HC Deb 28 October 1947 vol 443 cc823-38

10.8 p.m.

Colonel Clarke (East Grinstead)

I beg to move, That the Electricity (Stockholders' Representatives) Regulations, 1947 (S.R. & O. 1947, No. 2076), dated 24th September, 1947, a copy of which was presented on 20th October, be annulled. I am aware that since this Statutory Rule and Order was laid on the Table, a further amending Statutory Rule and Order has also been presented. Actually it was only available for study this morning, and during the course of the day we found that although we had hoped this new amending Order might make it unnecessary to move this Prayer, this is not the case. We are disappointed to find that a great many points have not been met. From the stockholders' point of view, from which we on this side of the House approach this matter, this Order is still inefficient and inept. The basic fact is once more shown as clearly as it has continued to be shown throughout the progress of the Electricity Bill, that great and unnecessary complications have been caused by the Minister dissolving all the electricity companies before their affairs were wound up.

It was said during the progress of the Bill that it would produce this effect, and there is no doubt that it has. Legislation by regulation is always bad legislation, and one of the proofs of it is that the House must sit later than it would do otherwise, as it is tonight, because of it. I regret I was unable to give the Minister more notice of some of the points which we wish to raise, but that was partly due to the fact that the amending Order was available only this morning.

Before I give some examples of the points I am raising I should like to call attention to the fact that these Regulations must be read in conjunction with certain provisions of the Electricity Act, 1947. It must be remembered that it is the duty of the stockholders' representatives to represent the interests of the electricity stockholders and that the amount of compensation payable in respect of unquoted securities has to be settled, failing agreement, by arbitration between the stockholders' representatives and the Ministry. I would also call attention to the fact that about three quarters of these securities are not quoted on the Stock Exchange. Lastly, by Section 63 notices to be given under the Regulations, if not sent personally, must be served by registered post.

I should like to give some detailed examples of defects in these Regulations as they stand at present. First of all, Regulation 1 (1) (a) declares that stockholders' representatives have to be appointed within two months of the date of the Regulation coming into force. I understand that it will be 6th December next. I want to call attention to the fact that for a very considerable amount of the two months Parliament was not sitting, and had no opportunity at all of correcting this Regulation, as I hope it will do tonight. Two months also is too short a time for companies, who may have thousands of stockholders, to comply with the necessary formulae with which they have to comply. In the second place, the Regulation declares that if the office of stockholders' representative becomes vacant, either because of the death of the stockholders' representative or for any other reason, a meeting of stockholders shall be held to appoint a new stockholders' representative, failing which the Minister should appoint one. Such a meeting has to be convened by the stockholders' representatives or the holders of securities. Of course, if the stockholders' representative as might be the case, was dead, he could not convene a meeting; and it is quite possible that the security holders might not hear of his death, or, at any rate, not hear of it until too late for them to convene a meeting in time to meet the Regulation. We do suggest that it would be wise for the Minister in such circumstances, to convene the meeting. I also suggest that he should pay the cost of doing so, because it is a substantial cost. I am told that in the case of one particularly large company the cost would come to within the region of £1,000. The answer to that is that in the event of the stockholders' representative dying, or leaving his office, the Minister should convene a meeting of stockholders, and that they should then elect their stockholders' representative.

Next in Regulation 4 (1) we want to know why stockholders' representatives should have to give security at all. I think it is quite probable that in very many cases the stockholders' representatives will be some well known firm of chartered accountants. It is ridiculous that such a firm should be asked to give a security. If, however, security must be insisted on, we suggest that the amount of the security should be stipulated; otherwise I do not see how an individual or a firm can accept the responsibility. At present all we are told is that the Minister may, from time to time, direct how much it shall be. That is very vague, and something definite is required, otherwise I believe there will be hesitation on the part of candidates in accepting the office of stockholders' representative. Incidentally, meetings have already been convened, so there is not too much time.

