HC Deb 20 October 1981 vol 10 cc246-53

Amendments made: No. 139, in page 153, line 8, at end insert— '3A. In both section 124 and section 125 the following subsection shall be substituted for subsection (3)— (3) If a company fails to comply with this section, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding the statutory maximum or on conviction after continued contravention to a default fine not exceeding one-tenth of the statutory maximum.

This paragraph shall not have effect in relation to any offence committed before the appointed day.'

No. 140, in page 153, leave out lines 27 and 28.

No. 141, in page 153, line 28, at end add— '8A. In section 187 (restrictions on undischarged bankrupts acting as directors, etc.) after the words "acts as director" there shall be inserted the words "or liquidator" and after the words "is concerned in the" there shall be inserted the words "promotion, formation or".'.—[Mr. Eyre.]

Mr. Eyre

I beg to move amendment No. 142, in page 153, line 29, leave out 'of the 1948 Act'. This amendment deletes the superfluous reference to the 1948 Act at line 29, page 153 as all the minor and consequential amendments in the first part of schedule 3 relate to the 1948 Act.

Amendment agreed to.

8.45 pm
Mr. Geoffrey Robinson (Coventry, North-West)

I beg to move amendment No. 192, in page 153, line 39, leave out paragraph 10.

This amendment seeks to retain a requirement for directors' names to be shown on business letters and certain other documents, together with their nationality if they are not British or citizens of another EEC country, and any former names.

It appeared a relatively minor matter in this enormously long piece of legislation but we have raised the matter again because the Under-Secretary specifically said in Committee on the question of liability and damages, when the point was put to him succinctly by my hon. Friend the Member for Hackney, Central (Mr. Davis): I find it difficult to answer that point but obviously there is something in it.

He said later: There is a good deal that I would like to say about that matter."—[Official Report, Standing Committee A, 9 July 1981; c. 545.] I hasten to add that I am not inviting him to say a great deal tonight, although he might have something more relevant to say than he did when we debated the matter in Committee.

We shall not push the amendment to a vote. In Committee the reasons given for refusing the amendment were the usual ones—it would be tiresome, there would be too much trouble and expense and it would not be in the national interest. There was neither a genuine argument nor an answer to the anomaly that was being created in respect of the unincorporated businesses that now have to register under the Registration of Business Names Act.

Recently a small company was started in my constituency. It is concerned with the transfer of technology from universities to manufacturing industry. When deciding how to show my name as a director of the company, I thought it proper, as I had one of the most common surnames in the country, that "G. Robinson" would perhaps not be clear enough and that "Geoffrey Robinson, MP" would be best. The people trading with the company should know that they are trading with Geoffrey Robinson as a director.

Companies have a right to know with whom they are dealing. I do not know whether the Minister can say anything about this matter tonight, although I doubt it. It is a substantial point. It is also important that companies should know with whom they are not dealing. Whilst one might say that if Lord Weinstock were to resign from the GEC there might be jubilation on Opposition Benches, many suppliers, shareholders and others would be anxious. But they would know about it without having to have his name struck off the notepaper of the GEC. There are many mini-Weinstocks—people on whom directly, and perhaps absolutely, the wellbeing of the company depends. It would be relevant if the name of such a person were suddenly to disappear from the company's notepaper in an exchange of correspondence. Many of these companies are limited liability companies although very small.

The Minister brought forward the rather pathetic argument about the requirement that EEC nationals need no longer be named. We can accept that, and as long as we are members of the EEC the position will remain. But to bring up the Jenkins report—the Jenkins committee reported in about 1962—as the reason for the change when so much of the Jenkins report is rejected on other issues, as it pleases the Minister, is rather choice. At that rate of progress, my hon. Friend the Member for Keighley (Mr. Cryer)—we are very pleased to see him with us—might have some chance of seeing the Bullock report enacted in about the year 2000.

I should like to reflect for a moment on the answers that we have had to the amendments and on the way in which this huge Bill has been dealt with. I do not think that Ministers, Opposition spokesmen, or Back Benchers on either side of the House, would consider the procedure to be very satisfactory. The fact that there is some directive from the EEC is not a good enough reason to force on companies this maze of legislation. We have had 40 new clauses and 200 amendments. In any complicated legislation there are bound to be times when the Ministers cannot readily find the notes which have been written for them in advance. Those who have to try to make sense of this sort of legislation and who are affected by its provisions daily in the real world do not thank us for it, and it does not do much credit to the House. I do not know what better system might be devised, but clearly we should not try to force this sort of burden on officials, Ministers or the House in the way that we have on this occasion.

There are no acceptable arguments for the proposed change. The arguments about reducing travel and expense, and the invocation of the national interest, are minimal when compared with the complexities that will arise with the enactment of the measure.

We believe that the amendment should be accepted by the Government. If the Minister has not had any second thoughts about it, perhaps he will tell us whether he has any new thoughts. If he has neither second thoughts nor new thoughts, I hope that he will say very little.

Mr. Eyre

I always enjoy listening to the managerial style of the hon. Member for Coventry, North-West (Mr. Robinson). He concluded his speech by seeking to direct what should be done in response to the amendment. I suppose that is how things are done in the British motor car industry. However, I am sorry to have to say to the hon. Gentleman that I must ask the House to reject the amendment.

