HL Deb 27 April 1989 vol 506 cc1377-402

3.50 p.m.

The Lord Privy Seal (Lord Belstead)

My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales, to acquaint the House that they, having been informed of the purport of the Companies Bill, have consented to place their prerogatives and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

I beg to move that this Bill be now read a third time.

Moved, That the Bill be now read a third time.—(Lord Belstead.)

Lord Belstead

My Lords, at the same time, I must apologise to your Lordships that my noble friend Lord Young of Graffham is not present at the moment. As a result, with my apologies to the House, I beg to move that we adjourn during pleasure for a period of five minutes.

Moved, That the House adjourn during pleasure for five minutes.—(Lord Belstead.)

Lord Williams of Elvel

My Lords, did the Leader of the House move that the House should be adjourned for five minutes?

The Lord Chancellor

My Lords, I think it is true to say that the Motion moved was that the Bill be now read a third time.

Lord Belstead

My Lords, perhaps I should rise to my feet to explain that I did indeed move that the House be now adjourned for a period of five minutes. My noble friends Lord Young and Lord Strathclyde are now present. With my apologies to the House for rising to move the Motion, I should like to ask leave to withdraw the Motion that the House do adjourn during pleasure for five minutes. I hope that the noble Lord, Lord Williams of Elvel, will support me in withdrawing that Motion.

Lord Williams of Elvel

My Lords, as this is a debatable Motion, I certainly do not wish to prolong it.

The Lord Chancellor

My Lords, the Question is that the House do now adjourn during pleasure for five minutes.

Lord Williams of Evel

My Lords, as this is a debatable Motion, I just wish to welcome the Secretray of State, Lord Young of Graffham, and the noble Lord, Lord Strathclyde, on to the Government front Bench so that proceedings on the Bill can continue.

Lord Belsted

My Lords, I beg to move that my Motion be withdrawn.

Motion, by leave, withdrawn.

Clause 5 [Group accounts]:

Lord Strathclyde moved Amendment No. 1:

Page 8, line 18, leave out from ("not") to ("to") in line 19 and insert ("later than six months after the end of the financial year before that").

The noble Lord said: My Lords, perhaps I may apologise to the House for not being here slightly earlier to deal with the Bill. Fortunately the noble Lord, Lord Williams, has given us so much to do in the last few weeks that we were still wrapped up in dealing with some of the amendments which we promised to bring forward at this stage of the Bill; namely, the Third Reading.

Amendment No. 1 is in response to an amendment agreed with the noble Lord, Lord Williams of Elvel, that a small change to the Bill was needed to ensure that a company could not avoid the effect of a notice served under new Section 228 by shortening its financial year. This amendment meets that commitment. It gives shareholders six months from the end of the previous financial year in which to serve a notice under new Section 228 requiring the production of consolidated accounts. This gives shareholders the same rights as under the Bill as originally drafted, but means that any subsequent change of year end date by the company cannot affect the validity of the notice. I beg to move.

Lord Williams of Elvel

My Lords, as the noble Lord, Lord Strathclyde, said, this is in answer to a point that we made at Report stage and we welcome the amendment.

On Question, amendment agreed to.

Clause 6 [Additional disclosure required in notes to accounts]:

Lord Strathclyde moved Amendment No. 2:

Page 12, line 27, leave out second ("and").

The noble Lord said: My Lords, with permission I shall also speak to Amendment No. 3. These amendments simply change the reference in new Section 232 which serves as a pointer to the content of Part I of Schedule 6 to the 1985 Act. They make no substantive change to the Bill. I beg to move.

On Question, amendment agreed to.

Lord Strathclyde moved Amendment No. 3:

Page 12, line 28, at end insert ("and sums paid to third parties in respect of directors' services").

On Question, amendment agreed to.

Clause 9 [Auditors' report]:

Lord Strathclyde moved Amendment No. 4:

Page 15, line 16, leave out ("sent to shareholders under section 238") and insert ("laid before the company in general meeting").

The noble Lord said: My Lords, with permission, I shall also speak to Amendments Nos. 5 and 6. Noble Lords agreed on the recommitment of Part V of this Bill to amendments which allow private companies by elective resolution to dispense with certain requirements of the Act. These amendments tie up loose ends in Part I following the earlier changes. They flow from those changes. I beg to move.

On Question, amendment agreed to.

Clause 15 [Private companies: election to dispense with laying of accounts and reports before general meeting]:

Lord Strathclyde moved Amendments Nos. 5 and 6:

Page 29, line 24, leave out from ("(1)") to end of line and insert ("A private company may elect (by elective resolution in accordance with section 379A)").

Page 29, line 27, leave out from beginning to first ("the") and insert— ("(2) An election has effect in relation to the accounts and reports in respect of the financial year in which the election is made and subsequent financial years. (3) Whilst an election is in force, the references in the following provisions of this Act to the laying of accounts before the company in general meeting shall be read as references to the sending of copies of the accounts to members and others under section 238(1)—

  1. (a) section 235(1) (accounts on which auditors are to report),
  2. (b) section 270(3) and (4) (accounts by reference to which distributions are justified), and
  3. (c) section 320(2) (accounts relevant for determining company's net assets for purposes of ascertaining whether approval required for certain transactions);
and the requirement in section 271(4) that the auditors' statement under that provision be laid before the company in general meeting shall be read as a requirement that it be sent to members and others along with the copies of the accounts sent to them under section 238(1). (4) If an election under this section ceases to have effect, section 241 applies in relation to the accounts and reports in respect of the financial year in which the election ceases to have effect and subsequent financial years.

Right of shareholder to require laying of accounts.

253A.—(1) Where an election under section 253 is in force,").

On Question, amendments agreed to.

Clause 20 [Other interpretation provisions]:

Lord Strathclyde moved Amendment No. 7:

Page 39, leave out line 49.

The noble Lord said: My Lords, this removes the reference to the word "material" in the index of defined terms in Clause 20. There is no change of substance. This reference presently lies high and dry following the removal in Committee of the definition of "material" from new Section 262. I beg to move.

On Question, amendment agreed to.

Clause 27 [Power of Secretary of State to require second audit]:

Lord Strathclyde Moved Amendment No. 8:

Page 43, line 3, leave out from ("section") to end of line and insert ("45 of the Court of Session Act 1988").

The noble Lord said: My Lords, with permission I should like to speak to Amendments Nos. 8, 9 and 25. These amendments concern three erroneous references in Part II of the Bill to Section 100 of the Court of Session Act 1868. That section has been repealed and re-enacted as Section 45 of the Court of Session Act 1988. The amendments substitute the new provision for the repealed one. I beg to move.

On Question, amendment agreed to.

Clause 38 [Directions to comply with international obligations]:

Lord Strathclyde moved Amendment No. 9:

Page 48, line 3, leave out from ("section") to end of line and insert ("45 of the Court of Session Act 1988").

On Question, amendment agreed to.

Clause 44 [Delegation of functions of Secretary of State]:

Lord Strathclyde moved Amendment No. 10:

Page 50, line 36, at end insert ("and").

The noble Lord said: My Lords, this amendment simply restores to Clause 44 the word "and" which was inadvertently omitted when your Lordships accepted Amendment No. 88 on Report. The word is necessary to indicate the relation between Clause 44(2)(a) and Clause 44(2)(b). The amendment makes clear that both the functions set out in paragraph (a) and those set out in paragraph (b) cannot be transferred by a delegation order to the statutory body. I beg to move.

On Question, amendment agreed to.

