HC Deb 19 July 1967 vol 750 cc2161-9

(1) The provisions of the principal Act and of the Stock Transfer Act 1963 concerning the registration of transfers of shares and debentures, the registers of members and debenture holders, the issue of share certificates and debentures and all matters relating thereto shall be modified to the following extent, namely, that it shall not be unlawful for a company to rectify the register of its members or of its debenture holders in accordance with and in order to give effect to a request to which this section applies and to issue share certificates and debentures accordingly.

(2) This section applies to a request which is made to the company in writing (accompanied by the share certificates or the debentures to which the request relates) by the person who lodged with the company the transfer to which the request relates, after the said transfer has been registered by the company, and which contains a statement of the rectification required and an assurance that the request arises from an error in or an unintentional, omission from the said transfer.

(3) A request made in pursuance of this section shall be an 'other document' within the meaning of section 483 of the principal Act (penalty for false statements) and accordingly a reference to this section shall be added to the provisions specified in Schedule 15 of the principal Act.—[ Graham Page.]

Brought up, and read the First time.

Mr. Graham Page

I beg to move, That the Clause be read a Second time.

This, again, is a very modest reform in company law, but it is an urgent one, because in some respects it has the same type of urgency as the last Clause, in that the law in this case is being observed partly in the breach, and unless the Clause is accepted commercial transactions will be obstructed by the law. The right hon. Gentleman will perhaps be justified in blaming me personally for causing this obstruction, because it arises out of the Stock Transfer Act, 1963, which I am proud to have been responsible for geting through the House.

This Act has saved an enormous amount of time in the transfer of shares and stock, and this is an important element in our commercial system, and in the financing of industry. It is very important that share transactions are completed expeditiously, and that we should not burden our productive effort with unnecessary administration and administrative costs in the transfer of shares. This is perhaps only one part of the problem of production, but it is a very important part, and can, if it is wrongly administered, be very obstructive.

4.45 p.m.

The Stock Transfer Act of 1963 has worked very satisfactorily, but it has had some small teething troubles. In the typical spirit of those who administer our commercial affairs—perhaps we can call them "The City" as a general name—the teething troubles have to some extent been relieved, or solved, or remedied, or whatever one does with teething troubles, but to some extent with a disregard of the law.

The transfer of shares does not now need the signature of the transferee, with the result that the transferee to whom the shares are transferred seldom sees the transfer. It goes through the brokers to the company for the registration of the shares in the transferee's name, and the issue of a certificate to him. It may hap- pen that in the course of the transfer being prepared, and the transferee himself not even seeing the document, some error occurs in his name. He is called "John Brown" instead of "James Brown", or his address is wrong, or some fairly minor point of that kind arises.

What happens at the moment is that the lodging brokers are informed of this error. They tell the company, and if the registrar of the company is satisfied that it is not a substantial alteration in the transfer, although he has entered the original transfer particulars in his register, he alters the register. This places registrars in grave difficulty. I do not think that they do anything wrong if it is an insubstantial alteration, but it is for them to judge, and it puts them in a difficult position about whether they are doing right or wrong.

If there is an error in the name between "John" and "James", it may mean that the share transfer has been registered in the name of the wrong member of the family, and if there is a family squabble, this is perhaps the most bitter squabble that ever occurs in litigation, and it is quite likely that some barrack room lawyer will take up this point, and the registrar may find himself prosecuted for breach of the law.

He has to judge whether he is making a substantial alteration in the registration. If he likes to be difficult over it, he can tell the transferee and the lodging broker that there is a provision in the Companies Act, 1948 for rectification of the register—"You apply to the court and have it rectified in that way". But if that were done on simple transactions of this sort there would be great obstruction to the transfer of shares.

The Clause sets out a reasonable way of getting over this difficulty. It says that if there is to be a rectification of this sort, the lodging broker, or whoever lodges the share transfer, can explain the position by letter, by notice in writing, that it is an error, and ask for it to be corrected in the register. He can explain that it is an unintentional omission, or an error, and that it is right that it should be corrected.

There is the possibility that some unscrupulous person might take advantage of that and endeavour to effect a sub-sale of the shares by a minor rectification of this sort, and therefore subsection (3) of the Clause imposes the sanction that any notice of this sort, any request to correct a register, shall be one of the documents which attract penalties under Section 483 of the principal Act.

This is a modest reform, but it would relieve a registrar of a company of great anxiety when he wants to help a person who has made an error or an unintentional omission, and it would not burden the courts with litigation or obstruct normal commercial transactions in the transfer of shares.

