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I now turn to Northern Ireland and the CIC regime. We are sympathetic to the attempts to encourage voluntary and charitable work. We accept that a conventional company structure does not always fit requirements. It was in that spirit that we welcomed in principle the new CIC regime when they debated the 2004 Bill, as it then was, but they raised concerns in Committee. Chief among those was the fact that yet another regulatory framework was to be created, with all its associated costs and expenses, for which there might be little demand. The CIC regime is not quite as simple as it might at first seem. Part 2 of the rather clumsily titled, Companies (Audit, Investigations and Community Enterprise) Act, does not just set up a CIC. There is to be a regulator under Clause 27 with a whole schedule, Schedule 3, with his duties. There is a CIC appeal officer in Clause 28 and he, too, has a schedule of duties associated with him. Finally, there is to be a CIC official property holder in Clause 29, also with a schedule of duties.
So we are giving this expensive party. How many people want to attend it? The Minister has just given us an up-to-date figure of about 700. In terms of the per capita or per company cost, that must be an extraordinarily expensive exercise. Do we really have to extend all that structure to Northern Ireland now? Would it not be better to wait to see the level of demand in England and Wales before going ahead? If we are to go ahead, will the Minister confirm that Northern Ireland will not have to have its own regulator, its own appeal officer and its own official property holder? If not, and Northern Ireland must have its own officials, surely it would be even more unwise to proceed now, because on a pro rata basis, given what has happened in England and Wales, it would seem unlikely that Northern Ireland will have more than about 20 CICs.
I fear that the Minister will not be moved by those arguments. I suspect that if I were to be able to sit on the Bench behind him and glance over his shoulder at
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I yield to no one in my desire to encourage and increase charitable and voluntary work, but we need at all times to have regard to the regulatory cost and burden that we are creating and whether they are proportionate to any return to be achieved. If the Minister is determined to press on with this part of the regulations, he owes the House an explanation of why we need these two parallel, overlapping structures; what he thinks the difference is between CICs and CIOs; and for which separate problems they provide a remedy.
I now turn to the implementation of the takeover directive and Part 28 of the Act. We had lengthy debates in Committee in March last year on the loss of self-regulatory flexibility hitherto enjoyed by the Takeover Panel, which, as the Minister said in his opening remarks, has been such an important part of the success of the City of London. We accepted that if we were to create a level pan-European playing field in financial services, which would be much to the City's advantage, that was a price that we were going to have to pay. Where we were unpersuaded was that once again, there was evidence of goldplatingthe UK doing more than was required by the directive. Specifically, what has become Clause 9(5)(3) makes failure to comply with rules about the takeover code and bid documentation a criminal offence. We were very concerned about what that might do for the City's competitive position.
At that time, last March, we could find no other European country that had felt it necessary to criminalise such behaviour to comply with the directive. The noble and learned Lord the Attorney-General argued lengthily and fluentlybut not, in my case, persuasivelythat we had to have that sanction to comply with the directive. However, he could not name any other country in the EU that thought as he did. When pressed, his only argument was that it was early days to see how different countries interpreted the provisions.
It is no longer early days. The directive has now been in force for eight months. It would be interesting if the Minister could tell us how many other countries have felt it necessary to introduce a criminal sanction. Were we right or was his colleague the Attorney-General right?
Finally, I have a point concerning the drafting. Schedule 1 has three paragraphs concerned with takeovers2, 3 and 4. Paragraph 4.(2) concerns
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I conclude by saying that we are pleased to see the Government proceeding with the implementation of the Companies Act 2006a vital updating of our corporate law. We are especially pleased in the light of the Hodge Statement on which the Government are to be congratulated. Notwithstanding that, given that general welcome, I will be grateful for some further detail on the points that I have raised.
Lord Razzall: My Lords, like the noble Lord, Lord Hodgson, but unlike the Minister, who took office afterwards, I have Company Law Bill 2006 written on my heart, rather like Mary did with Calais, but the Minister was either fortunate or unfortunatehe would say unfortunatenot to have the opportunity. Nevertheless, in the view of the noble Lord, Lord Hodgson, and myself, we ended up with a very good Bill as a result of the conduct of proceedings in both this House and the amendments that the Government took on board to what was, I think, the largest Bill ever presented to either House of Parliament.
As the noble Lord, Lord Hodgson, indicated, the Statement from Margaret Hodge, the relevant Minister in another place, indicated when the various pieces of legislation come into effect. My instinctive reaction has been to ask why some of them need to take so long. Industry and the professions have taken on board the Bills implications, but I am not entirely sure why it needs to take until 1 October 2008 to bring into effect many of the provisions. However, that is obviously what the Government have decided and that is what will happen.
