§ Mr. Clinton Davis (Hackney, Central)I beg to move amendment No. 167, in page 5, line 13, leave out 'one tenth' and insert 'one twentieth.'
§ Mr. SpeakerWith this it will be convenient to take amendment No 168, in page 6, line 23, leave out 'one-fifth' and insert 'one-tenth'.
§ Mr. DavisThe Opposition approve of the basic purpose behind the clause, which is designed to secure an extension of the requirements of section 4 of the 1967 Act. We feel that the figure that the Government have included represents too high a threshold. The Government said in Committee that they would consider the figure without any commitment to change it. However, we have had no indication from the Government that they are prepared to reconsider the issue.
The consequence of the Government's insistence on their own figure is that a minority holding of between 5 and 10 per cent. could in itself represent a substantial holding, especially in substantial and large companies. As we have learnt from recent history, that sort of holding can involve a large investment that might be located abroad. We ask the Government to consider that afresh.
We think that the provision of one-fifth in amendment No. 168 is too high. The Government accepted the maximum criteria that were laid down in the directive and there are circumstances, which were vividly illustrated by my hon. Friend the Member for Norwood (Mr. Fraser) in Committee, in which, on paper, a relatively small shareholding of even less than 20 per cent, in one pair of hands could represent a powerful block, capable of wielding vast influence over the appointment of the board, policies and control of the company.
It is influence, not control, that I am talking about in this respect. The Minister will recognise that one does not have to control voting shares to be able to wield influence. If the Minister argues that that relates simply to financial participating interest and not to control, I make the point as emphatically as I can that it is this measure of influence that is equally important.
§ The Under-Secretary of State for Trade (Mr. Reginald Eyre)I appreciate the way in which the hon. Member for Hackney, Central (Mr. Davis) has moved the amendment.
The principle underlying amendment No. 167 was discussed in Committee when my right hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) explained that the Government had decided to set at 10 per cent. the threshold for disclosure of non-financial information in respect of holdings other than subsidiaries required by article 43.1(2) of the directive in order to bring the threshold into line with the comparable disclosures required already under section 4 of the 1967 Act.
We noted carefully the reasonable remarks of the hon. member for Coventry, North-West (Mr. Robinson) in Committee. I reassure Opposition members that the Government will keep the question of the threshold under review. However, I am sure that hon. Members will appreciate the need to consider carefully any proposals to extend disclosure requirements to ensure that users of accounts are not swamped with large volumes of information of doubtful value and that too heavy a burden is not placed on accounts preparers. The Bill, as required by the fourth directive, adds to that burden. We are strongly of the view that now is not the time to add further straws to the camel's back.
Amendment No. 168 was also considered in Committee. The background to the Government's decision to establish the threshold for disclosure of financial information in respect of holdings at 20 per cent. was explained. Existing legislation requires such financial information only in the limited circumstances set out in paragraph 5A of the present schedule 8 to the Companies Act 1948. The Green Paper proposal that that provision should be repealed was generally welcomed.
The provisions of clause 4 have as their sole objective implementation of article 43.1(2) of the directive because in practice most companies are likely to take advantage of clause 4(5) by including investments in bodies corporate other than subsidiaries by way of the equity method of valuation in their accounts or in a note thereto. This would avoid the necessity of providing financial information holding by holding. In the limited number of cases in which we expect companies to give their financial information, we have considered it unnecessary to extend the requirement beyond the minimum level set in the directive.
Against those considerations, I have considered the remarks made in Committee by the hon. Member for Norwood (Mr. Fraser), referred to again today by the hon. Member for Hackney, Central. Those remarks concerned a holding of less than 20 per cent. of the share capital but which represented a significant proportion of the holding company's assets. At the end the day, this is a matter of judgment. In the Government's view, in such circumstances, it is likely that a company and its auditors would feel obliged to make appropriate disclosure of the circumstances, although we have concluded that it is not necessary to extend the exacting requirements of clause 4 to those fairly exceptional cases. As in relation to the thresholds under clause 3, I assure the hon. Member for Hackney, Central that we will continue to keep this question under review. 184 With that assurance, I trust that the hon. Member will feel able to withdraw his amendment.
§ Mr. Clinton DavisThe Government have said that they will keep a hell of a lot under review. The Minister will have to keep his eyes and ears open over the next six months. However, having regard to what he has said, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.