Mr. Darling

The House will be pleased to know that my arguments for not accepting the new Clause are slightly different from those which I advanced earlier. As the hon. Member for Crosby (Mr. Graham Page) has said before, this is a modest proposal. In Committee, as today, he argued that there is a certain element of urgency about it. I have been advised that very few cases—probably for the reasons given by the hon. Member—come before the courts asking for registers to be rectified under the existing procedure for rectification, and that very few are likely to come forward. In any case, my legal advisers have shaken their heads over the drafting of the new Clause, and ask that they should have a little more time to think about any proposal for the rectification of registers in this manner.

I therefore suggest—and this is where I come to the same answer that I gave before—that we are quite willing to meet the hon. Member and do everything possible to help him get this provision knocked into shape and put into the Companies Bill that I promise will come before Parliament and be placed on the Statute Book during the lifetime of this Parliament.

Mr. Gower

The right hon. Gentleman has made a very strange reply. I agree that it was a different rejection from the one we have heard before, but why could not he have put down an Amendment in the correct legal form? He objects to the wording of the new Clause. If he accepts the reasonable nature of its subject matter and agrees that it is modest and useful, surely the Government could have prepared a new Clause to the same effect, in the correct terminology.

I cannot feel that its rejection in the terms we have heard has any real merit. The truth is that the present position of registrars of companies is an invidious one. They should not be put into this position when they are confronted with a request for the amendment of a register where it is a question purely of a very slight error. It is wrong of the Government to continue to impose upon registrars this obligation to make a decision without giving them the sanction that my hon. Friends require. Although the right hon. Gentleman put forward a different reason for not accepting the new Clause in this case, it was just as disappointing a reason.

Mr. Corfield

I do not find the ingenuity of the right hon. Gentleman in trying to find a different way of saying the same thing any more attractive than I found his previous arguments. This question was raised by my hon. Friend in Committee, since when we have had about 34 days—which is plenty of time—for the Government to consider the drafting and put something down themselves. These 34 days have been occupied by the Government in adding 20 new Clauses, many of which were no more urgent and in many respects no better drafted than those which we are now discussing.

There was one new Clause in respect of which we had considerable discussion about the drafting, and it was clear that we could have made every bit as strong a case on misdrafting as the right hon. Gentleman has made about the drafting of this new Clause. It seems an absolute abuse of the time of the House, when we are discussing a Bill like the Companies Bill, not to be able to rectify a matter of this sort. The Government have had plenty of time to consider the question. I believe that at the back of the right hon. Gentleman's mind is the fear that somebody else will say, "Why should not you accept an Amendment put forward by the T.U.C.?" This is not what the House is for, and I hope that my hon. Friends will accept my advice and divide.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 142, Noes 203.

