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Lord Lucas moved Amendment No. 2:

Page 1, line 13, leave out ("Part") and insert ("section").

The noble Lord said: In moving the above amendment, I shall speak also to Amendments Nos. 61, 106, 107 and 110. Amendment No. 2 allows Clause 1 to come into force on a date to be specified by order. That is necessary to enable the corporation's register of social landlords to be introduced in the correct sequence of events. It is consistent with the commencement provision for the Bill as a whole (in Clause 204), which provides for the provisions at Part I of the Bill to be brought into effect at different times.

The other amendments in the group provide for the commencement of various other clauses to come into force on a date to be specified by order. Amendment No. 61 concerns the commencement of provisions relating to the right of tenants to acquire dwellings. Amendments Nos. 106, 107 and 110 all concern the commencement of provisions relating to grants under Sections 50 to 55 of the Housing Act 1988. I beg to move.

Lord Williams of Elvel: In themselves, the amendments seem to be unexceptionable. However, can the Minister say why the provisions were not included in the Bill in the first place?

Lord Lucas: I think it would be honest to say that they were neglected.

On Question, amendment agreed to.

[Amendment No. 3 not moved.]

Baroness Hamwee moved Amendment No. 4:

Page 1, line 16, after ("it") insert ("satisfies the conditions in subsection (2) and").

The noble Baroness said: In moving the above amendment I shall, for the convenience of the Committee, speak also to Amendments Nos. 5 and 6 which are grouped with it. Indeed, it would make no sense if I were not to do so. We are now dealing with a simpler point than might at first appear to be the case from the drafting of the amendments. Clause 2(1) describes bodies which are eligible for registration as social landlords and sets out three groups:

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    "(a) a registered charity, (b) a society registered under the Industrial and Provident Societies Act 1965 which satisfies the conditions in subsection (2), or (c) a company registered under the Companies Act 1985 which satisfies those conditions".

In the case of the second and third bodies, they are required to satisfy the conditions in subsection (2) of the clause. My amendment is designed merely as a means to ask the Minister to explain why those conditions do not have to be met by a charity. One of those conditions is that the body should be "non-profit-making". Of course, I can understand why it is not necessary to spell that out in the case of a charity. However, the "objects" of the non-profit-making body are dealt with later in the clause.

I wonder whether any charity which does not deal with housing matters--perhaps a medical charity, a dogs home; indeed, the list is almost endless--might be eligible to register. I suppose it is a rather picky point and I apologise to Members of the Committee for using prime time to raise it. Nevertheless, the issue arises at the start of the Bill and, therefore, I have raised it in its place. I beg to move.

Lord Lucas: The noble Baroness, Lady Hamwee, is right to say that it is a rather picky point. We are most concerned that charities should come forward where they feel able to play a part in the provision of social housing. However, looking at the amendments put forward by the noble Baroness, we feel that, picky though they are, they are probably right. Nonetheless, we would like time to look at the wording to see whether we agree with it absolutely or wish to propose something better. With those words of comfort, I hope that the noble Baroness will feel able to withdraw the amendment.

Baroness Hamwee: I shall not be quite as grudging as the Minister. I thank him for noting the point and for having regard to it. I have no particular proprietorial interest in my drafting; it is simply important to get the Bill to say what we want it to say. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 5 and 6 not moved.]

On Question, Whether Clause 1, as amended, shall stand part of the Bill?

Lord Williams of Elvel: Before we leave Clause 1 there is a matter of which I hope I have given substantial notice to the Government; namely, the whole question of what is a social landlord and what should be on the register. In Clause 2, which we shall come to, there is a provision for companies registered under the Companies Act 1985.

The problem with social landlords who may be registered under one Act or another is that the governing Act of a social landlord is the Act under which he will be registered. In the case of, for instance, local housing companies--the principle of which we support--which may be registered under the Companies Act 1985, there

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seem to me to be some problems which the Government should consider. We have no particular difficulty with housing associations registered under the Housing Associations Act 1985. That is referred to in Clause 1. However, we have some problems with the Government's approach as regards other social landlords who may be registered under the Bill as it is at present drafted.

