secretaries) are also authorised signatories in relation to the company,’.

Government amendment No. 732.

No. 375, in clause 285, page 134, line 7, at end insert

Government amendments Nos. 733, 734, 723 to 727, 781, 735, 782, 783, 736, 737, 764, 765, 721, 766, 722 and 767 to 769.

James Brokenshire: Let me first declare my interest in the business under discussion. Although I am a non-practising solicitor, before entering this House I advised on company law for some 14 years. I therefore draw hon. Members’ attention to the entries appearing by my name in the Register of Members’ Interests.

I should also like to put it on record that this is the first time that I have had the opportunity to address the House from the Front Bench. It is an honour and a privilege to be able to debate several key aspects of this very important Bill on behalf of Her Majesty’s Opposition. My only regret is that the timetabling means that we do not have as much time as we would like to debate some of the issues.

The amendments relate to parts 12 and 13 and the continuing position of company secretaries within the corporate environment. Before speaking to our amendments, I want to say how much we welcome the about-turn that the Government have made on this issue. The amendments tabled by the Government give proper statutory recognition to company secretaries in private companies. Conservative Members have argued steadfastly that the company secretary performs a crucial role in ensuring good corporate governance and legal compliance, as well as fulfilling several important administrative tasks within the company. Secretaries are also officers of the company with the legal liabilities that that brings with it, and have a recognised ability to sign documents on behalf of the company.

Until now, the Government have said that there is no need to recognise private company secretaries in the Bill. While they implemented greater flexibility on the need for private companies to have a secretary, they argued quite forcefully that there was no need to keep any records of such persons if the secretary was appointed by a private company, or for third parties to have any automatic ability to check whether somebody
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was a company secretary. The Government said that if the secretary was appointed and there was a need for such a secretary to sign documents on behalf of the company, they would have to be appointed as an authorised signatory under part 13. During our debate in Standing Committee, the Solicitor-General did not appear to have any concerns about the approach that was being taken, telling me:

The problems of implementation and the effect of the Government’s proposals have forced them to revise their whole stance. The Institute of Chartered Secretaries and Administrators set out the position well, saying:

The Solicitor-General rose—

James Brokenshire: I will try to allow some time for the Solicitor-General to respond, but we are short of time, as he will realise.

Not only did the revised arrangements cause problems, but the CBI suggested that the authorised signatory route would

Mr. Stephen O'Brien (Eddisbury) (Con): As a member of ICSA, as declared in the register, I welcome the Government’s about-turn and hope that they can now see their way to making the final changes to ensure that we have the final agreement.

James Brokenshire: I entirely endorse my hon. Friend’s comments.

Our only point of difference with the Government relates to the need for good corporate governance and a secretary’s role in that, and whether it should apply at the plc level or lower down the scale. We still argue firmly that it should be the latter, but I do not have time to develop those arguments further.

The Solicitor-General: I welcome the hon. Member for Hornchurch (James Brokenshire) to the Front Bench. However, in the amendment, he confuses the whole subject of private companies and tries to introduce new criteria. He should trust private companies to make the decisions—we do not need the nanny state to interfere. The amendment shows the Conservatives trying to impose more regulation on companies when it is not needed. We should reject it.

Amendment negatived.

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It being half-past Five o’clock, Mr. Deputy Speaker, put forthwith the Questions necessary for the disposal of the business to be concluded at that hour, pursuant to Order, [17 October].

Question, That amendments Nos. 771 to 773, 366, 261 to 264, 367, 776, 368, 304, 441, 369, 370, 728, 729, 373, 731 to 734, 207, 723 to 726, 347, 727 be made, that new clause 7 be brought up, read the First and Second time, and added to the Bill and that amendments Nos. 474 to 476, 510, 477, 478, 511, 479, 512, 513, 145 to 150, 208 and 151 be made, put and agreed to.

New Clause 81

Enforcement of directors’ liabilities by shareholder action

‘(1) Any liability of a director under section 376 is enforceable—

(a) in the case of a liability of a director of a company to that company, by proceedings brought under this section in the name of the company by an authorised group of its members;

(b) in the case of a liability of a director of a holding company to a subsidiary, by proceedings brought under this section in the name of the subsidiary by—

(i) an authorised group of members of the subsidiary, or

(ii) an authorised group of members of the holding company.

(2) This is in addition to the right of the company to which the liability is owed to bring proceedings itself to enforce the liability.

(3) An “authorised group” of members of a company means—

(a) the holders of not less than 5% in nominal value of the company’s issued share capital,

(b) if the company is not limited by shares, not less than 5% of its members, or

(c) not less than 50 of the company’s members.

(4) The right to bring proceedings under this section is subject to the provisions of section (Enforcement of directors’ liabilities by shareholder action: supplementary provisions).

(5) Nothing in this section affects any right of a member of a company to bring or continue proceedings under Part 11 (derivative claims or proceedings).’.— [Margaret Hodge.]

