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That issue was an extremely difficult one, of course, and if the Government are not to be congratulated on putting it in at a late stage, they are to be congratulated on having dealt with an issue dear to the hearts of many of the NGOs which have extensively lobbied all political parties and the Government. A satisfactory compromise subject to the various amendments we are going to discuss will have been arrived at. However, in the light of the speech of the noble Lord, Lord Hodgson, I look forward to the Tory party presumably opposing the introduction of Amendment No. 245.
I shall make one general point in the presence of the right reverend Prelate: there is nothing better than a sinner who repenteth. One of the reasons why we
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Lord Hodgson of Astley Abbotts: My Lords, if the noble Lord listened to my remarks, he will remember that I said that I was extremely grateful not only to the Minister, but to the Bill team for the efforts which have been made in that regard.
Lord Razzall: My Lords, I look forward to reading the noble Lord’s remarks in Hansard. While listening to him speak I found myself worrying that we would be here until at least two o’clock in the morning listening to the endless opposition which, judging from his speech, the Tories are going to produce for the Bill.
On Question, Motion agreed to.
commons amendments[The page and line references are to Bill 190 as first printed for the Commons.]
Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 1 to 4. I shall speak also to Amendments Nos. 40, 45, 46, 49, 50 to 55, 57 to 59, 67, 69, 71 to 73, 79, 81 to 83, 108, 119, 175, 176, 209 to 211, 213, 215, 216, 218, 530, 531, 643 to 645, 758, 833 to 837, 839, 844, 846, 862 to 865, 867 to 870, 873, 874, 877, 878, 881 to 883, 885, 886, 889 to 893, 898, 900, 946, 953, 955, 956, 958, 969, 993, and 1018 to 1022. Before turning to the amendments before us, it may be useful if I say a few words about the amendments we will consider today, particularly in the light of the remarks of the noble Lord, Lord Hodgson; it would be appropriate. Clearly we are considering a lot of amendments. They cover 319 pages, which is surely a record, and the amendments themselves are lengthier than the Financial Services and Markets Act 2000. On the other hand, it has to be said that this Bill is not least a consolidation measure and is probably the largest Bill that has ever come to Parliament.
It is important to remember the genesis of these amendments. The great bulk are due to the restatement exercise which was undertaken at the prompting of this House. It will mean that the Bill as amended will in effect be a complete code of company law. All the company law provisions of the 1985, 1989 and 2004 Acts have been brought into the Bill, other than the self-standing provisions on community enterprise companies and the provisions on investigations which go wider than companies. This I feel sure makes the Bill very much more useful to practitioners and that, after all, has been the common aim of both sides of the House. We are grateful to parliamentary counsel for the considerable work involved over the few months since the Bill left this
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As we go through the amendments I will not try to list which ones are restatements as there are over 400 of them, but I can assure the House that parliamentary counsel will produce a full destination and derivations table so that practitioners can see exactly which these clauses are. Most of the remaining amendments we are considering today are indeed technical improvements suggested during the parliamentary passage through this House or another place, and many of them have come from professional bodies such as the Law Society and others, all of which were consulted in great detail before the Bill ever came to the House. It is not surprising that on further reflection and detailed scrutiny they have come up with further improvements, and I think it would have been utterly ridiculous for us to say to those professionals that where they raised points of detail which improved the Bill we would not accept them. On the contrary, we have taken a totally different approach because we think the value of this Bill lies in the fact that it provides a good framework for practitioners, lawyers, accountants and other professionals to conduct their business. We have therefore made it a matter of policy to give them the very greatest scrutiny and accept every amendment where it makes sense to do so. I am not in any way ashamed of having done that, nor do I think it is wrong. This is what this kind of Bill should be about.
There is a small handful of contentious issues on which I expect we will have a lively debate today, but let us be clear that what we are talking about is some 13 amendments, a couple of which are government amendments. If we conduct our business in a sensible way, that is not too great a burden for this House. If we do not go over endlessly the many technical points, we should be able to tackle this within a reasonable time. That is against the background that there is now consensus on the Bill, which is very important for the competitiveness of the UK.
My right honourable friend the Minister of State for Industry and the Regions said in another place that we would announce our timetable for implementation before the Bill completed its passage, and I am happy to take this opportunity to do so. We have, of course, discussed this important issue with business and others and recognise that we will need to allow some time after the necessary regulations are in place for the business community to gear up to using the new law. On this basis we intend to produce for consultation further details of how the Bill will be applied to existing companies by early next year. We will follow this with further consultation on other aspects.