Division No. 476.] AYES [4.56 p.m.
Alison, Michael (Barkston Ash) Griffiths, Eldon (Bury St. Edmunds) Nott, John
Allason, James (Hemel Hempstead) Grimond, Rt. Hn. J. Onslow, Cranley
Astor, John Gurden, Harold Osborne, Sir Cyril (Louth)
Atkins, Humphrey (M't'n & M'd'n) Hall-Davis, A. G. F. Page, Graham (Crosby)
Baker, w. H. K. Hamilton, Michael (Salisbury) Page, John (Harrow, W.)
Balniel, Lord Harris, Frederic (Croydon, N.W.) Pearson, Sir Frank (Clitheroe)
Barber, Rt. Hn. Anthony Harrison, Col. Sir Harwood (Eye) Peel, John
Bell, Ronald Harvey, Sir Arthur Vere Pounder, Rafton
Bennett, Sir Frederic (Torquay) Hawkins, Paul Powell, Rt. Hn. J. Enoch
Bennett, Dr. Reginald (Gos. & Fhm) Heald, Rt. Hn. Sir Lionel Pym, Francis
Bessell, Peter Hill, J. E. B. Ramsden, Rt. Hn. James
Biffen, John Hirst, Geoffrey Renton, Rt. Hn. Sir David
Birch, Rt. Hn. Nigel Holland, Philip Ridley, Hn. Nicholas
Brinton, Sir Tatton Hooson, Emlyn Ridsdale, Julian
Bromley-Davenport, Lt.-Col. Sir Walter Hunt, John Robson Brown, Sir William
Brown, Sir Edward (Bath) Hutchison, Michael Clark Rodgers, Sir John (Sevenoaks)
Bruce-Gardyne, J. Irvine, Bryant Godman (Rye) Rossi, Hugh (Hornsey)
Bryan, Paul Johnston, Russell (Inverness) Russell, Sir Ronald
Buchanan-Smith, Alick (Angus, N&M) Kaberry, Sir Donald Shaw, Michael (Sc'b'gh & Whitby)
Bullus, Sir Eric Kimball, Marcus Sinclair, Sir George
Burden, F. A. King, Evelyn (Dorset, S.) Stainton, Keith
Campbell, Gordon Kirk, Peter Stoddart-Scott, Col. Sir M. (Ripon)
Carr, Rt. Hn. Robert Knight, Mrs. Jill Summers, Sir Spencer
Cary, Sir Robert Lancaster, Col. C. G. Tapsell, Peter
Cooke, Robert Langford-Holt, Sir John Taylor, Sir Charles (Eastbourne)
Cordle, John Lewis, Kenneth (Rutland) Taylor, Edward M. (G'gow, Cathcart)
Corfield, F. V. Lloyd, Ian (P'tsm'th, Langstone) Taylor, Frank (Moss Side)
Costain, A. P. Lloyd, Rt. Hn. Selwyn (Wirral) Temple, John M.
Crosthwaite-Eyre, 8ir Oliver Loveys, W. H. Thatcher, Mrs. Margaret
Cunningham Sir Knox Lubbock, Eric Thorpe, Rt. Hn. Jeremy
Currie, G.B H. McAdden, Sir Stephen Turton, Rt. Hn. R. H.
Dalkaith, Earl of MacArthur, Ian van Straubenzee, W. R.
Maclean, Sir Fitzroy Vaughan-Morgan, Rt. Hn. Sir John
Dance, James McMaster, Stanley
Davidson, James (Aberdeenshire, W.) Maginnis, John E. Wainwright, Richard (Colne Valley)
Dean, Paul (Somerset, N.) Marten, Neil Walker, Peter (Worcester)
Dodds-Parker, Douglas Maude, Angus Ward, Dame Irene
Elliott, R.W. (N'c'tle-upon-Tyne, N.) Mawby, Ray Weatherill, Bernard
Emery, Peter Maxwell-Hyslop, R. J. Whitelaw, Rt. Hn. William
Errington, Sir Eric Maydon, Lt.-Cmdr. S. L. C. Wills, Sir Gerald (Bridgwater)
Eyre, Reginald Mills, Peter (Torrington) Wilson, Geoffrey (Truro)
Fortescue, Tim Mitchell, David (Basingstoke) Wood, Rt. Hn. Richard
Foster, Sir John Montgomery, Fergus Worsley, Marcus
Giles, Rear-Adm, Morgan More, Jasper Wright, Esmond
Gilmour, Sir John (Fife, E.) Morrison, Charles (Devizes) Wylie, N. R.
Glover, Sir Douglas Munro-Lucas-Tooth, Sir Hugh Younger, Hn. George
Gower, Raymond Nabarro, Sir Gerald
Grant, Anthony Neave, Airey TELLERS FOR THE AYES:
Grant-Ferris, R. Nicholls, Sir Harmar Mr. Timothy Kitson and
Mr. Anthony Royle.
Allaun, Frank (Salford, E.) Brown, Bob (N'c'tle-upon-Tyne, W.) Dunwoody, Mrs. Gwyneth (Exeter)
Alldritt, Walter Brown, R. W. (Shoreditch & F'bury) Dunwoody, Dr. John (F'th & C'b'e)
Allen, Scholefield Buchan, Norman Edwards, Rt. Hn. Ness (Caerphilly)
Anderson, Donald Buchanan, Richard (G'gow, Sp'burn) Edwards, Robert (Bilston)
Archer, Peter Butler, Herbert (Hackney, C.) Edwards, William (Merioneth)
Armstrong, Ernest Cant, R. B. Ellis, John
Atkins, Ronald (Preston, N.) Carmichael, Neil English, Michael
Atkinson, Norman (Tottenham) Carter-Jones, Lewis Ensor, David
Bagier, Gordon A. T. Coleman, Donald Evans, Albert (Islington, S.W.)