I give the Committee some examples. There may well be a company registered under the Companies Act 1985 which is governed by that Act as amended by later companies legislation. The duties of directors under the Companies Acts are quite different to the duties of members of a council of housing associations registered under the Housing Associations Act 1985. As your Lordships will be aware, the Companies Act is a rather complex and difficult measure. It imposes a variety of obligations on directors and on shareholders and contains a variety of measures about who can call general meetings and what those general meetings can decide and many measures as regards mergers, acquisitions and various other matters of that nature. I do not wish to go through the whole of the companies legislation before the Committee this afternoon.

It therefore seems to me that before we move on the Government would be wise to spell out in a certain amount of detail how they see local housing companies--as opposed to those housing associations which are registered under the Housing Associations Act 1985 mentioned in Clause 1--and companies registered under the Companies Act 1985 conforming with the provisions which we shall discuss later in the Bill. This is a general point which I wish to raise at the outset.

The whole matter of companies legislation is one thing but it appears from what I have heard that local housing companies will be encouraging widespread ownership, perhaps ownership by tenants of the properties of the local housing company. I can envisage that the local authority may be a shareholder in such a company. I can envisage that private interests--pension funds and others--may be shareholders. Under those circumstances, if that is what the Government's thinking is, the placement of those shares would come under the Financial Services Act. That raises all sorts of rather more complicated questions about the nature of due diligence and of the criminal penalties for those who offer shareholdings in companies without due diligence. The maximum penalty for recklessness under the Financial Services Act is seven years' imprisonment.

It therefore seems to me that the Government have to--and I hope at this stage will--make a general statement which we may well come back to in the course of our discussions. I hope the Government will wish to make a general statement about how they see social landlords who are not registered as such under the Housing Associations Act 1985. There may be similar questions in Clause 2 about those registered under the Industrial and Provident Societies Act 1965. However, I shall come to that later. As the noble Lord, Lord Lucas, will be aware, I have raised this question before. I repeat that I hope that he will be able to make a general statement to which we may well come back in the

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course of amendments which we move. It is to us rather a serious problem to find out exactly what the Government's intentions are.

4.15 p.m.

Lord Lucas: Yes, indeed, the noble Lord made known his concerns to the Government some little while ago. If I may say so, they are entirely reasonable. It is important that these two powerful pieces of legislation should work together, particularly when they are governing the same company. I hope I may be allowed to take up some small amount of the Committee's time to go through the basic principles which we see underlying how these two Acts will work together when applied to the same housing association.

The present situation is that the Housing Corporation may register as a housing association, a registered charity or a society registered under the Industrial and Provident Societies Act 1965 which meets certain conditions. These conditions are in outline that the society does not trade for profit and is established chiefly for the purpose of providing housing for letting. It is for a body which wishes to become a social landlord to decide which form of incorporation best suits its purpose. A registered charity will be subject to the supervision of the Charity Commissioners. A registered charity which is a Companies Act company must comply with the requirements of the Companies Act. An industrial and provident society will be subject to the supervision of the Registrar of Friendly Societies. If such a body succeeds in achieving registration as a housing association, it will be subject to the monitoring and regulation of the Housing Corporation using the powers conferred on it by the Housing Associations Act 1985, as amended.

We have a situation therefore in which a registered housing association will be subject to two or three sets of requirements emanating from different sources and governed by different legislation but each reflecting legitimate interests of regulatory and supervisory bodies. This Bill extends eligibility for registration to those companies registered under the Companies Act 1985 which satisfy certain conditions. These are in brief that they are non-profit-making and are established chiefly for the purpose of providing housing for letting. This will permit non-charitable Companies Act companies to register which they have hitherto been unable to do. In large measure the Bill re-enacts with minor changes the powers conferred on the Housing Corporation by the Housing Associations Act 1985 as variously amended.