Lord Peston moved Amendment No. 11:

After Clause 92, insert the following new clause:

("Sex discrimination

In making appointments or arrangements for determining who should be elected to or offered the position of a director or non-executive director of a company, the company shall not do any act which would be unlawful under section 6 of the Sex Discrimination Act 1975, if the company were the employer for the purposes of that Act.").

The noble Lord said: My Lords, with permission I should like to move the amendment in the name of my noble friend Lady Lockwood who I believe is unavoidably delayed at one of your Lordships' Committees. I shall just say a word briefly about this matter. On several occasions during the Committee stage of the Bill we have discussed certain problems which arise in connection with what in the margin here is described as "Sex discrimination". It appears that the companies legislation is written largely on the assumption that almost everyone who has any connection with companies must be male. There is no doubt that that is offensive to women, even to those who are not normally regarded as being part of the feminist movement.

We have not made a great deal of progress in persuading the Government towards our point of view on these matters. However, at one time or another it appeared as though the Secretary of State was on the verge of responding favourably but somehow drew back. I hope that in a moment my noble friend will say a few words about the amendment. It is more modest than any of the others that we tabled, although I should like to see something stronger.

According to the Sex Discrimination Act it is unlawful to discriminate against women on matters of employment purely because they are women. Therefore, it seems reasonable that in connection with directors, including non-executive directors, a company should act as though it were bound by the principles of the Sex Discrimination Act and treat the case as though it were a matter of employment.

I have put the case as best as I can and I hope that now, thankfully, my noble friend will add to my comments. I beg to move.

4 p.m.

Baroness Lockwood

My Lords, I should like to apologise for my absence. I was upstairs in a Select Committee and your Lordships galloped ahead faster than I had anticipated. As my noble friend has indicated, this is a different amendment but its purpose is the same as those tabled at earlier stages. It is to bring about an increase in the number of women directors.

In Committee I pointed out the small proportion of women who are appointed as directors at either executive or non-executive level. It is important to note that executive directors are likely to be appointed on their ability and the progress that they make within a company. In other words, they bring a particular expertise. The non-executive director, as the report and recommendations from Pro Ned indicate, brings a wider perspective to companies. Therefore, one can have a wider experience on the board and issues can be looked at from that wider perspective. In that regard it is appropriate that we should look among the women of this country for more appointments or elections.

I do not suggest in this amendment, and I did not do so in previous amendments, that there should be a quota of women. Nor do I suggest that women should be appointed merely because they are women. An increasing number of women are gaining experience in industry, in some of the professions which are relevant to the Bill, in law and in accountancy. Public services and voluntary organisations also equip women with an expertise which could be helpful to boards of directors. They could be well qualified for positions as non-executive directors.

My last amendment was criticised because it asked for a fair proportion of women. I was asked what was a fair proportion and whether, when 52 per cent. of the electorate are women, we wanted 52 per cent. of women on boards. Of course I should have no objection to that, but I do not wish there to be any misunderstanding about my purpose. Therefore, this amendment is directly lifted from the Sex Discrimination Act 1975. Section 86 of the Act places a responsibility on government when making appointments to ensure that they take into account the women of the nation. The Act also brings Section 86 within the scope of Section 6, which deals with discrimination against applicants and employees. It also brings into play the concept of indirect discrimination as well as direct discrimination.

The current amendment places a responsibility on companies actively to seek to promote women where appropriate and not to discriminate directly or indirectly against them. It means that there must be an examination of their procedures if they are to comply fully with the intent of the amendment.

Lord Ezra

My Lords, I should like to support the amendment. It is modest and pays regard to other legislation. It is important that companies are reminded that women should be considered equally with men for the most senior appointments where that is appropriate and where there are women with suitable qualifications for the job.

Lord Mottistone

My Lords, I entirely agree that there are many opportunities for women to be on boards of directors of companies and that they should be encouraged. However, I suggest that the phraseology of this third try is inappropriate because of its reference to the Sex Discrimination Act 1975. The Act was formulated to deal with the particular relationship between employers and employees. It appears inappropriate to extend it to the relationship between the boards of directors and their shareholders. The obligations and duties of directors far exceed the obligations of an employee to a company. I believe, as does the CBI which advises me, that the introduction of sex discrimination provisions to the appointment of directors under that Act is inappropriate and it should be opposed by your Lordships.

Baroness Lockwood

My Lords, before the noble Lord sits down, can he say why it is inappropriate for the Sex Discrimination Act to apply to the appointment of directors when it is not inappropriate that it should apply to government appointees?

Lord Mottistone

My Lords, the Sex Discrimination Act was intended to deal with the situation between employers and employees. The relationship between directors and their companies is different, so it is an inappropriate use. I believe that the noble Baroness must try again with a different approach, but it must be in another place.

The Secretary of State for Trade and Industry (Lord Young of Graffham)

My Lords, I listened with interest to the comments made by the noble Baroness, Lady Lockwood, and the noble Lords, Lord Peston and Lord Ezra. As the noble Baroness said—and I agree with her—women are in the minority in the boardroom. I should like to make quite clear the fact that we on this side of the House are sympathetic to the breaking down of any prejudice against the choice of women as company directors and the elimination of the after-effects of any earlier prejudices. We have no quarrel with attempts to increase the representation of women on boards of companies by voluntary means.

Nevertheless, we are opposed to this amendment because we do not regard it as an acceptable means of attempting to redress the imbalance. I should like to explain why. First, I should like to address the reference to non-executive directors. As your Lordships know, company law in this country does not recognise the existence of the non-executive director as a distinct category of director. All directors have an equal and shared responsibility as regards the conduct of the company's affairs at board level. It is our view that against this background it would be unhelpful and confusing to pass into legislation an amendment which makes a specific reference to non-executive directors, as opposed to directors in general, without defining that distinction or making clear its significance, if any.

The second reason—and here I have great sympathy with my noble friend Lord Mottistone—for our opposition to this amendment is based on the fact that it is inappropriate. Employment which is the context of the section of the Sex Discrimination Act that the noble Baroness wishes to apply to company directors is in the employer's gift, but membership of the board is not in the company's gift. As was emphatically underlined by the noble Lord, Lord Williams, in an earlier debate, directors are not appointed; they are elected. It is true that the board of a company may put forward candidates for election or may temporarily co-opt a director. But shareholders also have rights to propose candidates or to nominate themselves for election as directors. I do not believe that arrangements which are designed to fit the circumstances of employment can simply be transferred wholesale to the entirely different and in many ways more complex situation of the election of directors.

It may be that at some stage in the future proposals will be put forward with the intention of removing sex discrimination from elections, whether for company directors, trade union officials, parliamentary candidates or more widely. If that happens, the implications of the proposals will need to be carefully considered and discussed. The present occasion has given the noble Baroness the opportunity to express her views on women on company boards. However, as I have explained, in this case the Government cannot accept the amendment put forward. I hope that the noble Baroness will understand the reason for that.

Lord Peston

My Lords, perhaps I may thank the Secretary of State for his reply, and one well understands how he argues his case. However, I am rather mystified because I did not interpret the clause to mean the use of the Sex Discrimination Act qua Sex Discrimination Act. I thought that the clause referred essentially to what would be unlawful under the Sex Discrimination Act, implying that that would be how we would approach the matter had we been able to persuade the Government to move on this issue.

