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Lord Lucas: I am grateful to the Minister for that explanation and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey moved Amendment No. 46:
- Page 7, line 16, after ("regulations") insert ("(whether or not together with other provisions)").
The noble Lord said: In moving this amendment, I shall speak also to Amendment No. 47. I find the drafting of these amendments extraordinarily difficult. It is to some extent helped by the marked copy of the Bill, which I have provided for noble Lords. I should
point out here that the amendments were instigated by parliamentary counsel, not by the department. The intention behind them is to ensure that there is no risk of any subordinate legislation requiring both the affirmative and the negative procedure.The amendment makes it clear that the regulations made under Clause 16(4) and which require the affirmative resolution can be made if what is approved in draft is an instrument containing them, together with regulations that require only the negative resolution procedure. The amendment also makes it clear that an instrument that has been laid in draft and approved under the affirmative resolution procedure does not require to be approved under the negative resolution procedure. I should tell the Committee that I have not come across this problem before. But if parliamentary counsel think that it is a problem, clearly we must take it seriously. I beg to move.
On Question, amendment agreed to.
8 p.m.
Lord McIntosh of Haringey moved Amendment No. 47:
- Page 7, line 31, leave out ("subsection (4) applies to the regulations)") and insert ("a draft of it has been approved by a resolution of each House of Parliament)").
On Question, amendment agreed to.
Clause 16, as amended, agreed to.
Lord McIntosh of Haringey moved Amendment No. 48:
- Page 7, line 39, at end insert--
The noble Lord said: This was spoken to with Amendment No. 5. I beg to move.
On Question, amendment agreed to.
Clause 17, as amended, agreed to.
Lord Phillips of Sudbury moved Amendment No. 49:
The noble Lord said: Amendment No. 49 is in the same vein as some of the earlier amendments concerning requirements for registration particulars of members of LLPs. This amendment is also designed to protect members of the public against the shenanigans--as I am afraid there will be--of those who seek to abuse the LLP status.
I cannot help resisting the earlier remark of the Minister about Adam Smith turning in his grave. Before Adam Smith reached his grave, limited liability
Lord McIntosh of Haringey: But was it not Adam Smith who also said that all professions were a conspiracy against the laity?
Lord Phillips of Sudbury: That is precisely why I have opposed this Bill stock, root and branch. I am a great admirer of my own profession. I am afraid that this measure is a conspiracy against the public interest from start to finish. However, I am more concerned with the small traders who will take advantage of the special privileges of this Bill. Let us make no bones about it; this will provide your two-man cowboy building outfit with a uniquely flexible and light framed means of screwing the public, to put it in Anglo Saxon terms. One of the most common methods of doing that is by changing the name of the entity concerned. It is all very well to say that people should search in the register before they get Mr Brown and Mr Trant to build their porch. But we all know that they do not. We all know that the general public will get nowhere near this register. We all know that the great firms of accountants and solicitors will be impeccable in the way they use the provisions of this Bill. I am solely concerned with those who will not.
The amendment is self-explanatory. The Government may think that the requirement period of a year after the change of name is too long, but I think that the principle is a sound and common-sense one. The fact that it may not be required in other parts of the corporate law at present does not impress me at all. The fact that there may be great machinations afoot to change the law of limited liability companies does not impress me at all. We have here a particularly privileged entity that we are in the course of creating which will--I am sure that all Members of the Committee will agree with me--be used wholesale by small traders. The amendment is the only practical way that I can think of alerting members of the public with no business access or particular knowledge to whom they are dealing with. I beg to move.
Lord McIntosh of Haringey: I am a paid up member of the conspiracy theory party. I agree with the noble Lord, in that I think that it is much more likely that there is conspiracy than cock-up in most aspects not just of history but of public policy. However, I think that on this occasion the noble Lord goes a little too far. I am sorry that he rejects the notion which he knows perfectly well will form my answer; namely, that if the provisions of his amendment do not apply to limited companies, there is no good reason why they should apply to limited liability partnerships.
Lord Phillips of Sudbury: I thank the Minister for giving way. Does he not agree none the less that one of the commonest ways of defrauding the High Street
Lord McIntosh of Haringey: It is certainly an argument for bringing forward one part of the company law review. Indeed, there are occasions--for example, in corporate governance--where we believe that it may be necessary to bring forward issues which form part of the company law review. We have never set our face against urgent matters having to be dealt with in a shorter time-scale than is permitted by the company law review. However, I do not think that the matter we are discussing is one of them. I do not think that the differences between LLPs and limited companies are sufficient to justify the special treatment which is proposed by this amendment.
Limited liability partnerships as bodies corporate are governed almost entirely by company law rather than by partnership law. The only exception concerns the tax treatment. All of the abuses which the noble Lord describes are possible, as he rightly says, as regards limited companies. That is true whether they are phoenix limited liability companies or phoenix limited liability partnerships. The main features of a phoenix limited liability partnership would be that an LLP would go into liquidation and a successor company continue the business with the same members, the same trading address and the same assets. These are offences when committed by companies, and they will be offences when committed by LLPs.
An insolvency practitioner who holds office as liquidator is required to report these offences to the Director of Public Prosecutions. If there is evidence that there has been fraudulent or wrongful trading, there is the power to apply to the court for an order that those responsible should make a personal contribution towards the assets of the limited liability partnership. If the DPP forms the view that the conduct of a member has been such as to make him unfit to be involved in the management of an LLP, he is required to make a report to the Secretary of State who will then have the power to apply to the court for a disqualification order if he thinks that it would be in the public interest to do so.
The noble Lord is sceptical as regards the efficacy of some of these provisions. I do not know whether the events I have described happen more often in Sudbury than in other parts of the country. I would not dream of casting any aspersions on the worthy burghers of Sudbury and I do not think that the noble Lord practises there anyway! Despite the noble Lord's
Lord Phillips of Sudbury: I am grateful for at least some of the Minister's remarks. I shall report his remarks to the mayor and corporation of Sudbury. However, to be serious, I must say that it is disappointing to hear the Minister concede that there is a real problem here with limited liability companies and then effectively to say that the Government are not prepared none the less as regards a new limited liability animal to do something about it. It could take years for any changes pursuant to the present review to come into effect.
Although there are statutory protections with regard to wrongful trading, phoenix company provisions and the rest of it, the Minister must accept that this area of law is singularly ineffective. It is honoured in the breach. One of my jobs is that of legal adviser on the "Jimmy Young Show". Over 25 years I have heard of hundreds of thousands of cases of abuse in relation to small, local companies that get nowhere near the attention of the DTI and get nowhere near being addressed by the various provisions to which the Minister refers.
It depresses me that in this House we are so far out of touch with public opinion, if I may put it this way, at the bottom end of the social spectrum. People are ripped off, day in, day out, by the easy availability of limited liability for off-the-shelf companies and the protections provided for them, and with no real remedies.
I shall withdraw my amendment, but I urge the Minister to consider that it is not too late to review this issue. I hope that he will do so.
Amendment, by leave, withdrawn.
(""business" includes every trade, profession and occupation,").
Page 9, line 41, at end insert ("but shall for a year after the change show the replaced name (prefixed by the words "formerly registered in the name") on all invoices, contracts, accounts, notepaper and such other documents of the partnership and representations and in such media and manner as the Secretary of State may by regulations prescribe").
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