I want to draw attention to a point about the regulations. I am more worried that the Minister in another place has indicated in her Statement that there will be a consultative document on the policy issues related to the secondary legislation that will need to be made under the Act and on transitional and savings provisions. I am concerned that we should not become bogged down in the detail; in particular, the corporate law files that seem to have applied particularly to Article 11(2) of the order. If that is the extent to which practitioners are expected to understand what the Government are saying, I draw attention to the Explanatory Memorandum on Article 11(2). The Minister is probably too young to remember the Hoffnung story about the bricks and the rope but the noble Lord, Lord Davies, sitting next to him, will remember it because he is older than I am. The Explanatory Memorandum states that:
Article 11(2) relies on Section 1296(1) of the Companies Act 2006 to save the application to limited liability partnerships (LLPs) of a provision of the Companies Act 1985 which it had been intended should continue to apply to LLPs despite the repeal of that provision in its application to companies. Because of an error in the Companies ... Order, this was not achieved.
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It has been suggested that the vires ought to be found within sections 15 to 17 of the Limited Partnerships Act 2000. They could not, however, have been relied upon in this commencement order, because the power there is to make regulations. There seems to be, in any event, no difference between what could have been achieved had separate regulations been made under section 15(b) of that Act and what has been provided in the Order under section 1296(1) of the Companies Act 2006.
I know that the noble Lord, Lord Davies, is a man of distinguished ability, perspicacity and brilliance. If even he is prepared to stand up and explain what that gobbledegook means, I bow to him with the estimation that I always show him, but if this is the quality of consultation that will apply to future orders, I worry for the future of consultation.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Truscott): My Lords, I am grateful to noble Lords for taking part in this debate. I would like to recall to your Lordships House the words of my noble friend Lord Sainsbury on 23 May last year in concluding the Third Reading debate on the Bill, which became in this House the Companies Act 2006:
I believe the constructive spirit in which we have engaged in what have sometimes been controversial and often extremely technical issues has contributed greatly to the quality of debate. That is one key reason why the Bill leaves this House in such good shape. Ultimately, it is a Bill that will greatly help the success of British industry. However, all good things must come to an end.[Official Report, 23/5/06; col. 796.]
It was no doubt with relief that your Lordships completed the work on that Bill; they have all my sympathy. Great work was carried out in this House on that Bill. The present draft instrument, the second commencement order, is a further step towards that end.
Before responding to the points that noble Lords have made, I would like to pick up on a few of the themes from my noble friend Lord Sainsburys remarks that remain pertinent this evening. The first is the constructive spirit of the debate. I am grateful to noble Lords this evening for their contribution to the provisions now contained in the Act which the second commencement order would bring into force. I am convinced that the provisions are all the more robust for the detailed scrutiny that they received in this House.
Secondly, I turn to the technical nature of the provisions. I fear, alas, that companies legislation will always be beset by more than its fair share of complexity, as we heard again from the noble Lord, Lord Razzall. We are taking steps to make the legislation as accessible as possible. There are, for instance, briefing notes and explanatory guidance on the DTI website concerning the commencement orders laid to date and the takeover provisions introduced by the current order. Information about
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Finally, I shall deal with the benefits to business. I shall not try to pretend that the content of this draft order is exciting in itself. It is a technical and complex instrument, but it brings into force important key provisions of the Companies Act 2006.
I shall deal with the points raised by noble Lords in the debate. The noble Lord, Lord Hodgson of Astley Abbotts, pointed out two minor blemishes in the Written Statement on the commencement timetable. I agree that it is important that business can plan properly for implementation of the Act. The Written Statement will greatly facilitate that. I can confirm that the extension of the CIC provisions of the CAICE Act will not lead to a parallel regulatory regime in Northern Ireland. Northern Irish CICs will use the same system as that in Great Britain. We expect roughly the same level of take-up as for Scotland and Wales, and the CIC regulator is absorbing the extra costs and therefore the regulatory costs should not be excessive.
On paragraph 4(2) of Schedule 1, there will be at least one more commencement order after this, and it will ensure that any transitional adaptations included in the draft order now before the House will cease to have effect at the appropriate time. The noble Lord, Lord Hodgson, also mentioned the takeover bid documentation offence. During the passage of the Bill we listened carefully to the arguments on the new takeover bid documentation offence. I wish to reassure the noble Lord about the impact of the new offence provision. Liability under the offence is incurred only where a person actively knew that the bid documentation did not meet the required standards or was reckless as to whether it did so and failed to take all reasonable steps to rectify the shortcoming. That seems to us a reasonable and proportionate test. We also introduced amendments designed to narrow and clarify the scope of the offence, but nevertheless continue to view the offence as an important part of our package to implement the EU takeovers directive. We are not aware of a comparable situation in other EU member states, but I will look into it further. If it is of interest to the noble Lord, I shall write to him on the matter.