In other words, one does not make the error of saying that directors are employees, but we are simply trying to find a logical way of solving the problem. At this stage I do not believe that one can press the matter to a Division. However, I believe that one day our successors will be somewhat surprised that we were loath to move forward in an area where I believe we all agree that something needs to be done. Anybody who looks at the boards of directors of our major companies Cannot help be startled that there are so few women—and I looked at this matter especially for this Bill. The business of those companies is often largely to do with women and yet women are still not involved. However, I do not press the point.

Lord Young of Graffham

My Lords, perhaps I should explain in order to make the position clear. The Sex Discrimination Act refers to employment. Employment is a conscious decision of the employer whether the employer is an individual or a company. The election of a director is a collective decision by a large number of people and the same rules cannot apply. It may well be that one day there will be another solution, but we do not believe that this amendment is the solution.

Lord Peston

My Lords, I am indebted to the Secretary of State because I was trying to make that point. One is not arguing that this is a matter of employment but we are trying to argue the logic of the case. However, one has had a chance to make the point. I am glad about that. I interpreted the Secretary of State as saying that he is glad that we had that opportunity. I believe that we must find a way of coming back to this matter—and I address this much more to noble Lords opposite—and we must find a way of persuading companies to appreciate this matter in their own interests, because it seems to me that we are talking here about people who have a valuable contribution to make. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 94 [Consequential amendments]:

4.15 p.m.

Lord Strathclyde moved Amendment No. 12:

Page 92, line 52, at end insert— ("( ) In Schedule I to the Company Directors Disqualification Act 1986 (matters relevant to determining unfitness of directors), in paragraph 4 (failure of company to comply with certain provisions), for sub-paragraph (h) substitute— (h) sections 398 and 703C (duty of company to deliver particulars of charges on its property).".").

The noble Lord said: My Lords, with permission, I shall also speak to Amendment No. 14. The amendments make changes to the Company Directors Disqualification Act 1986 which are consequential on the changes made by Part IV and Part V of the Bill respectively. They preserve the existing effect of Schedule 1 to that Act which sets out matters for determining the unfitness of directors. I beg to move.

On Question, amendment agreed to.

Lord Young of Graffham moved Amendment No. 13:

After Clause 106, insert the following new clause:

("Financial assistance for purposes of employees' share scheme

In Chapter VI of Part V of the Companies Act 1985 (financial assistance by company for purchase of its own shares), in section 153 (transactions not prohibited), for subsection (4)(b) (provision of money in accordance with employees' share scheme) substitute—

"(b) the provision by a company, in good faith in the interests of the company, of financial assistance for the purposes of an employees' share scheme,".").

The noble Lord said: My Lords, your Lordships will recall the amendments raised in Committee by the noble Lords, Lord Williams of Elvel and Lord Lloyd of Kilgerran, designed to encourage employee share ownership schemes. At that time we on this side of the House said that we had sympathy with the objectives of these amendments but that it was important to find the right formula rather than a quick one. Nevertheless, we promised to give the highest priority to the matter.

Since Committee we have discussed with the advocates of employee share schemes the effect of such schemes on the restrictions which present legislation places on financial assistance by a company for the purchase of its own shares. We have also taken note of views expressed in your Lordships' House, and we have reflected further on how to minimise the risk of abuse if the rules were changed.

The resulting amendment widens greatly the scope for a company to give financial assistance for the purposes of an employee share scheme. The assistance would no longer be limited to the provision of money for the acquisition of shares but would apply to all forms of financial assistance for the purposes of an employee share scheme. For example, a company would be able to assist an employee share scheme by repaying some or all of the capital or interest charges on borrowings taken out by a scheme for the acquisition of the company's shares. At present this is prohibited because the provision of the money is not for the acquisition of fully paid shares. It would also become possible for a company to give a guarantee or some other form of security or indemnity if that was required by a bank which was willing to lend money to an employee share scheme. The proposal should also remove some of the other difficulties which have been experienced when setting up trusts to administer employee share schemes.

In preparing the amendment we were very aware of the need to provide safeguards against possible abuse—for example, in a takeover situation —without unnecessarily inhibiting genuine schemes. I believe that, having considered and rejected a number of more complicated solutions, we have found a formula in the words, in good faith in the interests of the company", which does just that.

We are aware of the valuable role employee share schemes can play in encouraging the spread of wider individual share ownership. As a result of an amendment agreed in Committee, the Bill already contains a clause to enable model articles of association to be introduced for partnership companies; and one of this year's Budget proposals was the introduction of a new corporation tax relief for a company's contributions to an employee share scheme. I am sure that this new clause will keep up this momentum and meet the needs of those who are most involved in setting up employee share schemes. I beg to move.

Lord Williams of Elvel

My Lords, we are very grateful to the Secretary of State for coming forward with the amendment at this stage in response to our amendments tabled in Committee. Perhaps I may say that the noble Lord has fully lived up to his commitments of giving the matter the highest priority and, indeed, has been good enough to send me and my honourable friend Mr. Bryan Gould a draft of the amendment before it was tabled. For reasons simply of haste I did not want to hold up the process of tabling the amendment and therefore I sent a message to the noble Lord's private office that I did not wish to hold up the amendment in order to comment on the drafting.

It may be that the phrase, in the interests of the company", does what the noble Lord the Secretary of State says it does. Nevertheless, for the moment I keep an open mind on whether the interest of a company are not determined in certain situations by the board of directors of a company. The board of directors of a company might in certain circumstances be able to hold up financial assistance, judging it to be in the interests of the company, whereas in reality it is not in the interests of the employee share scheme which is interested in that assistance.

I do not want to press the matter but gently to comment on the drafting because I imagine that when the amendment goes to another place there will be further debate. I am grateful to the noble Lord the Secretary of State for meeting his commitments to myself and to the House, if I may say so, in full. For the moment we are happy to accept the amendment as it stands.

Lord Ezra

My Lords, I too support the amendment. We are fully in favour of extending employee share schemes and welcome the widening of the possibility of finding financial support for them. Therefore, we are in favour of the amendment as it stands and support it.

Lord Lucas of Chilworth

My Lords, I am grateful to my noble friend the Secretary of State, most particularly for having given this matter the highest priority. At the previous stage we spent some little time on the degree of priority because we felt that it was absolutely essential that the matter should be resolved before the Bill left this House. Therefore, I am particularly glad that the expression of the noble Lord, Lord Williams of Elvel, has now borne fruit.

We shall have to see what happens to the amendment in another place, but I am told by those whose affairs are most likely to be affected by this amendment that it is entirely welcome and satisfies the needs that gave rise to our earlier discussions. Therefore, I support it.

Lord Young of Graffham

My Lords, I am grateful to the noble Lord, Lord Williams, for his handsome acknowledgement of the way in which this side of the House always listens carefully to what is said. I am also grateful to the noble Lord, Lord Ezra, and to my noble friend. This is a demonstration of some of the amendments which have come before the Committee and the House and which represent an improvement to the Bill.

On Question, amendment agreed to.

Clause 108 [Annual returns]:

Lord Strathclyde moved Amendment No. 14:

Page 111, line 46, at end insert — ("(4) In Schedule I to the Company Directors Disqualification Act 1986 (matters relevant to determining unfitness of directors), in paragraph 4 (failure of company to comply with certain provisions), for sub-paragraphs (f) and (g) substitute — (f) sections 363 to 364A (annual returns);".").

On Question, amendment agreed to.