However, we will implement the provisions on company communications to shareholders and others in January 2007. This will include provisions facilitating electronic
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We will consult in February on our detailed implementation plans. Our intention is to commence all parts of the Bill by October 2008. We will continue to work with stakeholders in implementing the Bill. In particular, we will work with the business community to ensure widespread and effective communication of the Bill’s provisions so that all parties fully understand the new provisions and are in a position to take advantage of the benefits.
The noble Lord, Lord Hodgson, asked what was left behind in the 1985, 1989 and 2004 Acts. As I have explained, all the company law provisions of those Acts have been brought into the Bill, other than the self-standing provisions on community enterprise companies and the provisions on investigations which go wider than companies. The non-company-law parts of those Acts which will remain relate to some Scots law provisions, which are now devolved to and have been replaced by the Scottish Parliament; provisions about the Financial Reporting Council and the operation of that body and its subsidiaries, but not about how companies generally conduct themselves; and provisions about assisting overseas regulatory authorities in relation to the financial markets, the Financial Reporting Review Panel and insolvency, all of which relate more to financial services than to company law.
Finally, I stand by the words that I used at the beginning of the Grand Committee—which, as I remember it, were provoked by a rather angry letter from the noble Lord to the Times to which I thought we should give careful consideration. I hope that in this debate, in which we have to consider 1,029 amendments, the same spirit will prevail as in many of our Committee sittings. We have only a limited number of contentious amendments to get through.
The amendments in the first group are mainly technical. They have the effect of tidying up the drafting of the Bill, largely as a result of the restatement exercise. I therefore suggest that we do not spend a long time examining them. They make changes to the drafting where needed—for example, to amend references to the former Companies Act which are no longer needed as a result of restatement; to amend references to the name of the Bill, which is now the Companies Bill and not the Company Law Reform Bill; or to ensure the clarification of terms and a smoother reading of the Bill as a whole.
Moved, That the House do agree with the Commons in their Amendments Nos. 1 to 4.—(Lord Sainsbury of Turville.)
On Question, Motion agreed to.
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1.15 pm
Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 5.
At Report stage we replaced the requirement for subscribers’ names and addresses in the statement of capital and initial shareholdings with a power to prescribe in regulations made under the Bill the information that must be provided for the purpose of identifying the subscribers to the memorandum where a company is to have a share capital on formation. Amendment No. 5 simply carries forward this approach for the purpose of identifying the subscribers where it is proposed that a company will be formed as a company limited by guarantee.
At Report stage we removed the requirement for a statement of capital to be provided where an unlimited company that has not previously had a share capital re-registers as a company limited by shares. Such a requirement is unnecessary in these circumstances as the company will in any event have to include such a statement when it makes a return of allotments to the registrar under Clause 545 following re-registration.
However, some unlimited companies are formed with or acquire a share capital and, in such cases, there would be no need to make a return of allotments on re-registration as a limited company until such time as the company allotted new shares. We think this is a loophole and Amendment No. 78 therefore requires such companies to deliver a statement of capital to the registrar within 15 days of re-registering as limited. The company will, however, be exempt from this requirement if it has already provided this information; for example, in the statement of capital and initial shareholdings provided on formation or in a statement of capital contained in the company’s last annual return.
Amendment No. 8 contributes to a larger tidying-up exercise that we carried out in another place. As a result of the restatement exercise, there is now only one Companies Act, and clauses in the Bill which refer in general terms to the Companies Acts can now be made more precise.
Moved, That the House do agree with the Commons in their Amendment No. 5.—(Lord Sainsbury of Turville.)
On Question, Motion agreed to.
Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 6 and 7.
This group of amendments provides that private company and public company secretaries will be treated in exactly the same way under the Bill save in a number of specific respects. The main distinction is that there will not be a statutory requirement for a private company to have a secretary. In particular, these amendments provide that the authority of a private company secretary will be the same as that of a public company secretary. Accordingly, the appointment of a secretary to a private company must be notified to the registrar of companies and be recorded in the company’s register of secretaries.
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There are a large number of consequential and related changes, in particular relating to the formalities of doing business. These are largely in response to the helpful comments made in Committee, both here and in another place. In particular, we have amended Clause 44 so that for execution of documents by a company the alternative to affixing its seal is signature either by two persons who are either directors or secretaries of the company, or a single director if witnessed and attested.
We have taken a power to apply Clauses 43 to 53 to overseas companies. This power is based on that in Section 130(6) of the Companies Act 1989, which is being repealed.
