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Lord Lucas: My Lords, I think that the noble Lord has a very clear appreciation of how it might work in practice. The Companies Act and all its provisions have primacy and the situation that he described is entirely in accordance with those provisions.

The purpose of these provisions is to provide the corporation with the ability to transfer discussion from the board of a company to the shareholders. In general, they will be different bodies, differently constituted, although one has appointed the other. That will give the Housing Corporation an opportunity to move its disagreements with the company into the forum of the shareholders' meeting. If that shareholders' meeting disagrees with the actions that the corporation is taking and so votes, that is its right. It will result in the corporation's actions at that level being ineffective. If the corporation so decides, it then has the option of moving further to its much more considerable back-up powers, a full inquiry and such panoply, but it is not intended that the procedure of moving matters into the realm of the shareholders should provide an answer. We are merely suggesting that that is the forum in which such matters should be discussed before the corporation takes the full-scale action of holding an inquiry involving, as it would, the corporation's assumption of a lot of powers over the housing association. I recognise the comic aspect that may ensue if there is a rebellion by the shareholders against the Housing Corporation. We do not believe that we can do anything about that without fear of getting into serious trouble with the operation of the Companies Act. In most cases we prefer to rely on good sense to make sure that these matters

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operate properly. Where they do not, the corporation will have available to it greater backup powers to solve the problem, if required.

On Question, amendment agreed to.

[Amendment No. 201 not moved.]

Lord Lucas moved Amendment No. 202:

Page 128, line 36, after ("receive,") insert--
("( ) to move a resolution at any general meeting of the company,").

The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Lord Williams of Elvel moved Amendment No. 203:

Page 128, line 39, at end insert--

("Company: special share

.--(1) The memorandum and articles of association of Companies registered under the Companies Act 1985, shall be approved by the Corporation before any such Company is registered as a social landlord.
(2) A condition of such approved shall be that the Corporation will have an absolute right at any time to subscribe for a nominal sum to a special share.
(3) The special share will allow the Corporation to prevent any acquisition which is not approved by the Corporation and to remove directors of the Company who in the Corporation's view are not managing the company's affairs in a proper manner.
(4) The Secretary of State may by order specify other powers to be given to the holder of the special share.").

The noble Lord said: My Lords, I beg to move Amendment No. 203. In Committee I suggested to your Lordships that it might be useful if the corporation maintained a golden share in local housing companies. The formal description of such a share is a special share. That is the normal procedure. I believe that by allowing this the Government will obviate all of the difficulties that we discussed in the context of the last amendment. The special share would give the corporation the right to do more or less what it wanted when it subscribed to the share. As the corporation stands behind the local housing company and as a last resort has the panoply of powers described by the noble Lord, it is much simpler to allow the corporation to take a special share and give that special share such powers as to obviate the difficulties that we have discussed. I beg to move.

Lord Lucas: My Lords, it may assist the House if I outline the safeguards already in the Bill. In order to become a registered social landlord in the first place, a company will have to meet the various statutory requirements. These include requirements not to trade for profit and to meet a series of published criteria. Paragraph 1 of Schedule 1 prohibits the distribution of dividends with powers of recovery. This is backed up by the company's memorandum and articles, which will be approved initially by the corporation as part of the registration process. The Bill provides that any subsequent changes would similarly need to be approved.

In the case of a company with share capital, its memorandum and articles will be required to include provisions prohibiting or restricting the transfer of

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shares. Thus, a company which is a registered social landlord cannot be, and could not convert itself into, a profit-distributing company; nor could its shares be transferred in a way which threatened the objective of an independent provider of social housing. No disposal of land including housing would be permitted unless it met corporation requirements or had express approval. Thus, a company could not divest itself of its assets without explicit consent. Even if it did divest itself, the resulting income could not be distributed to shareholders. Finally, the company may not de-register without the corporation's permission and without meeting published criteria. Thus, a company could not dispose of its assets and take itself and the resulting income out of the sector at will. The corporation's permission would not be granted for anything which constituted asset stripping.

This represents a formidable set of hurdles. In the event of a company misbehaving, the corporation would have a series of sanctions, including the powers in Schedule 1 to appoint a director, hold an inquiry and to follow that up by directing the transfer of land, including housing. All in all, a registered social landlord is effectively constrained.

Given the extent of these safeguards, we do not believe that a golden share is necessary or desirable. The golden share has generally been used as a transitional device, for example, while privatisation arrangements are bedding down in large companies. We do not want to put the corporation in a position whereby it is involved in running a number of small social landlords. The provisions of this schedule enable the corporation to appoint one or more individuals to try to help a company in difficulties. The corporation does this now with housing associations, almost always by agreement rather than by imposition. The individuals are chosen for their experience and good sense, but they are not there to represent the corporation at the expense of shareholders; they are there to help the association get back on the rails.

We prefer the arrangements in the Bill under which the corporation is one step further back in its dealings with housing associations than we feel would be the case with a golden share. If there were a golden share the corporation might be tempted to get its hands dirty and become more intimately involved on a greater number of occasions.

I hope that what I have said about the safeguards already in place will enable the noble Lord to overcome his clear preference for the golden share and agree that, even if he does not like our way of doing it, it is none the less effective.

Lord Williams of Elvel: My Lords, to be frank I do not like the noble Lord's way and I do not believe that it will be effective. I believe that the golden share, which is well known in practice and in company law, is a much better way of doing it and will ensure that the corporation has control over local housing companies as I believe it should. To have to go back through the whole panoply of powers that the noble Lord has recited is much more difficult under the Bill as presently

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drafted. Nevertheless, I recognise that the Government have looked at the problem. I do not agree with their solution. We have had a good debate on the subject. I do not wish to push the matter further. I beg leave to withdraw the amendment.

Amendment, by leave withdrawn.

Lord Lucas moved Amendments Nos. 204 and 205:

Page 129, line 15, after ("receive,") insert--
("( ) to move a resolution at any general meeting of the society,").
Page 130, leave out lines 43 to 50 and insert--
("( ) An order of the court given for the purposes of section 425 of the Companies Act 1985 (compromise or arrangement with creditors or members) is not effective unless the Corporation has given its consent.
A copy of the consent shall be sent to the registrar of companies along with the office copy of the order delivered to him under that section.
( ) An order of the court given for the purposes of section 427 of the Companies Act 1985 (transfer of undertaking or property for purposes of reconstruction or amalgamation) is not effective unless the Corporation has given its consent.
A copy of the consent shall be sent to the registrar of companies along with the office copy of the order delivered to him under that section.").

The noble Lord said: My Lords, I beg to move Amendments Nos. 204 and 205 en bloc. I spoke to these amendments with Amendment No. 200.

On Question, amendments agreed to.

Lord Williams of Elvel moved Amendment No. 206:

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