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Lord McIntosh of Haringey: Last year the noble Lord, Lord Goodhart, and I spent many happy hours debating the Limited Liability Partnerships Bill (as it then was). If he attends tomorrow morning we can debate the regulations which result from the Limited Liability Partnerships Act 2000. However, although I

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am sympathetic to the idea of flexibility and reducing any difficulties arising from over-complex company legislation, I do not believe that this is the solution.

Section 2(1)(a) of the 2000 Act refers to,

    "persons associated for carrying on a lawful business with a view to profit",

which is not the intention of RTEs. Under paragraph 3.18 of the memorandum and articles they are allowed to carry on a trade which can, in the opinion of the board of directors, be advantageously carried on with, or ancillary to, any of the businesses of the company, but they do not really fall within the scope of limited liability partnerships, as the noble Lord and I understood the position to be when the legislation was passing through Parliament.

The limited liability partnership moves from an unlimited liability partnership rather than a limited company. It is designed to give a partnership limited liability while retaining responsibility for tax in the hands of the individual members rather than collectively in the company. The noble Lord, Lord Goodhart, now comes to it from the point of view of a company limited by guarantee. For that company the issue of tax does not arise. For RTEs it is expected that the issue of corporation tax will not arise, because, even if it made a surplus, as the noble Lord, Lord Hodgson, said, it could be disposed of by reducing the charges either immediately or over a period of time rather than paying tax on the surplus or profits. I am willing to look at this again simply on the basis that my noble friend Lord Bach gave a similar undertaking when the issue was raised under commonhold. However, on the face of it, I do not believe that a limited liability partnership is an appropriate vehicle.

I turn to Amendment No. 205B tabled by the noble Lord, Lord Hodgson. This would allow the use of any limited company as an RTE company, so it would permit a wide range of options to be used. While some may see advantage in flexibility, it would make it more difficult to prescribe the constitution of the enfranchising body. It is important that we prescribe the constitution of the enfranchising body, not just to secure comparability but because smaller companies would be burdened if they had to make up their own constitution. The prescribed constitution makes life easier for leaseholders and ensures that the body is suitable for the purpose. Under the existing legislation there have been cases where leaseholders have run into difficulties, which were described by Members of the Committee at an earlier stage; for example, the corporate body used as a nominee purchaser may not be suitable. That is why we have adopted the more prescriptive approach.

I want to come back to the motivation behind the amendment of the noble Lord, Lord Goodhart. It is worth saying that for most smaller blocks, compliance with the requirements of company law would not be particularly onerous. We would expect company formation agents to provide standard RTE companies off the shelf. A current review of company law is likely to lead to further simplification of the rules and reporting requirements for small companies. There are plans for measures to reduce the probability of

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companies being struck off the register and, if that occurs, making it easier and cheaper for them to be restored.

I am not as worried as the noble Lord, Lord Goodhart, apparently is about the burden of forming a company and, subject to any further consideration we may have together, I do not believe his solution is the right one.

Lord Goodhart: I am sorry the Minister gave certainly not as much as half a show of favour towards this amendment. He showed perhaps about one-tenth; a certain degree of sympathy only.

As regards the problem of limited liability partnerships being required to be businesses carried on with a view to profit, that difficulty would seem to be the main one and could be overcome by putting a clause in the Bill stating that an LLP company could be set up for these purposes, notwithstanding that it was not carried on with a view to profit. There is a prospect of real simplification here.

Lord McIntosh of Haringey: Surely, the problem is that if one is going to have alternative corporate structure, we will lose the consistency between one RTE company and another. The basis of the Bill and of us saying that it is not too onerous a task to run a company limited by guarantee is that there is consistency between one and another. Everyone recognises what an RTE company is. If there are two kinds of corporate structure, we shall lose that.

Lord Goodhart: The problem with that is that there is an enormous difference between running a converted house which contains three flats and running a massive block which contains 300 flats. It is entirely suitable to have different structures, in the same way that an LLP has been created to give an alternative form of corporate structure for small businesses.

There seems to be a close parallel. There is an LLP for a small business, forgetting the KPMG because basically it will be used for small businesses. Most large commercial businesses will continue to use the ordinary corporate structure. There should be a similar simplified form of corporate structure available for three, four or five-flat buildings, which may be inappropriate for a much larger building where something more bureaucratic is required.

As regards what was said by the noble Lord, Lord Hodgson, I would not support the idea of a company limited by shares. That is probably rather difficult to reconcile with the philosophy behind having an RTE company, and in any event, the noble Lord, Lord Hodgson, was wrong in suggesting that a company limited by guarantee cannot distribute its profits or capital payments. The situation is that most companies limited by guarantee are, in fact, charities or other non-profit companies which are limited by their own memorandum and articles in distributing profit. There is nothing inherent in the guaranteed company rules that makes it impossible to do so.

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Having said that, this is something we may well want to look at again on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p.m.

[Amendments Nos. 205B and 205C not moved.]

Lord Whitty moved Amendment No. 206:

    Page 54, line 24, leave out ("is already") and insert ("which is").

The noble Lord said: In moving Amendment No. 206, I shall speak also to Amendments Nos. 208 and 214. The first two amendments will allow more than one RTE company to exist for the same premises, provided that none has served a notice under Section 13 of the 1993 Act to initiate the enfranchisement process. Where a Section 13 notice has been served, only the company which served that notice can thereafter be considered an RTE company for the premises for as long as that notice remains in force.

The reasons for allowing the RTE company for the early stages in the enfranchisement process may vary. The most obvious is that the leaseholders might wish to do so because their existing RTE company is also an RTM company and they have now decided that they do not want to lose the right to manage by enfranchising through that company, and therefore wish to establish a new RTE company. It will not, however, be possible to have competing enfranchisement bids going on for the same property at the same time.

Amendment No. 214 changes the provisions which allow personal representatives of someone who was a participating member to themselves become participating members. We need to allow them to become participating members after the cut-off point which would otherwise apply, because they could otherwise inherit a liability to pay towards the enfranchisement price without being able to be part of the collective ownership of the freehold.

The Bill as it stands provides that personal representatives would become participating members unless they opted not to do so. That could lead to their being bound by certain obligations without having agreed to them. We now consider it better that they should be able to opt in and thereby formally agree to be bound by the obligations. I beg to move.

The Deputy Chairman of Committees (Lord Lyell): I draw the attention of the Committee to the fact that Amendments Nos. 207 and 208 are wrongly marshalled. The next amendment I shall call will be Amendment No. 208. That should not affect the procedures of the Committee.

I gave the Committee warning that the Minister had spoken to Amendment No. 208. It is only now that I have become aware of the instructions that these two subsequent amendments, Amendments Nos. 207 and 208, have been wrongly marshalled. They should be in separate order. We are still dealing with Amendment

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No. 206 until the Committee decides otherwise. Does the noble Lord, Lord Goodhart, wish to speak to Amendment No. 206?

Lord Goodhart: No.

On Question, amendment agreed to.

Lord Whitty moved Amendment No. 208:

    Page 54, line 28, at end insert--

("has given a notice under section 13 with respect to the premises, or any premises containing or contained in the premises, and the notice continues in force in accordance with subsection (11) of that section.").

On Question, amendment agreed to.

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