Moved, That the House do agree with the Commons in their Amendments Nos. 6 and 7.—(Lord Sainsbury of Turville.)
Lord Hodgson of Astley Abbotts: My Lords, in response to the Minister’s appeal for a mood of harmony, let me say that we appreciate these amendments. We always felt it was counter-intuitive for it to be impossible for a private company to have a company secretary and for that person to have no powers. We are very grateful for what the Government have done here.
On Question, Motion agreed to.
Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 8 and 9.
Moved accordingly, and, on Question, Motion agreed to.
Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 10.
This is a group of miscellaneous amendments relating to company constitutions. Perhaps the most noteworthy are Amendments Nos. 35 to 37. Amendment No. 37 was first moved by my noble friend Lord Wedderburn in Grand Committee. I am sorry to say that it was not until a later stage that we finally saw the wisdom of his suggestion.
Clause 34 describes the way in which the provisions of a company’s constitution bind the company and its members. My noble friend’s modest proposal was that this clause should say what it means, by making it clear that the provisions of a company’s constitution have effect as if there were covenants on the part of the company and each of its members to observe them. We are extremely grateful to my noble friend Lord Wedderburn and to those who pressed his cause in the other place for urging us to correct the Victorian drafting anomaly of not referring to the company in the context of the covenants. We are not changing the law here: we are just making it clear that it means what it has been recognised as meaning since at least 1915 and the celebrated Hickman case. So we are slightly ashamed of the fact that it took so long to make the adjustment but, given that this is something
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Amendments Nos. 35 and 36 tidy up some loose ends in the same clause.
Amendments Nos. 12, 15, 25 to 27, 56, 77, 107, 200, 201 and 205 are designed to make the use of “alter” and “amend”, in relation to companies’ articles, consistent across the Bill. Amendments Nos. 10, 11, 22, 23, 24, 28 to 34, 38, 39, 559 and 1011 tidy up references to companies’ constitutional documents and related cross-references between different bits of the Bill.
Moved, That the House do agree with the Commons in their Amendment No. 10.—(Lord Sainsbury of Turville.)
Lord Lea of Crondall: My Lords, the Minister will appreciate that his former noble friend Lord Wedderburn, who is not in the Chamber, will be most gratified to hear what he has just said.
On Question, Motion agreed to.
Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 11 and 12.
Moved accordingly, and, on Question, Motion agreed to.
Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 13 and 14.
The subject of entrenchment, which is the basis of this group of amendments, has rather unexpectedly stirred deep passions during the passage of this Bill. It may help if I begin by summarising how we got to where we are now.
The principle set out in Clause 22 is not in any sense something new. It is just that it stands out a little more clearly in the Bill than in the 1985 Act. Under the 1985 Act, a company can provide that certain provisions of its constitution either cannot be altered at all—what we call “absolute entrenchment”—or can be altered only if conditions more onerous than the passing of a special resolution are met, which we refer to as conditional entrenchment.
The Bill as introduced preserved the ability of companies to adopt absolute or conditional entrenchment for specified provisions of their articles. The only changes from the 1985 Act in the Bill as introduced as regards entrenchment were procedural. In future, in keeping with the reduced role of the memorandum, provision for entrenchment will need to be made in the articles rather than the memorandum. The Bill also provides for a special form of notification to the registrar when “provisions for entrenchment” are inserted into or removed from a company’s articles. The aim of this is to help to ensure the accuracy of the public register.
In our earlier debates, the noble Lord, Lord Hodgson, said that the Bill went too far as regards entrenchment. As a result, we moved a number of amendments in the other place. The most important change is Amendment No. 14, which removes “absolute
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Amendment No. 17 makes it clear that, whatever the terms of a provision for entrenchment, it will always be capable of being removed or changed by the unanimous consent of the company’s members, or by order of a court or other competent authority. Amendments Nos. 18 to 21 provide new and clearer drafting of Clauses 23 and 24. In the process, they slightly reduce the administrative burdens on companies with provisions for entrenchment and take account, like Amendment No. 17, of the possible involvement of courts or other authorities.
Colleagues of the noble Lord, Lord Hodgson, and the noble Lords, Lords Sharman and Razzall, have variously attacked us both for removing absolute entrenchment and for retaining conditional entrenchment. In defending the changes we have made, let me begin by recalling one of the few points on which all sides in this debate can agree. The Bill may facilitate entrenchment, but it does not encourage it. The general rule is, and will remain, that a company’s articles are a kind of contract between the company and its members, which, unlike most contracts, can be changed, and have parties added to or removed from it, without the agreement of all concerned. All that is required is a special resolution.
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