In Regulation 5 there are two main points. First, it will be observed that stockholders' representatives may be removed by resolution at any meeting of stockholders. That means, that at a meeting, called possibly for some quite formal reason, a disgruntled group, who may in no way represent the bulk of the shareholders, may pass a resolution and unseat the stockholders' representative. The answer to that is that, when the notice convening the meeting is sent out, there should also be notice in writing of the resolution to unseat the stockholders' representative, which it is intended to bring forward. Secondly, it seems curious that if the stockholders' representative is removed by resolution there is no provision requiring him to produce the accounts. He has to produce the accounts only when he has finished his work. Therefore, as the regulation stands, stockholders might have to retain in office a quite incapable stockholders' representative, because unless they keep him in office until he has completed his duties they would not get the accounts. I am sure there is an anomaly there which ought to be looked into.

Regulation 6 (1, a) which ought to state that the stockholders' representative, when convening a meeting, should be under an obligation to state what the meeting is for, does not so state at present. Without that there may be a lot of unnecessary travelling by stockholders who are nervous that some resolution may be passed about which they know nothing, and which may be detrimental to them. In these days travelling is no light task, and it has not been made any lighter by the withdrawing of the basic petrol ration. In Regulation 6 (3), in the event of a stockholders' representative not convening a meeting within 21 days of the requisition of such a meeting being laid by the stockholders, the stockholders may themselves summon such a meeting. Of course, the stockholders' representative may get out of his difficulties by fixing the meeting an almost unlimited time ahead, say a year, and the stockholders would have no redress. I hope that point will be looked into.

I refer next to Regulation 7 (1). I suggest, on behalf of my hon. Friends, that the wording here might be improved if it read, "not less than two nor more than four weeks as the time that is necessary for notice to be given of a meeting." At present a meeting might be evaded by fixing it a long time ahead—even eight, nine or ten months.

Regulation 8 deals with quorums. I suggest that a quorum of one-tenth is too large. I believe that there is one large company which has 50,000 shareholders, and so at present they are asking for 5,000 people to be present, or for persons and that number of proxies. The question of travelling comes in here again. I appreciate that the new Regulation laid today makes some improvements, but that refers more to the form of the proxies than to the number of proxies which are wanted. I still feel that the revised drafting is not very satisfactory. The present form in the original Order is really a miserable specimen. It is a utility form of proxy, and it gives no provision for alternatives, such as when the first named man dies, or if the stockholder takes a dislike to a man and wants someone else. It does not say whether the proxy is to vote for or against the resolution.

I should like to read Regulation 11, which states: A stockholder's representative, may, with the approval in writing of the Minister, exercise any of his functions through agents. Conversely, that means that without the Minister's approval the stockholder may not employ accountants, solicitors, or even counsel, in the case of arbitration. It might happen that in arbitration a stockholder would be represented by no one, or by someone who is a friend of the Minister. I suggest that the alternative would be for the Minister to substitute the Treasury.

Mr. Speaker

I gather that the hon. and gallant Member is reading some new Regulations which are apparently to supersede these Regulations. If these Regulations are not in force and are being superseded, are we not wasting time in dealing with them now?

Colonel Clarke

The position is that Statutory Rules and Orders, 1947, No. 2076 has been amended in some particulars by S.R. & O. No. 2277. I do not think I have referred to any of the alterations. I have been dealing entirely with the original S.R. & O.

Mr. Speaker

Then we are not dealing with anything amended by the amending Order, which is not before us?

Colonel Clarke

To the best of my belief I have not done so, but you will realise, Mr. Speaker, that it is difficult, where the two Orders are mixed up, not inadvertently to make some allusion. Regulation 12(3) states: The said statement, accounts and reports shall be laid before that meeting, and any explanation thereof which may be required thereat shall be given. I cannot but feel that that is strange drafting. It amounts to imposing a very wide obligation on no one in particular at the behest of anybody in general. It is very unsatisfactory. I think that something of this sort should be substituted. Explanations reasonably required at a meeting by a stockholder present in person or by proxy shall be given by the stockholder's representative and the auditor to the best of his ability. I think that the examples I have given will bear out the point I made at the beginning, that even with the amending regulations there is still great scope for improvement of the original regulation. While I have no doubt that those concerned are very grateful for what has been given them—and I admit that the changes have been substantial—I must make the point that those changes really prove how badly the Order was drafted in the first place.

10.27 p.m.

