HC Deb 03 March 1980 vol 980 cc166-76
Sir Graham Page

I beg to move amendment No. 344, in page 88, leave out lines 17 to 20 and insert to take all reasonable steps to secure that the secretary or each joint secretary of the company is a person who appears to them to have the requisite knowledge and experience to discharge the functions of secretary of the company and who'.

Mr. Deputy Speaker

With this we may take the following amendments: No. 385, in page 88, line 19 leave out 'and experience'.

No. 386, in line 20 leave out from 'secretary' to end of line 33.

No. 345, in line 21, leave out from 'secretary' to end of line 22 and insert 'or assistant or deputy secretary of the company'.

No. 346, in line 25, leave out 'the appointment has' and insert 'his appointment as secretary'.

No. 347, in line 26, leave out from 'a' to end of line 33 and insert 'company other than a private company; or (c) is a member of any of the bodies specified in subsection (2) below; or (d) is a barrister, advocate or solicitor called or admitted in any part of the United Kingdom; or (e) is a person who, by virtue of his holding or having held any other position or his being a member of any other body, appears to the directors to be capable of discharging those functions. (2) The bodies referred to in subsection (1)(c) above are: —

  1. (a) the Institute of Chartered Accountants in England and Wales;
  2. (b) the Institute of Chartered Accountants of Scotland;
  3. (c) the Association of Certified Accountants;
  4. (d) the Institute of Chartered Accountants in Ireland;
  5. (e) the Institute of Chartered Secretaries and Administrators;
  6. (f) the Institute of Cost and Management Accountants;
  7. (g) the Chartered Institute of Public Finance and Accountancy.'.

No. 138, in line 31, after Ireland insert 'or of the Association of Certified Accountants'.

No. 139, in line 31, after 'Ireland' insert 'or of the Institute of Cost and Management Accountants'.

No. 140, in line 31, after 'Ireland' insert 'or the Chartered Insurance Institute'.

No. 141, in line 31, after 'Ireland', insert 'or of the British Association of Accountants and Auditors'.

No. 142, in line 31, after 'Ireland', insert 'or of the Association of International Accountants'.

No. 143, in line 31, after 'Ireland', insert 'or of the Association of Authorised Public Accountants'.

No. 144, in line 31, after 'Ireland' insert 'or (in the case of an insurance company) of the Chartered Insurance Institute'.

No. 145, in page 88, line 31, at end insert—

  1. (i) is a member of the Association of Certified Accountants, or
  2. (ii) is a member of the Institute of Cost and Management Accountants, or
  3. (iii) is a member of the Chartered Institute of Public Finance and Accountancy.'.
  4. (iv) is a member of the Association of International Accountants.

Sir G. Page

In Committee the principle that the secretary to a public company should be qualified for that purpose was accepted. We pile more and more obligations on the directors in every Companies Act. The directors must necessarily look to the secretary for guidance. The situation was burdensome before the Government introduced the present Bill. This Bill will give the directors more duties. They will need more advice by a qualified person. A director will need to consider the interests of employees, limitations on contracts with directors, loans to directors, and the disclosure of directors' interests. Directors may also seek guidance on insider dealings. All of those issues require expert knowledge.

I shall not argue the case fully, as the principle that secretaries should be qualified was accepted in Committee. Of course, the clause required consideration by those involved. I am glad that my hon. Friend the Minister had consultations with those involved. As a result, my amendments stand on the Amendment Paper. I shall not discuss amendments Nos. 138 to 144 as they have been overtaken by amendment No. 347.

Amendment No. 344 is consequential on amendment No. 346. It is little more than a redrafting of the first few lines of the clause. The first few lines make two assumptions that are incorrect. The first assumption is that the secretary is always appointed by the directors. Perhaps there are provisions in the articles for the secretary to be appointed by someone else. The revised wording provided in amendment No. 344 would take that into account.

Secondly, as originally drafted, consideration was not given to the fact that the secretary might become disqualified. A secretary might have his membership of an institution withdrawn. One should consider whether the secretary is qualified at all times, not merely when he is appointed. Amendment No. 345 restricts paragraph (a) to certain specific officers —the secretary, the assistant secretary and the deputy secretary—because in the larger amendment No. 347 the matter is picked up in paragraph (e) where other officers are concerned.

Amendment No. 347 deals with the question of the qualifications and with those listed in subsection (2). Those are the bodies which the House would consider without question as they provide a natural channel for an individual equipping himself for a career as a secretary. The new paragraph (c) in subsection (1) introduces that list in subsection (2). Paragraph (d) of the new subsection (1) retains within that list solicitors and barristers who were in the clause accepted in Committee.

For the moment I shall skip new subsection (1)(e) and go straight to the list in subsection (2). The House will see that paragraphs (c), (f) and (g) are additions to that list so far as the list was accepted in Committee. Paragraphs (a), (b), (d) and (e) were accepted in Committee and the list now covers those who are already accepted in the Companies Acts as qualified as auditors for a company, and it also covers those who belong to a body known as the Consultative Committee of Accountancy Bodies, which includes the recognised accountancy bodies.