Lord Monson moved Amendment No. 15:

After Clause 108, insert the following new clause:

("Proxies

In section 372 of the Companies Act 1985 (proxies), after subsection (3) insert — ( ) In the case of a company having an issued and fully paid share capital in excess of £2.5 million, every notice calling a meeting of the company issued to those of its members entitled to attend and vote at the meeting whose registered addresses are in the United Kingdom shall be accompanied by a reply-paid form of proxy".").

The noble Lord said: My Lords, in moving Amendment No. 15 I speak also to Amendment No. 16 which is consequential and merely brings the penalty for a breach of the provisions of Amendment No. 15 into line with the penalties applying to breaches of any other part of Section 372 of the Companies Act 1985 dealing with proxies.

Of the four shareholder protection amendments (as I call them) that I started with in Committee, this amendment—or, strictly speaking, a variation of it—is the one that has attracted the most widespread support from various parts of the House. Therefore I jettisoned the other three amendments and am concentrating on this one. On Report, my noble friend Lord Grantchester, with his great experience of these matters, pointed out that my amendment on these lines was technically defective in one minor respect. For that reason I did not press it at the time. I have now duly put right the technical defect and at the same time further narrowed the scope of the amendment, which I hope will be pleasing to the Government, so that the obligations it imposes will apply only in respect of those shareholders with addresses registered in the United Kingdom. This follows the pattern of much other company law; for example, that relating to rights issues.

The broad arguments for this amendment have been rehearsed twice before and they do not need to be gone into in great detail again today. We are trying, albeit in a small way—I realise that there is nothing earth-shaking about this amendment—to promote true shareholder democracy by obliging a maverick 1 per cent. or less of medium and large-sized public companies to fall into line with the conscientious and public-spirited 99 per cent. majority who send out reply-paid forms of proxy in the form of either proxy cards or envelopes.

During our previous debate on this matter I fear that the Government completely confused wider share ownership with shareholder democracy. The two are of course quite separate, as I believe the noble Lord, Lord Williams, pointed out. All who have put their names to this amendment believe that wider share ownership is good, but not if the new shareholders are to be exploited and treated cynically as a largely passive buffer to blunt the predatory instincts of the large institutional investors.

The answer to the problem is not, as the Government suggested previously, for the aggrieved shareholders to sell their shareholdings. The cost of doing so is disproportionately high nowadays, when minimum commissions have risen so staggeringly since Big Bang. Moreover, shareholders who take such a course may have to sell at a loss or, assuming that the company has done well under its previous management, they may have to sell at such a profit as to incur massive capital gains tax liabilities. Furthermore, the Government should remember that, after all, shareholders own their companies. In contrast, some directors may not hold shares in the companies which they run. The owners therefore have a right to be consulted and to be involved. It is a right and not a privilege.

The Government also appeared to suggest that a laissez-faire attitude was in order and that companies were entitled to do almost anything they wished with regard to shareholders' rights, with the exception of the most blatant abuses. The fact that we have before us today a 236-page Bill containing 166 clauses and 17 schedules totally contradicts that attitude. What is company law all about if it is not about imposing obligations to behave properly on companies and their directors, officers, auditors and agents?

Contrary to the suggestions from the Government Front Bench—and, indeed, the Back Benches—at our previous debates it is not a matter of haggling over the cost of a 14p stamp; it is a question of nuisance and time, which most busy people cannot afford. Let us value the average person's time at £5 an hour, and I am certain that noble Lords on the Government Benches who oppose this amendment value their time at a great deal more than that. If the average person does not have the privilege of two post offices within easy walking distance which are open until late at night and therefore has to wait, say, 12 minutes in a queue to buy that 14p stamp, it costs not 14p but £1.14. What is more, shareholders often receive more than one proxy card for signature where, for example, it is a question of altering the articles of association or a capital reconstruction of one kind or another.

Earlier this week I, together with tens of thousands of other shareholders, received from the noble Lord, Lord Rippon of Hexham—I am sorry he is not in his place, and I do not suppose that he personally posted them—two such proxy cards. The noble Lord is an honourable and conscientious individual and is aware of his moral duty to his shareholders. He is also doubtless keen that they should contribute to the affairs of their company. It goes without saying that the proxy cards were reply-paid. I hope that noble Lords on the Government Benches agree that all public company chairmen should behave in a correct and honourable way similar to their noble friend, and not like the few bad eggs who are contemptuous of shareholders' rights. I beg to move.

4.30 p.m.

Lord Grantchester

My Lords, I support this amendment, which is designed to make it easier for small shareholders who cannot easily attend the meetings of companies in which they hold shares, in order that they may indicate their views to the directors on the resolutions proposed to be put to the meeting. It requires all companies to conform to the best modern practices. I believe that it is in the interests of the companies themselves, which put out various resolutions for consideration at meetings, to know the views of as many of their shareholders as possible on the resolutions that it is proposed to pass.

Lord Ezra

My Lords, I too wish to support this amendment. I have had some experience of AGM's. It will be highly desirable for smaller shareholders who cannot be present to be encouraged to make their views known. The big institutional shareholders will always make their views known and the mass proxy votes will come from them. These days it surely must be an objective that we encourage the smaller people if we want—as the Government are endeavouring to do—to widen the nexus of shareholding.

Shareholders must be encouraged to participate as actively as possible. If they cannot come to meetings they should be given every facility for expressing their opinions in their absence. This modest amendment will enable more small shareholders to give their views without having to fumble around for stamps or go to the post office. They can reply immediately and express their opinions on matters of importance to the company and to themselves.

Lord Williams of Elvel

My Lords, as the House knows, I supported this amendment at Report stage because I believe that it has important implications. I shall not go over all the arguments that I used then because they stand by themselves. I shall correct one thing that the noble Lord, Lord Monson, said, simply for the record. He reported me as saying that I was in favour of wider share ownership. I have said on many occasions in your Lordships' House that I am neutral on that question.

I am in favour of wider share ownership by employees, as I have indicated to your Lordships. I support the noble Lord, Lord Monson, in his argument. If there is to be wider share ownership there should be wider participation by shareholders who are owners. I believe that this is a perfectly sensible amendment and I endorse what the noble Lord, Lord Ezra, said. As I said at Report stage, there are shareholders up and down the country, and there are another 3 million to 5 million shareholders as a result of the Abbey National exercise. It is very important that they should be encouraged to take part in the affairs of their company.

Lord Mottistone

My Lords, I oppose the amendment for the same reasons that I gave at Report stage. The question of cost is not a point. The CBI has advised me that this is a quite unnecessary additional statutory burden on companies. Many companies do what is proposed; it is voluntary, and that is all right. But if it becomes a statutory burden the companies may be liable for a breach of the condition if they fail to do what is required. Furthermore, shareholders who feel strongly about a resolution which is to be voted on in a company can easily afford the postage. There are enough burdens on companies through company law and there is no need to enforce yet another one. This extra burden is one that the ordinary shareholder can easily bear for himself. I hope that your Lordships will reject the amendment.

Lord Young of Graffham

My Lords, I am grateful to the noble Lords, Lord Monson and Lord Grantchester, for introducing this amendment. A moment or two ago the noble Lord, Lord Williams of Elvel, was so encouraging, but he has disappointed me. I thought that he had been converted to the great virtues of wider share ownership. I shall exercise a little patience and time will cure all.

It seems that the noble Lord, Lord Monson, and all the supporters of this amendment are attempting to deal almost with a particular case by a change in the law. We shall need much more evidence of real abuse before being able to accept that legislation is an appropriate solution. I do not believe that the Government should subscribe to the concept that there should be a law against it or that the law should make it happen. I do not believe that is the answer we should apply to every single problem. Are we really being asked to believe that the rights of shareholders are being infringed merely because a shareholder must use his or her own stamp rather than being sent a reply-paid card? Surely it is nonsense to suggest that the shareholder democracy is being overthrown for some companies because an absolute minimum of effort is required in order for shareholders to exercise their rights.