Major Peter Roberts (Sheffield, Ecclesall)

I beg to second the Motion.

I wish to emphasise one or two of the points which have been made tonight by my hon. and gallant Friend the Member for East Grinstead (Colonel Clarke). First, I want to make it quite clear that under the Electricity Act the form of dealing with compensation is that existing companies are to be killed on 1st April next, for some reason best known to the Minister, and that a stockholders' representative has to carry on the duties of the directors, who are to deal with the liquidation of the company. That is an extraordinary method of dealing with this form of nationalisation, and it has led to a great deal of confusion. The new Act requires to be laid before the House how, and in what forms, the duties of the stockholders' representative are to be carried out. This Statutory Rule and Order was brought into being, and it is against that that we are praying tonight. Subsequently, another Order, amending only a small part of the original Order, was laid on the Table, but we are not entitled to talk about the benefits of the amendment.

I want to deal with the regulations still carried out under the old Order, and which are not touched by the new regulations. It must be clear to the Parliamentary Secretary that there are many anomalies. My hon. and gallant Friend has been through a dozen different regulations which it would be difficult for the stockholders' representative, or his staff, or the shareholders to work. Therefore, we are not at this moment concerned with what the companies consider the position to be. I hope the Parliamentary Secre- tary will withdraw this Order, look into these questions, and lay it before the House again when it has been amended. We do this in no party spirit; we are trying to assist the Ministry, and those who have to work the regulations. We believe that it is unnecessary to ask companies to have to pay up to £1,000 in order to notify their shareholders of a meeting by registered post. In an ordinary company notice of meeting is given by letter. Demanding registered post may entail, for large concerns, the spending of £1,000. I ask the Minister to make an arrangement whereby, if a stockholders' representative dies, notice will be given at once to the shareholders. Those shareholders will be scattered over the country with nobody to look after them. A stockholders' representative might die, and there must be a duty put on somebody to see that he is replaced.

Then I wish to emphasise the question of the meeting and the number who must be present. Surely, a quorum of 10 per cent. where you have 50,000 shareholders is going a bit too far. It is extraordinary that the Minister, or those who drafted this Order, should consider that it is easy to get a hall which will hold 5,000 people and then to say that if there is an adjournment that hall shall be taken a week later for a further meeting. That is one of the anomalies. Hon. Members who have had experience of holding meetings in London know that it is impossible to book a hall which will hold 5,000 people from week to week. It often takes months to get hold of such a hall. These things show that this Order has not been properly thought out by practical people. Surely the Parliamentary Secretary will not mind these things being pointed out so that be can amend them.

I wish also to raise the question of the stockholders' representative being asked to give security. This seems to me to be a very important question. Why should a person, chosen no doubt for his worthiness, be asked to give security? Further, he is asked to take on this job without knowing how much security he will have to put up; in other words, he has to accept the post and then the Minister may ask for £10,000 security, or he may say, "You are a bloated capitalist, we want £30,000 out of you." There is no reason for this provision.

Then there is the question of voting which was mentioned by my hon. and gallant Friend, though he did not go into it in great detail. Under Regulation No. 8, paragraph (8), by which a vote is given to the shareholder when he meets the stockholders' representative, the vote is given per share. If there are 2s. shares and you hold £1 worth, you have 10 votes, whereas if you have a debenture of £1, you have only one vote. That is not practical politics. The answer, of course, is that anyone holding a nominal amount of £I should have a vote of that amount. The idea that he is a 2s. shareholder, and, therefore, gets 10 votes, seems stupid, and apparently it is a point which has been overlooked.

Again, there is the question of the auditor. This is another point which will cause great difficulty to all the auditors concerned. Companies have to consider auditors. They are appointed under Sectioin 27 (1) of the Act for various jobs of valuation. They have to try to value the amount of the undertaking. Regulation 10, paragraph (1), says that after all that is finished, and after all the values have gone through, the same auditor shall, irrespective of whether he wants to or not, audit the accounts. It is a small point, but we do not usually try to make professional people do something which they have not undertaken as part of their service. There is no provision in the regulation for the appointment of another auditor if the original firm either does not want to do it, or one of the partners in the firm happens to have died.

