DIRECTORS OF INSOLVENT COMPANIES BILL (Hansard, 26 June 1973)

§ Mr. Greville Janner (Leicester, North-West)
I beg to move, That leave be given to bring in a Bill to amend the law relating to directors of insolvent companies. The Bill requires disclosure by certain company directors of their part in depriving the company's creditors of their money. I shall speak briefly, but this is a matter of importance to many millions of people who are owed money by companies or who are employed by companies which go into liquidation not necessarily as a result of fraud but as a result of the failure of the directors of the company properly to conduct the company's affairs. As the law stands, these directors in most cases can immediately set up the same business under another company name, with the same limited liability, and incur further debts from the same people without full disclosure of their part in the previous disaster.
The number of liquidations concerned in the last 10 years is just over 10,000. The number of directors concerned we do not know, because the Secretary of State for Trade and Industry says that he regrets that the information cannot be ascertained without undue expenditure of time and effort. When I asked how many directors had been required to pay out of their own resources deficiencies of companies put into compulsory liquidation during each of the last five years he regretted that the information was not readily available but said that inquiries would be made of official receivers and he would write to me when the information was to hand. Unfortunately that time has not yet arrived.
The object of the Bill is simple. At present company notepaper and certain other documents must contain the names of directors. I am asking in the Bill that 1328 in addition it should be stated on such documents the number of times each director has held office in companies put into compulsory liquidation during the previous five-year period. This would not penalise the innocent because they could apply for exemption, but it would mean that those who use the present system of limited liability to take away the money of others would at least be held in the limelight and would, I hope, be inspired to indulge in such action far less.
I wrote to the appropriate Minister on this subject and I received in reply a letter from the noble Lord, Lord Limerick who said that he disagreed with my proposal but hoped that some way could be found of improving disclosure in this area, because I agree that adequate disclosure to shareholders has a vital role to play in improving the efficiency of company management. The noble Lord, with respect, totally missed the point. It is important that shareholders should be protected and that companies should be efficiently managed. It is of even greater importance that the jobs of my constituents should be protected and, in addition, that those ordinary people who buy goods from companies which then go into liquidation and who cannot obtain spare parts or service in respect of those goods should be protected in their very much greater numbers.
The range of companies which the Bill seeks to encompass runs from the small builder who takes money from an individual and then goes into liquidation in the middle of a job, to companies such as Rolls-Royce, the liquidation of which left many small companies which supplied Rolls-Royce with spare parts in dire straits and consequently left many thousands of people in my constituency and others without jobs.
The Bill will make life more difficult for the man who seeks to put his limited liability before the welfare of those who are owed money by the company.
The CBI recently commented on this—and unfortunately that comment has not been given the airing it should have been given. The report of Lord Watkinson's Committee said: It appears to be too easy for directors of a company which has failed to meet its liabilities. financially or otherwise, or which is 1329 under investigation by the Department of Trade and Industry, to set up a new company or to be appointed to directorships in other companies. Consideration should be given to the introduction of a provision in the next revision of the Companies Act which would prohibit the appointment of any such individual to the board of another company except with the approval of the Department of Trade and Industry. I agree with that comment, but there is a much simpler and more immediate step which can be taken by a simple addition to one section of the Companies Act which would require fuller disclosure.
The matter was set in proper perspective a long time ago by W. S. Gilbert in "Utopia Limited". In concluding this brief submission to the House, I hope I may be permitted to read three verses which I think set the matter on a proper footing and with a relevance which has not changed over the years Some seven men form an Association (If possible, all Peers and Baronets), They start off with a public declaration To what extent they mean to pay their debts. That's called their Capital: if they are wary They will not quote it at a sum immense. The figure's immaterial—it may wary From eighteen million down to eighteenpence. I should put it rather low; The good sense of doing so Will be evident at once to any debtor. When it's left to you to say What amount you mean to pay, Why the lower you can put it at, the better.… They then proceed to trade with all who'll trust 'em, Quite irrespective of their capital (It's shady, but it's sanctified by custom); Bank, Railway, Loan, or Panama Canal. You can't embark on trading too tremendous— It's strictly fair, and based on common sense— If you succeed, your profits are stupendous— And if you fail, pop goes your eighteen-pence. Make the money-spinner spin! For you only stand to win, And you'll never with dishonesty be twitted, 1330 For nobody can know, To a million or so, To what extent your capital's committed! Then comes the final verse: If you come to grief, and creditors are craving (For nothing that is planned by mortal head Is certain in this Vale of Sorrow—saving That one's Liability is Limited),— Do you suppose that signifies perdition? If so you're but a monetary dunce— You merely file a Winding-Up Petition, And start another Company at once!

Several Hon. Members
Encore!

§ Mr. Janner
The encores have been given through the centuries. They have brought no result whatever. Therefore, I hope that my Bill will bring some results for it will remove the cosmetics from the unacceptable and ugly face of capitalism. It will let directors of defaulting companies stand in the limelight and will make their position infinitely more uncomfortable. It will protect people and therefore I hope that this brief and admirable measure will be passed in due course on the nod. In the meantime I hope that I shall be given leave to introduce it.