§ Mr. Darling
I beg to move Amendment No. 186, in page 23, line 25, at the end to insert:'provided that that is situate in England, in a case in which the company is registered in England and in Scotland, in a case in which the company is registered in Scotland'.The Clause requires a company to keep copies of its directors' contracts of service open to inspection to the members of the company at an appropriate place. One of the appropriate places is the company's principle place of business. The effect of the Amendment is to permit a register to be kept at the principal place of business only if that place of business is situated in the country in which the company is registered—in other words, in England if the company is registered in England and in Scotland if the company is registered in Scotland.
It had been suggested that this would be an appropriate Amendment, and I hope that it will be acceptable to the House.
§ Amendment agreed to.
§ Mr. Bruce-Gardyne
I beg to move Amendment No. 59, in page 23, line 26, at the end to insert:(5) Any member of the company or, in the case of a company whose shares are quoted or offered to the public on a stock exchange or which is a subsidiary of a company whose shares are so quoted or offered, any other person, may require a copy of the documents described in subsection (1 above, or any part thereof, on payment of a fee of 2s. or such less sum as the company may prescribe for every 100 words or fractional part thereof required to be copied; and the company shall cause any copy so required by a person to be sent to him before the expiration of the period of ten days beginning with the day next following that on which the requirement is received by the company.2344 As the Minister of State has just said, we are now dealing with the publication of directors' service contracts, and the purpose of the Amendment is to provide that members of a company in the case of private companies and members of the public in the case of public companies should be able to obtain copies of extracts from the register of directors' service contracts through the post and that, in the case of public companies, where the requirement is for the provision of such copies to members of the public it should be upon payment of a fee.
When we discussed this question in Committee I drew attention to the fact that the Government have made a distinction between the provisions for the passing of copies of extracts in the case of the register of directors' service contract as against the case of the register of directors' share dealings and the register of beneficial ownership of 10 per cent. or more of the equity.
In the latter two cases the provisions written into the Amendment are laid down in the Bill, but in the case of directors' service contract this provision is not made. During the discussions in Committee the Minister of State explained that this lacuna was intentional. I had always assumed that it was. He explained that it was felt that there was a degree of confidentiality over directors' service contracts which did not apply to the other two matters, but I was not entirely convinced by this.
When a quotation is sought for a new issue, the details of the directors' share service contracts have to be published in the prospectus, so this information is not confidential in public companies. The same obligation does not bind private companies but the information in public companies would be available only to the company, and it is important to recognise this distinction. With public companies, one must determine whether they are service contracts or insider share dealings or confidential ownership of 10 per cent. of the equity.
But these registers could be kept at remote company offices and would not be readily available to the public necessarily. In certain public companies a director's service contract arrangement involves a grave oppression of the shareholders' interests; in one notorious case, 2345 a director was entitled to a proportion of profits before all charges. By enlarging the company on the loan capital he vastly increased his emolument and therefore had a vested interest in building up a series of agreements which were not in the interests of the shareholders and which eventually landed the company in serious trouble.
Presumably Clause 26 is meant to deal with this and it is a step in the right direction—but not far enough. It does not remove the danger, because the damage may have been done by the time that a member of the company has scrutinised the register. Last week we discussed an Amendment to get these things published in regular reports by the Board of Trade. Members of the company, or the general public in a public company, should be entitled to have copies of extracts from the register of directors' service contracts sent to them in the post.
In Committee the Minister of State promised to look at this again. I hope that he has done so and that this time he will have a more agreeable reaction. The argument about special confidentiality does not stand up, particularly as service contracts have to be published in the prospectus in the case of a new issue. Let us not have the argument that the Amednment does not fit into the Bill but must come into the next Bill. If Clause 18 fits into the Bill, then anything fits into it—and my proposal is certainly more suitable to the purposes of the Bill than is Clause 18.
§ 2.15 a.m.