I want to reinforce the other point of Regulation 10, whereby the stockholders' representative is debarred from choosing his solicitor or his counsel because he cannot get a notice in writing from the Minister. The Government have set up this machinery whereby the stockholders' representative, acting for his stockholder, to try to get the best value he can on his behalf, says to the Minister who sits on the other side of the table, "We want to employ Mr. So-and-so, K.C.," and the opponents on the other side of the table say, "No, we will not allow you to appoint him." There is no reason for it, and I am certain that when the Measure was drafted, this was not intended. I wish to point out and to reinforce this and other points—I am not going through them all—which have been put to the Parliamentary Secretary by my hon. and gallant Friend.

We should be satisfied tonight if the Parliamentary Secretary would say that these regulations have been hastily drawn; that they have, probably, been drawn by inexperienced people with no great knowledge of companies, or windings-up, or liquidations, and so on. It would be of great convenience to people who have to carry out these schemes if there were a suitable amendment, and I do hope that the Parliamentary Secretary will say tonight that some amendment will be made.

10.35 p.m.

Sir William Darling (Edinburgh, South)

I have only one question to add to those which have been put already, and it is a point which has been put to me by one of my commercial associates. It will be observed that under the pro-visions of Regulation No. 6 (1) (a) the stockholders' representatives "may "convene a meeting; and under paragraph (b), the representative" shall "convene a meeting. This, it is suggested, may offer a wide loophole for possible misunderstanding. It might be that the company is a nation-wide one, with 50,000 stockholders, and I, as stockholders' representative, might have a meeting at Thurso, or Exeter, or Cardiff. It would be grossly inconvenient for my supporters to attend, and I suggest that the Parliamentary Secretary should consider the desirability of indicating something to guide the stockholders' representative as to the place of meeting. It is surely quite obvious that, unless the place of meeting is defined in some way, there is offered a loophole for wide misunderstanding.

The proxy form might be improved. It is, at present, a bald form, which might be elaborated by including something to indicate that "I appoint my proxy to vote for me, on such and such a day, at such and such a place." It is obvious that the place is of primary importance. I would add in conclusion that the stockholders' representative is something entirely new in the commercial world. The Minister has given us these new creations, and he should see to it that the creature of his creation is armed with proper powers of defence. I hope I have made my point. Under Regulation No. 6, the right hon. Gentleman has not armed the stockholders' representative with a proper defence, and I do hope he will give consideration to this matter.

10.38 p.m.

The Parliamentary Secretary to the Ministry of Fuel and Power (Mr. Robens)

I am sure that, on this, my first, appearance at this Box, I should receive commendation from hon. Members opposite if I withdrew these regulations, but my hon. Friends beside me would not commend that. I cannot withdraw the regulations. Let me say, first, that the hon. Member for South Edinburgh (Sir W. Darling), really makes a very gross reflection on the intelligence of the existing stockholders in electricity undertakings and companies if he thinks those stockholders will elect a representative who-would be so very foolish as to call a meeting of shareholders at places so very far apart in the country, in the way which he has suggested, thereby causing them the greatest possible inconvenience. I must say that I cannot understand him. We must exercise some common sense, and, in calling a meeting dealing with compensation—an important subject, it will be agreed—the stockholders would surely elect a representative in whom they had confidence and trust.

The regulations have been drawn up in accordance with the Act. One hon. Member has made some criticism of that Act, but that is something with which we are not concerned tonight. The Act is on the Statute Book, and cannot be discussed, because we are not dealing with it. What we have to deal with now are regulations arising from that Act. Section 21 deals with the appointment of stockholders' representatives, and the regulation in front of us has been drawn up to carry out the provisions of that part of the Act. I accept that if those responsible for drawing up regulations were infallible, there would be no omissions at all. I accept right away that there was need for some review of these original regulations, and as a consequence the new amending regulation was available in the Vote Office last evening, but I will accept that perhaps first thing this morning would be what one might call the public issue. In this amending regulation—I am not at liberty to discuss it, though I may refer to it—we have dealt with a great many of the problems that have been raised by the interested parties as a result of the publication of the first regulations.