I come back to new subsection (1) (e), which provides that the following shall be qualified: a person who, by virtue of his holding or having held any other position or his being a member of any other body, appears to the directors to be capable of discharging those functions. On consultation, I have found that there were officers who were a little superior to secretaries but who undoubtedly had the qualifications front experience in many companies. There are officers referred to as "directors-general", "chief administrators" or "chief executives". It may well be that the directors would think that anyone with experience in such a position was well qualified to act as secretary. That was one point that we wanted to cover in paragraph (e).

Secondly, there are specialist institutions such as those for insurance or banking where obviously those who have qualified or who are members of those institutes would be fit and proper persons to act as secretaries for an insurance company or a banking company. Those are the sort of cases that it was obviously necessary to cover in this clause. With this list, which I hope the House will approve, we include a body which concentrates on the education of secretaries, namely, the Institute of Chartered Secretaries and Administrators. I declare an interest in that I am an honorary fellow of that body. That is the main body for secretaries, and I hope that it will organise a common examination and a common training programme with the other institutions that I have mentioned. Until that applies universally, it is necessary to allow those who are experienced in secretarial business to be accepted as qualified.

Whenever the House has passed legislation saying that those practising a certain profession or in a certain business must in future be qualified or not practise in that business, it has always recognised that there will be, at that point, those who have not reached that qualification but who have good experience in that position. One cannot exclude them at that stage. Eventually I hope that there will be universal—

It being Ten o'clock, further consideration of the Bill stood adjourned.

Ordered, That, at this day's sitting, the Companies Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Mather.]

Bill, as amended (in the Standing Committee), further considered.

Sir G. Page

I hope that in due course all secretaries will become qualified by examination as well as by experience, so that the directors will not have any doubt that the person they are appointing is properly qualified.

I hope that the House will accept the amendments.

Mr. Martin Stevens (Fulham)

I support the amendments in the name of my right hon. Friend the Member for Crosby (Sir G. Page). On amendment No. 347, it is true that presently many bodies are seeking to present themselves as holding professional status. The Institute of Directors is seeking to be regarded as an essential body to which all persons wishing to serve as directors of companies must belong. Over the coming years, the Institute of Directors will try to apply to its members a growing range of professional requirements which would at the end of the day, justify members of that institute regarding themselves as professionals.

In the list of bodies mentioned in the amendment there are some that are truly professional, in the sense that they offer a course of study followed by an examination, the passing of which is an essential prerequisite to acting as a professional person, and in which bodies there is a self-regulating code of practice applied to ensure proper professional behaviour. There is no such requirement in many of the other organisations listed.

I hope that my hon. Friend the Minister for Trade, will have regard, over the years, to those factors so that organisations that are fully professional will be added to the list, and those which fail to become fully professional may be considered with a sharper scrutiny.

The amendment clearly meets a requirement in the Bill. It is a more liberal statement than that made in the revised version of the Bill. I commend it to the House.

Mr. Clinton Davis

I recall that on the evening that the right hon. Member for Crosby (Sir G. Page) managed, with some difficulty, to persuade the Government to accept his proposal, he was feted and regaled by the Institute of Chartered Secretaries and Administrators at a dinner that he will remember. However, the mighty victory has been affected by some of the amendments that provide, in effect, that one must be qualified unless one is not qualified.

If we are to press for a list, I ask the Minister to consider the Association of International Accountants, which is specified in amendment No. 145. I know that the Department of Trade has not regarded the AIA's examinations as being adequate, but I understand that they have now been endorsed by distinguished moderators of the Department's choosing, and that may make a difference.

The association was concerned chiefly with Commonwealth accountants in places such as Nigeria who looked to this country to establish their standards through the AIA. The association has 27 principal examiners and, in addition to examining in English law, conducts examinations in taxation and company law, in the local law of 10 other countries. It has impartial examination standards and hopes that the Minister will look upon it with some favour.

I am surprised that the Minister has not sought powers to add to the list by statutory instrument. That would be more helpful than including the list in primary legislation, but we are stuck with the legislation, as is the Minister.

Mr. Ben Ford (Bradford, North)

I support my hon. Friend the Member for Hackney, Central (Mr. Davis). For a number of years I have sought to excite the attention of successive Ministers to the claims of the Association of International accountants. The association has now brought its examinations up to the standard of other recognised bodies.

Clause 75 is unduly restrictive, because there is no provision for the Minister to recognise bodies other than those included in the list. I hope that the Government will make a concession and will accept the plea of my hon. Friend.

Mr. Nicholas Baker

I have made known my opposition to the clause and the amendments. I do so with some hesitation, because the amendments are in the name of my right hon. Friend the Member for Crosby (Sir G. Page), but I did not come here to implement another restrictive practice.

I was surprised to see that in Committee the hon. Member for Hackney, Central (Mr. Davis), who had opposed the suggestion for years when in office, achieved a conversion in two and a half hours and joined an unholy alliance with some of my right hon. Friends to support the clause, which is a restrictive practice and unnecessary.