At some point one simply has to say that legislation on the detailed exercise of shareholders' rights passes beyond the point of furthering those rights in any worthwhile way and then becomes burdensome. It is our belief that this amendment is just on the wrong side of that boundary, which is why we oppose it as a matter of principle. The reality is that the law presently provides that every notice calling a meeting of the company must contain a statement, with reasonable prominence, that a member entitled to attend and vote is entitled to appoint a proxy. Moreover, the Stock Exchange listing requirements stipulate that listed companies should send all persons entitled to vote at meetings proxy forms with provision for two-way voting.

To add a reply-paid envelope would make little or no practical difference, not least because, as the noble Lord himself said, the large majority of public companies already follow this practice. Indeed, it can be said to be in the interests of the management of the companies to do so because in that way they get a better response to the proxies they seek. Even if a company does not voluntarily do this it is not easy to visualise circumstances in which a shareholder who is sufficiently interested to want to appoint a proxy will be deterred from doing so by the cost of a postage stamp or even by the necessity of having to go out to buy one.

I must therefore conclude, as we have done before, that the substance of this proposal seems to be entirely a matter for the internal organisation and running of the company's affairs and its relationship with its own shareholders. In all the circumstances we still do not consider that this is a matter for legislation.

Lord Monson

My Lords, I am most grateful to the noble Lords who have spoken in favour of what the noble Lord, Lord Ezra, rightly terms a modest amendment: a modest question of shareholder protection. I am very disappointed at the Government's response, as I leant over backwards to revise this amendment to make it technically perfect and to narrow it in order to exclude shareholders who are living outside the United Kingdom. I also said that I would not proceed with the other shareholder protection amendments which might have been slightly more controversial.

The noble Lord, Lord Mottistone, said that shareholders who feel strongly about what is happening to their own company can easily afford the postage. Yes, but they cannot afford the time. Not everyone has a secretary to stand in a post office queue to buy stamps: I believe that the noble Lord forgets that. Many shareholders are retired people living in cottages a long way from the nearest town. They may wish to register their feelings even though there is probably no realistic chance of their vote doing any good. Nevertheless, without undue burdens in terms of cost and time to themselves, they may want to register their vote because after all they own a fractional, minuscule part of the company.

I am very disappointed. Given that 99 per cent. of public companies with an issued capital of £2.5 million or more behave correctly—it may be more than 99 per cent.—it seems so strange that the Government are determined to protect the few rotten apples in the barrel. I am sure that they do not intend to.

This is a matter on which honourable Members of all parties in another place ought to be able to decide. Unless I press the amendment they will not have the opportunity to do so. I beg to move.

4.40 p.m.

On Question, Whether the said amendment (No. 15) shall be agreed to?

Their Lordships divided: Contents, 70; Not-Contents, 102.

DIVISION NO.1
CONTENTS
Addington, L. Cledwyn of Penrhos, L.
Airedale, L. Cocks of Hartcliffe, L.
Amherst, E. Craigavon, V.
Ardwick, L. Dean of Beswick, L.
Aylestone, L. Diamond, L.
Birk, B. Donaldson of Kingsbridge, L.
Blackstone, B. Elwyn-Jones, L.
Blyth, L. Ennals, L.
Bonhan-Carter, L. Ewart-Biggs, B.
Bruce of Donington, L. Ezra, L.
Butterfield, L. Falkland, V.
Carmichael of Kelvingrove, L. Gladwyn, L.
Graham of Edmonton, L.
Carter, L. [Teller.] Grantchester, L.
Gregson, L. Nicol, B.
Hampton, L. Paget of Northampton, L.
Hatch of Lusby, L. Perry of Walton, L.
Hirshfield, L. Peston, L.
Hooson, L. Ponsonby of Shulbrede, L
Houghton of Sowerby, L. Sainsbury, L.
Howie of Troon, L. Saint Brides, L.
Irving of Dartford, L. Scanlon, L.
Jeger, B. Seear, B.
Jenkins of Putney, L. Serota, B.
John-Mackie, L. Shackleton, L.
Kirkhill, L. Stallard, L.
Lawrence, L. Stedman, B.
Leatherland, L. Stoddart of Swindon, L.
Listowel, E. Strabolgi, L.
Llewelyn-Davies of Hastoe, B. Thurso, V.
Tordoff, L.
Lockwood, B. Underhill, L.
Longford, E. Wallace of Coslany, L.
Lovell-Davis, L. White, B.
Monson, L. [Teller.] Williams of Elvel, L.
Mountevans, L. Young of Dartington, L.
NON-CONTENTS
Abinger, L. Long, V.
Airey of Abingdon, B. Lucas of Chilworth, L.
Aldington, L. Mackay of Clashfern, L.
Ampthill, L. Manchester, D.
Arran, E. Mancroft, L.
Bauer, L. Margadale, L.
Belhaven and Stenton, L. Maude of Stratford-upon-Avon, L.
Bellwin, L.
Beloff, L. Merrivale, L.
Belstead, L. Mersey, V.
Bessborough, E. Middleton, L.
Blatch,B. Milverton, L.
Boyd-Carpenter, L. Monk Bretton, L.
Brabazon of Tara, L. Monteagle of Brandon, L
Brougham and Vaux, L. Morris, L.
Butterworth, L. Mottistone, L.
Caithness, E. Mowbray and Stourton, L
Campbell of Alloway, L. Munster, E.
Campbell of Croy, L. Nelson, E.
Carnegy of Lour, B. Norfolk, D.
Constantine of Stanmore, L. Nugent of Guildford, L.
Cottesloe, L. O'Brien of Lothbury, L.
Cox, B. Orkney, E.
Cullen of Ashbourne, L. Orr-Ewing, L.
Davidson, V. [Teller.] Oxfuird, V.
Denham, L. [Teller.] Pender, L.
Dilhorne, V. Piatt of Writtle, B.
Dormer, L. Porritt, L.
Dundee, E. Rankeillour, L.
Elibank, L. Reay, L.
Elliott of Morpeth, L. Reigate, L.
Elton, L. Renwick, L.
Enniskillen, E. Rippon of Hexham, L.
Erroll of Hale, L. Rodney, L.
Ferrier, L. St. Davids, V.
Forbes, L. Sanderson of Bowden, L.
Fortescue, E. Selborne, E.
Fraser of Carmyllie, L. Selkirk, E.
Fraser of Kilmorack, L. Sempill, Ly.
Gardner of Parkes, B. Shannon, E.
Gibson-Watt, L. Somers, L.
Glenarthur, L. Strathclyde, L.
Grimthorpe, L. Sudeley, L.
Hailsham of Saint Swansea, L.
Marylebone, L. Thomas of Gwydir, L.
Henley, L. Trafford, L.
Hesketh, L. Trefgarne, L.
Hives, L. Trumpington, B.
Holderness, L. Tryon, L.
Hooper, B. Vaux of Harrowden, L.
Hylton-Foster, B. Wise, L.
Joseph, L. Young of Graffham, L.

Resolved in the negative, and amendment disagreed to accordingly.

4.47 p.m.

[Amendments Nos. 16 and 17 not moved.]