Barnett, Joel Concannon, J. D. Evans, Iona L. (Birm'h'm, Yardley)
Beaney, Alan Conlan, Bernard Finch, Harold
Bence, Cyril Craddock, George (Bradford, S.) Fitch, Alan (Wigan)
Benn, Rt. Hn. Anthony Wedgwood Crosland, Rt. Hn. Anthony Fletcher, Raymond (Ilkeston)
Bennett, James (G'gow, Bridgeton) Crossman, Rt. Hn. Richard Ford, Ben
Blackburn, F. Cullen, Mrs. Alice Forrester, John
Blenkinsop, Arthur Darling, Rt. Hn. George Fraser, John (Norwood)
Boardman, H. Davidson, Arthur (Accrington) Galpern, Sir Myer
Booth, Albert Davies, Dr. Ernest (Stretford) Gardner, Tony
Bottomley, Rt. Hn. Arthur Davies, S. O. (Merthyr) Garrett, W. E.
Bowden, Rt. Hn. Herbert Dell, Edmund Ginsburg, David
Boyden, James Dempsey, Jamea Gourlay, Harry
Braddock, Mrs. E. M. Dickens, James Gray, Dr. Hugh (Yarmouth)
Bradley, Tom Doig, Peter Gregory, Arnold
Brooks, Edwin Driberg, Tom Grey, Charles (Durham)
Brown, Hugh D. (G'gow, Provan) Dunnett, Jack Griffiths, Will (Exchange)
Hamilton, James (Bothwell) McNamara, J. Kevin Roberts, Albert (Normanton)
Hamilton, William (Fife, w.) MacPherson, Malcolm Roberts, Goronwy (Caernarvon)
Harrison, Walter (Wakefield) Mahon, Peter (Preston, S.) Robertson, John (Paisley)
Haseldine, Norman Mallalieu, E. L. (Brigg) Rogers, George (Kensington, N.)
Heffer, Eric S. Mallaiieu, J.P.W. (Huddersfield, E.) Rose, Paul
Hooley, Frank Manuel, Archie Ross, Rt. Hn. William
Horner, John Mapp, Charles Rowlands, E. (Cardiff, N.)
Howie, W. Marquand, David Sheldon, Robert
Hoy, James Marsh, Rt. Hn. Richard Shinwell, Rt. Hn. E.
Huckfield, L. Mason, Roy Short, Rt. Hn. Eclward (N'c'tle-u-Tyne)
Hughes, Emrys (Ayrshire, S.) Maxwell, Robert Short, Mrs. Renée (W'hampton, N.E.)
Hughes, Hector (Aberdeen, N.) Millan, Bruce Silkin, Rt. Hn. John (Deptford)
Hughes, Roy (Newport) Miller, Dr. M. S. Silverman, Julius (Aston)
Hunter, Adam Mitchell, R. C. (S'th'pton, Test) Slater, Joseph
Jackson, Colin (B'h'se & Spenb'gh) Morgan, Elystan (Cardiganshire) Small, William
Jackson, Peter M. (High Peak) Morris, Alfred (Wythenshawe) Spriggs, Leslie
Jay, Rt. Hn. Douglas Morris, Charles R. (Openshaw) Steele, Thomas (Dunbartonshire, W.)
Johnson, Carol (Lewisham, s.) Moyle, Roland Storehouse, John
Jones, Dan (Burnley) Murray, Albert Strauss, Rt. Hn. G. R.
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.) Newens, Stan Taverne, Dick
Jones, J. Idwal (Wrexham) Noel-Baker, Francis (Swindon) Thornton, Ernest
Jones, T. Alec (Rhondda, West) Norwood, Christopher Tinn, James
Kelley, Richard Ogden, Eric Tomney, Frank
Kerr, Dr. David (W'worth, Central) Orbach, Maurice Tuck, Raphael
Kerr, Russell (Feltham) Orme, Stanley Urwin, T. W.
Lawson, George Owen, Dr. David (Plymouth, S'tn) Wainwright, Edwin (Dearne Valley)
Lee, Rt. Hn. Frederick (Newton) Owen, Will (Morpeth) Wallace, George
Lestor, Miss Joan Padley, Walter Watkins, Tudor (Brecon & Radnor)
Lever, Harold (Cheetham) Page, Derek (King's Lynn) Wellbeloved, James
Lever, L. M. (Ardwick) Paget, R. T. White, Mrs. Eirene
Lewis, Arthur (W. Ham, N) Pannell, Rt. Hn. Charles Whitlock, William
Lewis, Ron (Carlisle) Park, Trevor Williams, Alan (Swansea, W.)
Lipton, Marcus Parkyn, Brian (Bedford) Williams, Clifford (Abertillery)
Lomas Kenneth Pavitt, Laurence Willis, George (Edinburgh, E.)
Loughlin, Charles Pearson, Arthur (Pontypridd) Wilson, William (Coventry, S.)
Luard, Evan Pentland, Norman Winterbottom, R. E.
Mabon, Dr. J. Dickson Perry, Ernest G. (Battersea, 8.) Woodburn, Rt. Hn. A.
McBride, Neil Perry, George H. (Nottingham, S.) Woof, Robert
McCann, John Price, Christopher (Perry Barr) Yates, Victor
MacColl, James Price, Thomas (Westhoughton)
McGuire, Michael
Mackenzie, Gregor (Rutherglen) Price, William (Rugby) TELLERS FOR THE NOES:
Mackintosh, John P. Probert, Arthur Mr. Joseph Harper and
MacMillan, Malcolm (Western Isles) Rankin, John Mr. Harold Walker.
McMillan, Tom (Glasgow, C.) Rees, Merlyn