Clause 38 (Hansard, 17 May 1973)

§ Mr. Millan

I beg to move Amendment No. 45, in page 26, line 30, leave out 'one-half' and insert 'one-quarter'.

We are dealing here with the definition of a controlling interest in a company. The Bill as originally published in Clause 39 defined a controlling interest as one-quarter of the votes which could be cast at a general meeting of the body corporate". That clause was taken out and another put in. In the new clause the "one-quarter" had been changed to "one-half". The one-quarter was taken from the 1965 Act where it was inserted basically in relation to newspaper mergers. As far as I know it has worked perfectly well in the years since 1965. It has not caused any difficulty. Therefore, I do not see why, in the slightly wider context in which we have the definition of controlling interest in the Bill, we should not maintain the proportion of one-quarter.

In practice, no matter what existing company legislation might provide, a controlling interest can be obtained with significantly fewer than one-half of the votes which could be cast at a general meeting. It may be that in certain 1801 circumstances one-quarter would not be enough.

When we are dealing with persons who may have committed an offence and may be taken to be personally liable, we are looking for something which meets the actual situation rather than a theoretical possibility. I prefer one-quarter to one-half. Obviously the Government preferred that originally as well. It was only later that they changed their minds, for, as far as I can see. no very good reason.

§ Mr. Emery

The hon. Member for Glasgow, Craigton (Mr. Millan) moved the amendment in an extremely reasonable way. However, I make no apology for the change from one-quarter to one-half. As I said in Committee, this was done only after careful consideration of representations from the CBI and consideration to the interpretation of the law and other circumstances where a 50 per cent. holding is the common way of defining control.

This part of the Bill deals with the remedies that the Director General may pursue against someone who persists in a course of conduct detrimental to the interests of the consumer. Therefore, the question is how we should define the circumstances in which the Director General might seek an order against not the offender himself, but some other person. The proposition that the court should make an order against a third person is, as I am sure the hon. Gentleman will accept, an unusual procedure. Indeed, it indicates the Government's intention that this part of the Bill should have teeth. In other words, we are going after the person who might be behind the front man. Therefore, it may be necessary to seek an order against the person who has a controlling interest in a company and who may appear to be ultimately responsible for the company's conduct. That is what Clause 38 does. It is fair and reasonable that its definition of "controlling interests" should be properly and tightly drawn and in line with that which operates for company law purposes.

We understand the arguments of Labour Members who fear that there may be someone who is not covered by what we are saying. But, after consideration, we believe that the normal definition for Companies Act purposes— 1802 the 50 per cent. holding—should obtain. The hon. Gentleman said that for the purposes of the Act a newspaper proprietor is defined to include any person having control of more than one-quarter of the votes in a newspaper company. Our original drafting did not go along with the normal company law basis but followed the definition for newspaper mergers. The definition of control is not the definition which normally operates for company law purposes. If the hon. Gentleman wants references he will find that Section 194 of the Companies Act 1948 applies.

The 25 per cent. control test was severely criticised when the Bill was originally published and we concluded that there was force in the representations. That is why we have reverted to 50 per cent.