Schedule 7 [Amendments consequential on Part I]:

Lord Strathclyde moved Amendments Nos. 18 to 23:

Page 194, line 2, at end insert— ("(2A) In paragraph 4, omit sub-paragraphs (b) and (c). (2B) In paragraph 5, omit sub-paragraph (b).").

Page 194, line 5, after ("15A") insert ("(renumbered 15B)").

Page 196, line 16, at end insert—

("Transport Act 1981 (c. 56)

. In section 11(4) of the Transport Act 1981, for "section 235" substitute "section 234".").

Page 196, line 22, leave out paragraph 26 and insert— ("26.—(1) The Company Directors Disqualification Act 1986 is amended as follows. (2) In section 3(3)(b)(i), for "section 244" substitute "section 242(4)". (3) In Schedule I, for paragraph 5 substitute—

"5. The extent of the director's responsibility for any failure by the directors of the company to comply with—

  1. (a) section 226 or 227 of the Companies Act (duty to prepare annual accounts), or
  2. (b) section 233 of that Act (approval and signature of accounts).".").

Page 196, line 25, leave out paragraph 27 and insert— ("27.— (1) The Financial Services Act 1986 is amended as follows. (2) In section 117(4) and (5), for "section 227" substitute "section 226". (3) In Schedule I, for paragraph 30 substitute— 30.— (1) For the purposes of this Schedule a group shall be treated as including any body corporate in which a member of the group holds a qualifying capital interest. (2) A qualifying capital interest means an interest in relevant shares of the body corporate which the member holds on a long-term basis for the purpose of securing a contribution to its own activities by the exercise of control or influence arising from that interest. (3) Relevant shares means shares comprised in the equity share capital of the body corporate of a class carrying rights to vote in all circumstances at general meetings of the body. (4) A holding of 20 per cent. or more of the nominal value of the relevant shares of a body corporate shall be presumed to be a qualifying capital interest unless the contrary is shown. (5) In this paragraph "equity share capital" has the same meaning as in the Companies Act 1985 and the Companies (Northern Ireland) Order 1986.".").

Page 196, line 26, at end insert—

("Banking Act 1987 (c. 22)

.—(1) The Banking Act 1987 is amended as follows.

(2) After section 105 insert—

"Meaning of 'related company'

105A.— (1) In this Act a 'related company', in relation to an institution or the holding company of an institution, means a body corporate (other than a subsidiary) in which the institution or holding company holds a qualifying capital interest.

(2) A qualifying capital interest means an interest in relevant shares of the body corporate which the institution or holding company holds on a long-term basis for the purpose of securing a contribution to its own activities by the exercise of control or influence arising from that interest.

(3) Relevant shares means shares comprised in the equity share capital of the body corporate of a class carrying rights to vote in all circumstances at general meetings of the body.

(4) A holding of 20 per cent. or more of the nominal value of the relevant shares of a body corporate shall be presumed to be a qualifying capital interest unless the contrary is shown.

(5) In this paragraph "equity share capital" has the same meaning as in the Companies Act 1985 and the Companies (Northern Ireland) Order 1986.".

(3) In section 106(1) (interpretation), for the definition of "related company" substitute— 'related company' has the meaning given by section 105A above;".").

The noble Lord said: My Lords, these are all minor amendments to the Companies Act and other enactments which are consequential on Part I of the Bill. I beg to move.

On Question, amendments agreed to.

Schedule 9 [Recognition of professional qualification]:

Lord Graham of Edmonton moved Amendment No 24:

Page 205, line 9, at end insert— ("10. In this Schedule the word "qualification" means qualification for appointment as auditor of a company in accordance with Part II of this Act.").

The noble Lord said: My Lords, the effect of the amendment is to clarify that a qualifying body is not required to restrict its professional qualification—its membership—to persons who have completed at least three years practical training of which a substantial part was spent being trained in company audit work, and that paragraph 6(1) of Schedule 9 applies only for the purpose of a member becoming a registered auditor.

This clarification is sought because not all professional accountancy bodies have a compulsory requirement that practical training for membership shall be restricted to employment in the office of an accountant recognised under Section 389 of the Companies Act 1985. Such professional accountancy bodies which do not have this stipulation accept, as satisfying their requirement in respect of practical experience, approved accountancy training in industry, commerce and government sere ice as well as with accountants recognised under the Companies Act.

The Association of International Accountants has drawn my attention to this blemish, as it sees it, in the Bill. I understand that there has been much discussion between the association and the department. The association has asked me to convey to the noble Lord, Lord Young, how grateful it has been for the understanding which has been shown in the negotiations, albeit, as I understand it, that the view is that the amendment is neither appropriate nor acceptable. However, in view of the exchange of correspondence between the association and the department, it would be helpful and satisfactory if the Minister could confirm that his assurances on the matter will be in accord with those contained in the department's letter of 14th March 1989. If, indeed, he were to give that assurance, I should be prepared to withdraw the amendment.

Lord Strathclyde

My Lords, I am indeed grateful for the remarks made by the noble Lord, Lord Graham of Edmonton, and for the courtesy with which he spoke about the Department of Trade and Industry. I can assure him that there is no danger of the Bill restricting the range of qualifications which a professional body may offer. It simply sets conditions for the specific qualification which is concerned with the audit of companies. I can also, as requested, confirm that the position as set out in a letter from the department to the AIA on 14th March is quite correct. I hope with that assurance that he will feel able to withdraw the amendment.

Lord Graham of Edmonton

My Lords, I am most grateful to the noble Lord for what he has said. In view of the assurances given, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 11 [Supervisory and qualifying bodies: restrictive practices]:

Lord Strathclyde moved Amendment No. 25:

Page 211, line 3, leave out from ("section") to end of line 4 and insert ("45 of the Court of Session Act 1988").

The noble Lord said: My Lords, I beg to move.

On Question, amendment agreed to.

Schedule 17 [Repeals]:

Lord Strathclyde moved Amendments Nos. 26 and 27:

Page 235, line 51, column 3, after ("74,") insert ("75").

Page 235, line 55, column 3, at end insert— ("In Schedule 11—

  1. (a) paragraph 4(b) and (c);
  2. (b) paragraph 5(b).")

The noble Lord said: My Lords, the amendments make minor additions to the repeals schedule and are consequential upon changes made elsewhere in Part I of the Bill. I beg to move Amendments Nos. 26 and 27 en bloc.

On Question, amendments agreed to.

On Question, Bill read a third time; an amendment (privilege) made.

4.55 p.m.

Lord Young of Graffham

My Lords, I beg to move that the Bill do now pass.

When I commended the Bill to your Lordships' House on Second Reading, I linked it to my department's objectives of promoting open, efficient and properly informed markets and of limiting regulation to areas where it is in the public interest. We said that the Bill was needed to adapt to changes in the business environment, to implement Community objectives and to implement deregulatory measures. But, while the many provisions are designed to lead to a simpler and less burdensome framework for business, we also acknowledged that they were in many cases detailed and technically complex. Indeed, during the Bill's progress through your Lordships' House we expected to receive advice and help and we looked forward to receiving your Lordships' expert suggestions for improving the Bill.

Over three and a half months have now passed since the Second Reading of the Bill and the House has, I am told, spent over 40 hours on the Bill in Committee and over 10 hours on Report. Noble Lords have discussed nearly 700 amendments, over 400 of which were government amendments. Many of the amendments have reflected the points which have been put to us by experts outside the House or by noble Lords who are themselves experts on various aspects of the Bill. Many others have served to clarify aspects of this wide-ranging Bill.