The most significant new provisions are those relating to the right to acquire and to cases of insolvency. Thus non-charitable Companies Act companies will be subject to the regulatory requirements of the Housing Corporation, as charitable companies have thus far been, and will be subject to the new provisions like all other registered social landlords.

The Bill does not seek generally to replace, override or amend the Companies Acts. The duties, functions and other prohibitions placed upon directors, shareholders and others by those Acts remain unchanged. The powers in the Housing Bill supplement and overlay the

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Companies Acts with additional requirements designed to allow the Housing Corporation to fulfil its remit of protecting public funds and protecting tenants. The corporation needs separate, often parallel, powers because it will have different legitimate interests from those of directors, shareholders and others. It may wish or need to act when they do not. We need to ensure that it has the powers it requires to do its job.

Any Companies Act company considering bidding for social housing grant or taking over transferred council housing stock, or anyone thinking of setting up such a company for these purposes, will be able to see in the Bill and in the published criteria guidance and so forth from the Housing Corporation of what will be required of them. It will be for the company or the individual to judge whether this is acceptable to it.

It may be helpful to the Committee if I illustrate how the basic principle of separate but overlapping legislative provisions might work. The corporation has certain powers which parallel those of the shareholders of a company--for example, to remove a director in certain circumstances, Schedule 1, paragraph 4, and to appoint a new director in certain circumstances, Schedule 1, paragraph 7. This does not remove the shareholder's power to do the same thing. The corporation needs the power independently in order to be able to take action when the company is failing to manage its affairs so as to deliver adequate housing to its tenants. It must be able to act in the public interest whether or not any or all of the shareholders agree or are concerned. It is still the case that shareholders may dismiss directors and could, therefore, dismiss directors appointed by the corporation. They may seek to reappoint directors whom the corporation has dismissed. That kind of battle can develop now between rival factions of shareholders.

However, if in doing that shareholders put at risk the proper management of the company as a social landlord, with all that that implies for tenants, the corporation has further powers to bring into play. It may direct an inquiry into the affairs of the company. If the corporation embarks on this course it has various associated powers, in effect, to take control of the company's finances and staff. Again, therefore, in pursuit of the protection of public funds, the corporation can act without the agreement or against the wishes of shareholders but cannot remove their rights.

A director appointed to the board of a company by the corporation may call an extraordinary general meeting at 21 days' notice. Shareholders may also require an EGM to be held. Typically an EGM will be called to dismiss or appoint directors. These powers operate in parallel. This could lead to a succession of EGMs in the same way as the actions of different groups of shareholders could cause a series of EGMs to be held in an ordinary Companies Act company. It is unlikely that that would be an efficient way of resolving disagreements but company law permits it and the Bill does not change that.

The noble Lord, Lord Williams, asked about the issue of shareholdings in local housing companies to tenants and local authorities. It is likely that local authorities

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and tenants will wish to be shareholders in local housing companies. But those companies will not be publicly quoted companies. Shares will not be offered freely to members of the public. Therefore I believe that the noble Lord's concern about the full weight of the Financial Services Act being brought to bear may not arise. However, this is clearly an area of great importance and I do not wish to be drawn too far into what is a difficult and complicated area with a large number of teeth in its jaws. If the noble Lord will allow me, I shall write to him and to others who speak in Committee between now and Report stage to give a detailed picture of how we see this procedure operating under the Financial Services Act.

There are obviously other illustrations I could give of how the Companies Act will work with this Bill. For instance, perhaps I may draw the noble Lord's attention to paragraph 16(1) of Schedule 1 where the corporation determines the form of a company's accounts. The noble Lord, Lord Williams, asked whether that will lead to companies producing two sets of accounts, as people are rumoured to do in Italy. Yes.

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