Brought up, and read the First time.

Margaret Hodge: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following:

Government new clause 82— Enforcement of directors’ liabilities by shareholder action: supplementary.

Government new clause 83— Trade unions.

New clause 76— Expenditure on lobbying—

‘(1) A company must not in any financial year incur expenditure on lobbying activity in excess of the limit then in force, unless the expenditure has been authorised by a resolution of the members of the company.

(2) The provisions of sections 372(2) to (5), 372(6)(b), 372(7), 373(1), 373(2), 373(4), 373(6), 373(7), 374 and 375 to 379 shall apply to a resolution under this section.

(3) The Secretary of State shall have power to make regulations, which shall be subject to the affirmative resolution procedure, to—

(a) set the limit, and

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(b) exempt, to any extent the Secretary of State sees fit, expenditure incurred by companies in responding to requests for information initiated by governmental or parliamentary bodies,

but if the Secretary of State fails to set the limit, the limit shall be £1,000.

(4) Companies must report expenditure on lobbying activity in excess of the limit in a form to be specified by the Secretary of State by regulations, which shall be subject to the affirmative resolution procedure.

(5) Failure to comply with reporting requirements established under subsection (4) shall count as a violation of the duty to keep accounting records under section 392 and shall be punishable in accordance with section 393.

(6) This section applies to overseas companies, as defined in section 1011, as well as to UK companies, and the powers of the Secretary of State in Part 34 shall be deemed to include a power to require overseas companies to report their expenditure on lobbying activity in excess of the limit.

(7) “Lobbying activity” means any activity intended directly or indirectly to influence legislation or policy at any level of government in the United Kingdom.’.

Amendment No. 687, in clause 372, page 168, leave out lines 34 and 35 and insert—

‘(3) Subsection (2)(b)(i) shall not apply where a company is a wholly owned subsidiary of a UK company.’.

Government amendments Nos. 647 and 708 to 711.

Amendment No. 376, in clause 380, page 173, line 12 [Clause 380], at end insert

Amendment No. 377, in page 173, line 15, at end insert—

‘(3) The conditions are that the trade union currently has in force a political resolution authorising the trade union to apply its funds in the furtherance of political objects and such political resolution authorised donations or expenditure under one or more of the following heads—

(a) donations to political parties or independent election candidates,

(b) donations to political organisations other than political parties, and

(c) political expenditure,

in each case up to a specified amount in the period for which the resolution has effect; and for this purpose “political resolution” shall have the meaning set out in the Trade Union and Labour Relations (Consolidation) Act 1992 (c. 52) save that the reference in section 73(3) of such act to “ten years” shall be deemed to be “four years”.’.

Margaret Hodge: The funding of political parties is a topical issue, with implications for all hon. Members and parties. However, I hope that we all recognise that, in the debate, we are considering the matter from the perspective of companies and their members, and how and when directors of companies need to obtain authorisation from their members before making a political donation or incurring political expenditure.

The company law interest in the matter arises from the possibility that a director might put his personal interests or those of a political organisation before those of the company. In other words, a director might experience a conflict of interest when making a political donation or incurring political expenditure. The provisions therefore have an important but limited
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purpose. Company law is not an appropriate vehicle for delivering wider policy objectives in relation to political funding.

Clause 380 provides that a trade union is not a political organisation for the purposes of part 15 of the Bill. This means that funding from a company for a trade union—for example, providing free meeting room facilities or giving employees paid time off for trade union activities—cannot be considered as a political donation requiring the authorisation of the company’s shareholders. As we said in Committee, clause 380 was included in the Bill at the express request of companies that felt strongly that they should be able to provide facilities for their work force through a trade union without it being deemed political funding.

In Committee, however, a number of hon. Members expressed concerns that the provision might allow companies to circumvent the Bill’s requirement for authorisation by making donations to the political fund of a trade union, in the expectation that the trade union would make a donation to a political party. In response to those concerns, we propose to replace clause 380 with a new clause that would apply the controls of part 15 to donations made to the political fund of a trade union but to no other donations made to the union.

Mr. John Gummer (Suffolk, Coastal) (Con): I think that the Minister will agree with what I am about to say. Does she agree that, when we are talking about these matters, even in the narrow confines of the Companies Bill, it is important to refute the attitudes of those who think that there is something wrong in financially supporting political parties of all kinds? Ought we not to say to such people that it is an important part of the nature of a democracy that political parties should be so supported, that that is an honourable thing to do, and that it is very much akin to supporting charities and other important institutions?

Margaret Hodge: I agree with almost all that the right hon. Gentleman says. I would not put contributions by individuals to political parties on the same level as contributions by individuals to charities, but the continuation of healthy political parties is an essential feature of the democratic expression of the political views of all in our community. On the whole, therefore, I agree with the thrust of his remarks.

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