For our part we have, as I predicted on Second Reading, brought forward new clauses in Committee and on Report to implement proposals which had been announced in advance of the publication of the Bill. I refer especially to clauses in Part V of the Bill designed to reform the ultra vires doctrine and to implement the elective regime for private companies.

There are many matters upon which the Government are still in the process of coming to a view and which may lead to further changes to the Bill in another place. These include the system of regulation under the Financial Services Act where, as in so many matters contained in the Bill, we have undertaken a public consultation exercise. There are also a number of points upon which we are reflecting which were raised in discussions on Part II of the Bill, notably by the noble Lord, Lord Benson, and, on some other parts, by the noble Lord, Lord Hacking.

However, there is one matter which has been discussed during the debates on the Bill and upon which the Government have now reached a decision. I am sure that your Lordships would wish me to indicate briefly what we propose to do in this connection. I refer of course to what are known as the Dearing proposals on the making of accounting standards. Sir Ronald Dearing's Accounting Standards Review Committee was appointed in November 1987 by the Consultative Committee of Accountancy Bodies. Its main proposals for new standard-setting machinery were addressed to the CCAB and have been broadly endorsed by that body. Certain proposals, however, call for new legislation and were therefore addressed to the Government.

In discussion of amendments put down at earlier stages of this Bill, we gave an undertaking to come forward with our proposals on these recommendations once our consultation had been completed. The consultation has now confirmed the desirability of implementing most of the legislative proposals and government amendments will be introduced in another place. The main effect of these amendments will be, first, to require directors of public limited companies and large private companies to state in the notes to the annual accounts whether they are drawn up in accordance with applicable accounting standards and to draw attention to any material departures.

Secondly, we will propose a new statutory power under civil law for the Secretary of State and certain bodies (to be authorised by the Secretary of State) to apply to the courts for an order requiring the revision of accounts that do not comply with the Companies Act. It has, however, been decided not to adopt the Dearing Committee's recommendation to reverse the onus of proof in the event of legal proceedings involving the question of whether the accounts of a company gave a true and fair view.

As this example shows, reconsideration of aspects of the law as it applies to companies is a continual process. All sorts of changes are proposed, from within as well as outside government. Many of these require careful consideration and discussion because, however sensible they may seem from one point of view, they may on reflection be found to have undesirable effects elsewhere. Experience in your Lordships' House with this Bill has reflected that reality. We have had earnest and learned debates on many of the features in the Bill. We have also had a few lighter moments. In the end the Government have to take a view on how far it is right at any moment to accept proposed changes in the law and, in many of the technical areas of the Bill, this has been recognised and respected in the different parts of your Lordships' House.

I am grateful for the care and expertise which noble Lords in all parts of the House have expended on this Bill. On the Benches behind me I should like to mention in particular my noble friends Lord Boardman, Lord Peyton, Lord Mottistone and Lord Morris, who have all taken a close interest in many parts of the Bill and other of my noble friends have made significant contributions on individual points.

I have already referred to the noble Lords, Lord Benson and Lord Hacking. We have heard powerful and persuasive arguments from those noble Lords on the Cross Benches; we have also had the benefit of significant contributions from the noble and learned Lords, Lord Roskill and Lord Brightman, and the noble Lord, Lord Monson. I also wish to thank those on the Benches opposite who have contributed to the work of the House on this Bill. I refer first to the noble Baronesses, Lady Lockwood and Lady Seear, who have made pertinent and well-argued contributions. The noble Lord, Lord Lloyd of Kilgerran, has, as always, impressed us with the breadth of his expertise on these matters, the way in which he has virtually single handed been involved in most, if not all, aspects of this major and wide-ranging Bill and the unfailing eloquence and courtesy with which he has made his contributions.

From the Opposition Front Bench we have been faced by no fewer than six noble Lords. By profession they are, I believe, an academic lawyer, an accountant, a banker, an economist, a farmer and a solicitor. I list those occupations in alphabetical order. I hestitate to do it in any other way; but in any language they have made a formidable and talented team.

We have admired the learning and the eloquence of the noble Lord, Lord Wedderburn; the urbanity and the intellect of the noble Lord, Lord Miscon; the lucidity and common sense of the noble Lord, Lord Peston; and the expertise, in one case long acquired and the other perhaps of a more recent growth, of the noble Lords, Lord Bruce of Donington and Lord Carter. The talents of those noble Lords have been united behind the leadership of the noble Lord, Lord Williams of Elvel. He has a powerful armoury which comprises mastery of many of the subjects contained in the Bill, instant selection of the perceptive and penetrating question, and, above all, an uncanny sense of when the Government are perhaps debating with themselves whether to play forwards or backwards to a particular delivery.

The combined effect of the talents deployed in different parts of your Lordships' House has improved the Bill in many ways which could not have been predicted when we met on Second Reading. It would be wrong to let the occasion pass without expressing my debt to my noble friends on the Government Front Bench: my noble and learned friend Lord Fraser, who did not flinch from entering the ring with the noble Lord, Lord Wedderburn, to discuss an area of law where the noble Lord is an eminent authority.

My noble friend Lord Brabazon of Tara lent his talents to deal effectively and equitably with two contrasting areas of the Bill. Above all, my noble friend Lord Strathclyde has spent many hours in Committee and on Report dealing with points of every description, coming from all parts of your Lordships' House. He has acquitted himself well, showing unfailing courtesy and commitment. When my noble friend wound up your Lordships' Second Reading debate, he said that he hoped that by the time Third Reading was reached the noble Lord, Lord Williams of Elvel, would wax lyrical about the virtues of the Bill. I feel that I should conclude my remarks on that note so as to give the noble Lord the opportunity to do just that. I commend the Bill to your Lordships.

Moved, That the Bill do now pass.—(Lord Young of Graffham.)

5.2 p.m.

Lord Williams of Elvel

My Lords, the House will be most grateful to the Secretary of State for staying to the end of the passage of the Bill and for giving your Lordships the Government's final message before the Bill goes to another place.

As I said on Second Reading, what the Bill left out was more important than what it put in. There was in our view a major lacuna in the Bill, which was the problem of employee share ownership. I am glad that the Government have conceded the principle of employee share ownership and the financing by companies of those schemes We regard that as a major and important concession.

The Government have also filled in some of the gaps as we went along: the ultra vires gap; the written resolution gap; the elective regime gap; the market dealing insolvency gap. It is not an entirely satisfactory way to deal with such matters, and that led us to ask for recommitment on certain matters because we felt that we were being bombarded with government amendments without having a proper opportunity to deal with them. I am afraid that I take a somewhat old fashioned view, that the Government should make up their mind what they want and then come forward with the legislation required to effect it.

There are, as the Secretary of State said, still major gaps in the Bill: amendments to the Financial Services Act, and the implementation of the Dearing recommendations. They will no doubt be tabled and discussed fully in another place. Your Lordships will have an opportunity to comment upon them—although not to debate them in the detail that we should have liked—when Commons amendments come back before your Lordships.

Your Lordships have made one important insertion in the Bill; that is, the treatment of contributions for political reasons. It is in our view an extension of shareholder rights, which is practised by some companies already, and we hope that the Government will not use their majority in another place to reverse your Lordships' decision. To do so would give rise to the suspicion that the Government, who are meant to be the government of the whole country, are exercising their power, not only against shareholder rights, but in favour of the Conservative Party. I can think of nothing that would discredit the Government more. I hope that at the end of the day the Secretary of State will show himself to be the Secretary of State of Her Majesty's Government and not the Secretary of State of the Conservative Party.