One of the faults of the clause is that it is based on a misapprehension of the job of a secretary of a public company. Secretaries are not central to the management of companies, and public companies are a much wider group of bodies than people credit, especially in the House.

Because public companies are so wide, the requirements of a secretary are equally wide and the attempt to produce a list of suitably qualified people who can do the job is, on the basis of the unamended clause, too restrictive and, on the basis of the clause as amended, so wide as to make it meaningless. I believe that one of the intentions behind the proposal was that secretaries should be qualified to protect shareholders and companies and their directors. I have no evidence that secretaries of public companies have been responsible for major scandals or instrumental in shareholders being defrauded. The secretary is a special kind of employee. His job varies according to the needs of the company.

I carried out some soundings between the Committee stage and this stage of the Bill. I have the views of the Law Society and those of the Consultative Committee of Accountancy Bodies, which includes most of those mentioned in subsection (2) of amendment No. 347. Their view is that the clause—this, it seems to me, restrictive practice—is unnecessary in the public interest. I agree with that view.

The proposed subsection (e) in the amendment refers to a person who, by virtue of his holding or having held any other position or his being a member of any other body". I do not know what the phrase "any other position" means. It seems to mean what the directors of the company would like it to mean. In other words, it drives a coach and horses through the whole clause, which, I agree, is better than the clause in its previous incarnation. I do not think, however, that we help companies, the people who have to work in them, or those who advise them by introducing legislation that is not clear. I quarrel not only with the clause but with the amendments.

10.15 pm

I hope that my right hon. and hon. Friends, aided perhaps by the hon. Member for Hackney, Central will reconsider the support they gave this clause in Committee and change their minds even at this late hour.

Mr. Eyre

I emphasise that this clause applies only to public companies. There has been some misunderstanding in the past. As my right hon. Friend the Member for Crosby (Sir G. Page) has indicated, clause 75 was introduced into the Bill in Committee, not least because of my right hon. Friend's gift of persuasion and persistence. While such a clause was not originally proposed by the Government, we accept that there is a strong body of opinion both in the House and outside that considers that the importance of the office of company secretary and hence of the appointment made to the office justifies a clause of this kind in our companies legislation.

We made clear, however, at that stage that amendments would be needed at a later stage to remedy the deficiencies in the drafting of the clause.

I am now glad to commend to the House amendments Nos. 344 to 347 inclusive in the name of my right hon. Friend the Member for Crosby and my hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) as remedying these deficiencies. I hope that the other amendments will not be pressed. I have noted the strong feelings expressed by my hon. Friend the Member for Dorset, North (Mr. Baker) and also the detailed proposals put forward by my hon. Friend the Member for Fulham (Mr. Stevens), both of whom gave valuable service in Committee.

It was generally recognised in Committee that the clause was narrowly drafted. I appreciate the points made by the hon. Member for Hackney, Central (Mr. Davis) and also by the hon. Member for Bradford, North (Mr. Ford) relating to the Association of International Accountants. It simply is not practicable or wise to think in terms of remedying the imperfection by adding to a list. It is generally recognised that there are certain bodies of which most company secretaries are members. These are set out in amendment No. 347. But I know that there are many other bodies, in accountancy and in insurance, banking and the actuarial field, for example, to which company secretaries belong. There are also company secretaries from the EEC or the Commonwealth who may not belong to one of our institutes but whom directors would have no qualms in appointing. There are bodies corporate that act as secretaries.

If we were to seek to arrive at a comprehensive list of bodies to whom company secretaries might belong, we would take up literally pages of the statute book. It would be disastrous if this House carried a clause which deprived eminently well-qualified, conscientious and competent people, in whom the directors would have confidence, of the opportunity to fulfil this important position in companies. In my view, amendments Nos. 344 to 347 strike the right balance between duty and flexibility.

Amendment agreed to.

Amendments made: No. 345, in page 88, line 21, leave out from 'secretary' to end of line 22 and insert 'or assistant or deputy secretary of the company'.

No. 346, in page 88, line 25, leave out 'the appointment has' and insert 'his appointment as secretary'.

No. 347, in page 88, line 26, leave out from 'a' to end of line 33 and insert: 'company other than a private company; or (c) is a member of any of the bodies specified in subsection (2) below; or (d) is a barrister, advocate or solicitor called or admitted in any part of the United Kingdom; or (e) is a person who, by virtue of his holding or having held any other position or his being a member of any other body, appears to the directors to be capable of discharging those functions. (2) The bodies referred to in subsection (1)(c) above are: —

  1. (a) the Institute of Chartered Accountants in England and Wales;
  2. 175
  3. (b) the Institute of Chartered Accountants of Scotland;
  4. (c) the Association of Certified Accountants;
  5. (d) the Institute of Chartered Accountants in Ireland;
  6. 176
  7. (e) the Institute of Chartered Secretaries and Administrators
  8. (f) the Institute of Cost and Management Accountants;
  9. (g) the Chartered Institute of Public Finance and Accountancy.'.—[Sir Graham Page.]

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