The noble Lord, Lord Razzall, mentioned the implementation timetable. All of the Act will be in place by October 2008, with many elements implemented earlier. Major parts of the Act will be commenced in October 2007 and April 2008. The Government have been guided by a desire to see the benefits for business introduced as quickly as possible and to observe common commencement dates. We are aware, however, that business needs time to prepare properly for the implementation of such a large and important Act, as I said earlier when referring to the point raised by the noble Lord, Lord Hodgson. We have had extensive discussions with a wide range of interested parties to make sure that we have a timetable that gives business certainty, time to prepare and, wherever possible, early savings and administrative benefits.
The Governments consultative document was published on 28 February. It sets out our proposed approach in areas where secondary legislation is necessary to implement the Companies Act 2006. It also considers the extent to which transitional provisions are needed to ensure that the Act operates in a reasonable way for existing companies. It deliberately seeks to focus the attention of consultees on areas where we are considering substantive change.
Lord Truscott: My Lords, I am always grateful for the knowledgeable advice of my noble friend Lord Davies. Article 11(2) arises from the repeal of a provision in the 1985 Act, which repeal was brought into force by the first commencement order. The article provides that the repeal does not apply to limited-liability partnerships. This is not the reinstatement of a repeal but a saving. The repeal provision was applied to LLPs by the Limited Liability Partnerships (No. 2) Regulations 2002, which remain fully in force. Our intention is to include a saving provision in all the commencement orders so that the provisions of the Companies Act 1985 which have been applied to LLPs by regulations such as these remain in force for LLPs until such time as we are ready to replace them. In this case, the saving provision was omitted in error. The Joint Committee on Statutory Instruments has raised no objection to this provision. I hope that I have made the position on this absolutely clear and that there is now a full understanding of the clause.
Lord Razzall: My Lords, the point I sought to make was not on the substance of the article, which is summarised but that the language and explanatory documents on these commencement orders should not be presented in a Hoffnung manner. The noble Lords, Lord Davies and Lord Hodgson, and I are all old enough to remember Hoffnung. We need to use plain English in explaining these provisions. We may understand the points, but a lot of people out there will not.
Lord Truscott: My Lords, the noble Lord makes a fair point. The clearer and simpler the language can be in these documents, the better. I think that we would all appreciate the use of clear English that people outside this House may have an opportunity of understanding. I commend the order to the House.
The Governments rhetoric surrounding the Bill has spoken of the new tough measures regarding people involved in serious crime, so it is important to examine whether these measures will indeed target what would be commonly thought of as serious crime, or whether it misses that target and adopts a scattergun approach across a wide range of offences that would not normally be considered serious. We have tabled a series of amendments to examine different aspects of that question. They fall into different groups, some of which I anticipate will be debated upon another occasion but not tonight.
The first group challenges the Governments proposition that the definition of serious crime can be changed on a day-to-day, case-by-case basis by the courts. That seems extraordinary. There was some small reference to this earlier today, but these amendments address the detail of the matter.
Schedule 1 lists a range of criminal offences that are to be treated as serious crime. In a later group we shall examine whether that list is in itself appropriate, when we reach Amendment No. 49. What concerns us in this group of amendments is the fact that the Bill provides that a serious offence includes any that, in the particular circumstances of the case, the court considers to be sufficiently serious to be treated for the purposes of the application or matter as if it were so specified. So even if an offence is not listed in Schedule 1, a judge can treat it as if it were.
I join with the Minister in her remarks earlier today; I am on record too as having great faith in our judiciary. Of course I do. I have previously declared my interest, that I am married to a barrister who sits as a part-time recorder in the Crown Court. The Ministers effusive remarks were on the calibre of the High Court judges and the way they were going to make these decisions, and I also, of course, admire those in the Crown Court.
Despite all that, however, I can set that partiality aside; it does not mean I am content with the proposition that there should be so little clarity and certainty in the law before us that we should leave it to the judge to determine case by case, on the matter of the moment, what should be construed as serious crime within the context of the applications for a serious crime prevention order. In theory, that means any offence could be construed as serious, such as graffiti or minor criminal damage to a neighbours fence. Despite what the Minister said when she responded to Amendment No. 2 earlier today about the ability of High Court judges to construe what is serious crime, the problem is that, however able they are, by giving them that power in the context of these
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The Governments proposals do damage to the principle of legal certainty. We seek to remove that uncertainty. Our amendment would ensure that an offence was only a serious offence if it was actually listed in Schedule 1. I beg to move.
Lord Dholakia: We wish to be associated with these amendments. We are also concerned that, as the noble Baroness, Lady Anelay, has pointed out, at present an offence can be a serious offence for the purposes of the Bill if the court considers the circumstances of the case to be sufficiently serious to be treated as such. These amendments would remove that provision, meaning that an offence was only a serious offence if listed in Schedule 1 of the Bill.
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