The Bill has had a slightly rocky passage through your Lordships' House. We had the recommitment of Part V. We had five days on Report instead of three. I am grateful to the Government for giving us that time. The time was required. We almost had a five minute adjournment of the House this afternoon. Nevertheless, we have had good debates. I want to congratulate the Secretary of State on meeting his commitment to listen to the arguments put forward by your Lordships. I should also like to congratulate him on the skill with which he has responded to the major debates that we had in Committee and on Report.

In congratulating the Secretary of State, I should like also to congratulate the noble Lord, Lord Strathclyde, who has been unfailing in his courtesy and who has borne the heat and burden of the day and the long hours of debate. It has been something of a baptism of fire. He has come through, I hope, not scorched by the exercise. He avoided the ultimate fate of being burnt at the stake. We are most grateful to the noble Lord for the way in which he conducted the Bill from the Government Front Bench.

I am also grateful to my noble friends. The Secretary of State recited the various professions that we have available on our side. We have managed to put up what I hope has been a constructive opposition. We have not tried to wreck the Bill; we have tried to improve it. I agree with the noble Lord that the Bill has been improved. It is too early for me to wax lyrical, as the Secretary of State invited me to do, or to wish the Bill well, because we shall have to wait and see what the Government produce in the way of Financial Services Act and Dearing amendments in another place before we can take a final view of the Bill.

As I said on Second Reading, we should have liked to have seen a more comprehensive review of company legislation. There are still a number of loose ends about. However, I recognise that the Government had to bring forward something to meet the accounting directives. That was a necessity.

We look forward to the day when the Commons amendments come back before us. Some of us look forward with eager anticipation; others with a certain degree of tiredness, having taken the Bill through its passage in your Lordships' House. I can only say that I am grateful to the Secretary of State, the noble Lord, Lord Strathclyde, and the Government for their courtesy. We look forward to fighting another day.

5.8 p.m.

Lord Ezra

My Lords, on behalf of my noble friend Lord Lloyd of Kilgerran, who unfortunately is absent because he has to attend a memorial service out of London, I should like to say that we much appreciate the kind remarks made by the Secretary of State which were addressed to my noble friend. He had to bear the brunt of the Bill. Our Benches are not as fully supplied as our friends next door with the panoply of talent that they have been able to muster on this occasion. We shall try to do better next time around.

The Bill leaves us in better shape than when it came. In a way, I am not too much against the fact that there were such a large number of amendments, because the Bill required a great deal of thought and consultation. That consultation, especially with the professional bodies, has been carried out and much of their advice has been taken into account. There are a number of other matters which we should have liked to see in the Bill. Those omissions may be repaired during its passage through another place. Like the noble Lord, Lord Williams, we look forward to dealing with the amendments from another place when they appear, but in the meantime I believe that we have done the work well in this House, according to our usual high standards.

5.9 p.m.

Lord Mottistone

My Lords, I thank my noble friend the Secretary of State and my noble friend Lord Strathclyde for the courtesy with which they accommodated the amendments which I put forward on my own behalf and as advised by the CBI; for accepting what they could; and for explaining what they could not. I also greatly enjoyed debating with noble Lords opposite, the more especially when we were in disagreement. I thought that what might be called a rather over-encompassing Bill, covering such a wide range, went through with much greater overall courtesy and accommodation between the two sides than perhaps it might have done. I think that that is a matter for congratulation to everybody who took part to any extent.

Lord Hacking

My Lords, before I respond to the kind comments that the noble Lord the Minister made concerning my own small contributions in the debates on this Bill, may I give a personal apology for not being in the House when my amendment was called? I have been discourteous and I much regret it. I was hoping that the Third Reading of this Bill would come on at a later stage. I was also hoping that the traffic would be slightly easier from the City of London to your Lordships' House. However, both matters impeded me and in the result I am afraid that I was discourteous to your Lordships.

I had some doubt whether it was right for me to move my amendment. On the reading of our Companion it seemed that I might be stretching the rules slightly by introducing a new matter at Third Reading by way of a tabled amendment. I wrote personally to the Minister and indicated my concern as to whether it was appropriate for me to move this amendment at Third Reading. In doing so, I indicated that I would nonetheless like to raise this matter in my Third Reading speech.

This is a problem that goes back to debates in which the noble Lord, Lord Williams, and I participated when the Financial Services Bill was wending its way through your Lordships' House in July and October of 1986. Indeed, we debated precisely the contents and drafting of paragraph 22 of Schedule 1 of the Financial Services Act, as it now is. This was, and is, the paragraph to which my amendment is directed. Suffice it to state that the Act—and this is my submission to your Lordships —fails to take proper account of the concept of a trust, or the functions of a trustee or a personal representative, and the investment protection regime which it introduced does not recognise the degree to which trustees and personal representatives are otherwise regulated by the law.

The Under-Secretary of State at the noble Lord's Ministry recently received two letters. One was from the president of the Law Society written on 19th April; and the other letter was from the president of the Institute of Chartered Accountants dated 17th April. In both of those letters this problem was drawn in some detail to the attention of the Minister. Clearly under no basis is the Minister able to deal with this at this stage; but nonetheless I wanted to put a marker, as it were, into the pages of this Bill. If the Minister can come back with some encouragement that this matter will receive further attention, I should be extremely grateful.

The other matter that I want to mention to your Lordships as this Bill passes from us concerns a more general comment on the Financial Services Act. The Minister said just now in his speech that his department is currently going through a consultation process on the Financial Services Act. Indeed, I have in front of me his department's consultation paper dated 1st March. Since then a memorandum has been submitted by the Law Society's Company Law Committee which comments in some detail not only on that consultation paper but upon the earlier papers issued by the Securities and Investments Board.

In a nutshell, as most of your Lordships know, there is considerable concern in the financial services industry over the complexity of the regulatory law which has been created under the Financial Services Act. It arises partly out of the complexity of the Act itself, and particularly the schedules thereof, partly out of the complexity of the SIB rules and because of the "equivalence" requirement upon SROs, partly out of the complexity of the rules of the various SROs.

It would greatly help your Lordships, and certainly me and the Law Society and other persons concerned, if the Minister could indicate how far he thinks he will be able to take this consultation process, and to what degree he will be able to use this Bill in another place as a vehicle for resolving the difficulties to which I have generally referred. Having made those two observations to your Lordships, I again thank the Minister for his kind comments about me and wish this Bill well in another place.

5.15 p.m.

Lord Young of Graffham

My Lords, I am grateful to the noble Lord, Lord Williams of Elvel, for his most generous comments on the conduct of this matter. I should like to say to the noble Lord, Lord Ezra, that the noble Lord, Lord Lloyd of Kilgerran, had let me know that he was unfortunately unable to be with us. It is a great pity that he could not see the closing stages of this long race. Perhaps I may say to my noble friend Lord Mottistorie, who in so many ways is a powerful advocate of the virtues of the Isle of Wight, that during the course of this Bill he has been an equally powerful advocate for the CBI.

Finally, I should like to say to the noble Lord, Lord Hacking, that not only have I heard from the Law Society and the Institute of Chartered Accountants, but I have heard from two other accountants' institutes, and all those matters will be considered. Regarding the representations on the changes to the Financial Services Act, I do not think that in the dying stages of this Bill it would be right for me to deal with those matters. However, I shall write to the noble Lord about the points of concern that he has raised.

On Question, Bill passed and sent to the Commons.