The hon. and gallant Member for East Grinstead (Col. Clarke) has raised a number of points as has the hon. and gallant Member for Ecclesall (Major Roberts), who followed him. I propose to deal with as many of these points as I can, and I will certainly undertake to look at some of the others, and if there is any substance found in them, I will recommend my right hon. Friend to issue another regulation amending these. I expect that the purpose of this Prayer is to make real good regulations that will meet all the interests concerned.

The point was made as to the death of the stockholders' representative. In the circumstances if there is a vacancy which is not filled, then, of course, the regulation provides for that—" the Minister will appoint." That is in the original regulation. I am not going to deal with the second regulation which amends this, because Mr. Speaker has ruled that we should not discuss that.

The other point that was made was that two months was too short a time in which to call this meeting. I recognise right away that because we have put in a further regulation amending this regulation it does vary that time, but again in the regulation the Minister has power. I will give the undertaking that when representations are made by the companies that they have not had sufficient time their application for an extension of time will receive sympathetic consideration. Another point that was raised was with regard to the method of advising security holders, and an example was given that it costs one company, I think, £1,000, because they have to do this in accordance with Section 63 and, therefore, have to do it by registered post. The regulations that I must not talk about cover that point very admirably. There is not now the necessity to carry out that particular regulation.

Mr. John Foster (Northwich)

Is it in order for the Parliamentary Secretary to allude to regulations, which we were not allowed to discuss, as covering the point admirably? How are we to answer and say that it does not?

Mr. Deputy-Speaker (Mr. Hubert Beaumont)

The only way to deal with the point raised by the hon. Member—although I am not suggesting it—is for the hon. Member to put down a Prayer to annul the regulation.

Mr. Foster

I would ask you, Mr. Deputy-Speaker, to rule whether it is or is not in Order for the Parliamentary Secretary to allude to this regulation and say that it covers the point admirably.

Mr. Deputy-Speaker

That is a matter of opinion, and was only a passing reference.

Mr. Robens

I am sure the House wants the best explanation and when one recognises that that is in the amending regulation, I think it is sensible to refer to it. I shall do my best to keep within the bounds of Order, as I recognise that the hon. Gentleman has not been able to discuss the regulations, but the fact is that we have met that particular case with the new regulations, which will be available for discussion if they are prayed against.

With regard to the quorum, it was suggested that one-tenth was too large. What we did in this case was to follow the Companies Act, 1929, in which it is perfectly clear that a majority of one-tenth is necessary for an extraordinary general meeting. That is Section 119 of the Companies Act. It seems to me that we are doing the right thing in following that Act in relation to that particular matter. With regard to the form, which was criticised, that, too, has been taken from the Companies Act, and quite frankly I do not think hon. Members can object when a matter of this kind is being dealt with, if we utilise the existing Act, which laid down a form for this regulation.

A point was made in relation to the employment of an agent and the Minister's approval of this. The shareholders' representative has to obtain the Minister's approval to employ an agent because the Minister has to pay the expenses and it seems to me very reasonable that if he pays the piper, he should call the tune.

Major P. Roberts

I appreciate about paying the piper. Would it not be better to make the Treasury responsible in that case?

Mr. Robens

I do not think so. Whoever pays will pay presumably from Government funds, and as the Minister is responsible under the Act, it seems to me reasonable that the position should be maintained. I do not know whether any other points can be adequately dealt with tonight. I have indicated that I will carefully read again the speeches that have been made, and if there is any substance in them, I give the assurance again that I will deal with them. May I say, finally, that we feel we have covered all anomalies that have arisen, and the House may be interested to know that the Incorporated Association of Electrical Power Companies, who have been giving some assistance from time to time, as recently as yesterday wrote to us and said, if I may quote an extract: It was good of you to lend such a sympathetic ear to our representations and I am sure the new regulations will be warmly welcomed, especially by secretaries of companies. This organisation is fairly well satisfied that, taking the two together, we have met the anomalies.

Colonel Clarke

Will the hon. Gentleman bear in mind that in moving this Prayer, I said we were speaking from the point of view of stockholders, and not associations, or corporations, or secretaries?