§ Mr. Darling
In Committee I undertook to look into the arguments which had been put forward and to consider the whole matter. I did not consider it alone, for we tried to canvass informed opinion, and we found that the opinion and our own views were finely balanced between the advantages of greater accessibility of information about directors' service contracts to members and the confidential nature of the documents and the rights to privacy of directors.
After considerable examination and some argument, we have come down against the Amendment of the hon. Member for South Angus (Mr. Bruce-Gardyne). At this stage of our progress towards greater disclosure of information on all kinds of activities in which direc- 2346 tors personally are concerned, there is a case for keeping the service contract to a certain extent confidential to members, and as the shareholders of the company can examine the service contract, it seems to me that to ask for copies to be supplied so as to give them a wider distribution is not required at this stage.
I must give the hon. Member the answer that he does not want: let us see how it goes. If it can be shown that we have made a mistake and that we should have accepted the Amendment, we will see that it is put right in the next Companies Bill. I feel sure that what we are doing is likely to be accepted and that the disclosure of contracts to members of companies without copies being available—if members of the company want to get hold of a service contract—will be sufficient to stop the kind of activity which the hon. Member mentioned and which we agree must be stopped in the public interest. We have come down, for the time being at any rate, on the side of the directors' privacy.
§ Mr. Graham Page
I wish to deal with a small point which the Minister did not mention in his reply to my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) and which occurs in two places, first in the last line of Amendment 59. It sets a time limit within which the information is to be given in relation to the requirement. Having asked for information, the person concerned must be supplied with it within a certain time.
We are dealing also in this group with Amendment No. 101, which is an Amendment to subsection (6) of Clause 34, in page 39 at line 29. The same point arises there, that the information from the register—in this case a different type of register—is to be provided within 10 days of the requirement. The Clause also provides for payment for copies. I should have thought that the word "requirement" in subsection (6) should be altered to "payment", as in our Amendment.
Members of the public use the registers for all sorts of purposes. It is not just a matter related to the company. It may be the honest take-over bidder who wants to look at the register to see who to buy from, or it may be a genuine adviser on investments, but more likely it is the journalist or even, I am told, 2347 the mail order advertiser who, in connection with the ordinary register, merely writes to the big companies and says, "Send me £5 worth of your register." He is not doing anything other than obtaining names to circulate, but we should protect the registrars and their companies against that sort of thing and allow them to demand payment first, the time to run from its receipt. I hope that when we reach Amendment No. 101 the right hon. Gentleman will say that he accepts it.
§ Mr. Darling
I had forgotten that we are discussing Amendment No. 101 with Amendments Nos. 59 and 60.
Amendment No. 101 is unnecessary, because under this Bill and Section 113 of the Companies Act, 1948, relating to the members register, provision is made for the company to charge a fee for copies of the members register. Requirement is not a proper requirement unless it is accompanied by the correct fee and time does not begin to run until a proper requirement has been received. Therefore, a company would not be committing an offence if it did not supply copies in response to a request which was accompanied either by the wrong fee or by no fee.
For those reasons the Amendment is unnecessary, but I agree that there is a serious problem here. I should have declared an interest. I am a member of the Council of the Institute of Advanced Motorists, and a short time ago it was discovered that under the Companies Act everybody who has passed the driving test and joined the Institute is a member of the association. The Institute has had people asking for the register of members for all kinds of purposes. It has had to get over the difficulty and now the only members of the association are the members of the Council. All the other members are associate members, and we can now keep the register to ourselves.
§ Mr. Darling
Arrangements have been made for them to vote. There is a serious problem here, and we shall have to deal with it at some point.
§ Amendment negatived.2348
§ Amendment made: No. 187, in page 23, line 41, after 'kept', insert:
- (a) a copy of, or memorandum setting out the terms of, a director's contract or a copy of, or memorandum setting out the terms of, a variation of such a contract, so long as the contract (as made or varied) requires him to work wholly or mainly outside the United Kingdom; or
- (b) —[Mr. Jay.]