Mr. Robens

This association is interested in the stockholders, too. With the assurance I have given and the general desire of the Minister to ensure that stockholders are properly, fairly and adequately represented and given all assistance in making their proper claims under the terms of the Act, I hope the House will agree, if forced to a Division, to vote against this Prayer.

10.55 p.m.

Mr. John Foster (Northwich)

I think it is unfortunate that the Parliamentary Secretary has to avow that he has been forced to bring in an amending regulation. Surely, this is one of the things which the Government could have foreseen. There is no unpredictable element here, like a drought, or an American slump which the Government seem so confidently to have expected. The thing is in black and white. It is a perfectly simple problem. Nothing new has happened since the regulation was drafted.

It is also, I think, unfortunate that the Parliamentary Secretary, on the first occasion on which we welcome him in the House in his new capacity, should have been forced to use arguments about the stockholders' representative who, be- cause he is chosen by the stockholders, must be a man of intelligence because the stockholders also would be intelligent. But immediately he went on to point out that in certain circumstances the stockholders' representative would be appointed by the Minister, and the criticisms which were levelled by my hon. and gallant Friends at the possible actions of the stockholders' representative could apply to one appointed by the Minister. His answer that the stockholders' representative, being appointed by the shareholders, could not do anything foolish does not apply to one appointed by the Minister.

Mr. Robens

The Minister only appoints a stockholders' representative when the stockholders themselves have failed to appoint one. They have an opportunity of appointing one themselves, and it is their failure to do so that causes the Minister to step in and appoint one himself. If I may say so, it will be a very intelligent appointment.

Mr. Foster

Has the Parliamentary Secretary thought of the case where the stockholders' representative dies after two months? That is not through failure of the stockholders, however intelligent they are. They cannot foresee that anybody is going to die. Then the Minister appoints a stockholders' representative, and it is not through the default of the stockholders. That is a case where the stockholders' representative through nobody's fault, is appointed by the Minister. It is in this case that there should be safeguards against his acting in a foolish or misguided fashion. I think it is a pity that the Parliamentary Secretary did not deal more specifically with some of these points of detail.

It is curious that in these regulations the Minister seems to have omitted the possibility of death. The death of the stockholders' representative is not provided for and the death of the auditor is not provided for at all. The Parliamentary Secretary should bear in mind the dissolution of all things human, governments, and so on. It is always possible for things to come to an end, though one would not think so from the cocksure attitude of the Government's supporters. My hon. Friends have pointed out in detail the points of criticism, and it will be within the recollection of the House that these points have been made.

Mr. Robens

If I might intervene for one moment, it is really unfair to say that none of these regulations deals with the question of the death of the stockholders' representative. Regulation No. 2 makes it perfectly clear what happens if the office becomes vacant, and it would obviously become vacant if the stockholders' representative died. The regulation states: Provided that if a new stockholders' representative is not appointed by the holders of securities before the expiry of two months from the date when the office became vacant, the Minister may appoint a new stockholders' representative.

Mr. Foster

That does not cover the position. How are the stockholders to know? The death of a stockholders' representative occurs and there is no notice to the scattered shareholders all over the country, and no machinery is provided for letting them know. It is quite easy to provide a safeguard against that. It would take only six or seven words of drafting. Two points of special importance with which I hope the Parliamentary Secretary will deal—as he said he would in his very conciliatory and, in some parts, helpful speech—are the security to be given by the stockholders' representative and also the matter that when a stock- holders' representative is removed he does not have to give accounts. It looks as if there is something a little peculiar there,

I conclude by saying that this matter should have been foreseen. It is a case of a Minister not applying his mind sufficiently to the position and duties of the stockholders' representatives. One can understand that this extraordinary position—unknown in any other form of nationalisation or acquisition by the State—should have led to difficulties. All the more reason for studying the position carefully and making the regulations watertight. It is perhaps a matter of congratulation that the regulations were signed by the former Minister of Fuel and Power, and that, now that the Government have shown their faith in unilateral disarmament, we have another Minister who is going to do better.

Question put, and negatived.

ADJOURNMENT

Resolved, "That this House do now adjourn."—[Mr. Popplewell.]

Adjourned accordingly at Three Minutes to Eleven o'Clock.