The amendment seeks to retain the requirement for directors' names to be shown on business letters and certain other documents—including, for example, showcards. A director would also have to give his nationality, if not British or a citizen of another EEC country, and any former names.

The present requirement, contained in section 201 of the Companies Act 1948, is of similar origin to the Registration of Business Names Act 1916. It was introduced in 1916 as a means of ensuring that the connection of enemy nationals with business enterprises in this country could be readily identified.

The effectiveness of the provision has been steadily eroded. However, since 1974, companies are not required to show the nationality of nationals of other EEC member States, and the Secretary of State has always had discretion to grant exemption from all the requirements "in special circumstances". As the hon. Gentleman knows, that is where the difficulty comes. The Department has always taken a liberal view of "special circumstances"—in the time of the hon. Member for Hackney, Central (Mr. Davis) and in my own—and has granted exemptions regularly. Applicants normally claim that the movement of directors is likely to cause frequent alterations to their letter headings, but the argument that, for example, export opportunities may be lost by disclosure of directors' names or nationality is also accepted as grounds for a direction.

In 1962 the Jenkins committee recommended that section 201 should be repealed. The committee contended that while it was convenient for persons dealing with the company to see the names of the directors on the company's letter paper, it was not essential. The information was available in a fuller and more up-to-date form, either in the records available to the public in the Companies Registration Office or from the company's own registered office. That information is, of course, the answer that I must give to the question raised by the hon. Gentleman when he said that people want to know. That is how they can find the information that they want. The committee contended, moreover, that it was an unduly onerous task, particularly for large companies where changes of directors might be frequent, to keep letter headings up to date. It also took the view that since so many exemptions had been, and are being, granted by the Department every year, with no evidence of harm arising therefrom, the section served little purpose.

It is now a statutory requirement under the European Communities Act 1972—and the hon. Gentleman will appreciate the importance of this—that companies should disclose on their letter paper particulars of their registered office, registration number and place of registration. An up-to-date list of directors will be available there. The provision made by section 201 is no longer essential for the purpose that it was intended to serve and the need to consider applications for dispensation from it places an avoidable burden on the Department of Trade. In our view, it should therefore be repealed.

Mr. Geoffrey Robinson

The hon. Gentleman still has not answered the very specific point made by my hon. Friend the Member for Hackney, Central (Mr. Davis), which I shall put again without repeating it at tedious length and in great detail, namely, that small businesses fall into a completely different category and there is the problem of liability in relation to them.

The Minister took the point in Committee and said that he would return to it on Report. I rather sense that he has not given it consideration, but we put on record that it is a valid point and that he conceded it as a valid point in Committee. We were hoping that he would deal specifically with it on this occasion.

Mr. Eyre

It is a point of difficulty, but I am sorry that I am not able to add anything here. It is very difficult to find a solution to the problem. I should point out, however, that the hon. Gentleman regards it as more of a problem than other people do, as we have received no other representations on this point. I am sorry, but I cannot meet the hon. Gentleman on that point.

Amendment negatived.

Mr. Eyre

I beg to move amendment No. 143, in page 154, line 14, after 'Act)' insert— '(a) in subsection (3), the following words shall be inserted after paragraph (b), that is to say, "and (c) in an appropriate case, if the company wishes to be registered with the Welsh equivalent of "public limited company" or, as the case may be "limited" as the last words or word of its name, a statement to that effect."; and (b)'.

Mr. Deputy Speaker

With this we may take Government amendments Nos. 144 and 145.

Mr. Eyre

These amendments permit a joint stock company registering under part VIII of the 1948 Act to use the Welsh equivalent of "public limited company" or "limited" as the last part of its name if its registered office is to be situated in Wales. It is considered that, as drafted, paragraph 13 of schedule 3 makes the use of the Welsh equivalent compulsory in such cases.

9 pm

Mr. Clinton Davis

The Minister is always keen on phonetics and he told me how to pronounce St. Piran. Perhaps he will say whether the word "cwmni" in the first line of amendment No. 144 is a typographical muddle or whether it can be pronounced by him. I think the word "cyfyngedig" in amendment No. 145 is pronounced "sifin-geddig". My memory takes me back to the days when we were discussing this matter, and I think that I am right.

Mr. Eyre

The hon. Gentleman's pronunciation of that word sounds reasonably satisfactory.

Amendment agreed to.

Amendments made: No. 144, in page 154, line 24 leave out from 'if' to 'cwmni' in line 27 and insert 'the company has delivered a statement under section 382(3)(c) of this Act to the registrar'.

No. 145, in page 154, leave out lines 32 to 34 and insert 'if the company has delivered a statement under section 382(3)(c) of this Act to the registrar, "cyfyngedig".'.

No. 146, in page 155, line 14, at end insert— '17A. In section 455 after the definition of "share warrant" there shall be inserted the following definition— "statutory maximum" has the meaning given by section 87(1) of the Companies Act 1980;".'.—[Mr. Eyre.]

Mr. Eyre

I beg to move amendment No. 147, in page 157, line 41, after 'shares', insert 'or debentures'.

This is a drafting amendment to correct an omission to a reference here, as elsewhere in the paragraph, to interest in debentures as well as in shares.

Amendment agreed to.

Amendments made: No. 148, in page 158, line 5, leave out 'fourteen' and insert 'ten'.

No. 149, in page 158, line 9, at end insert '(disregarding in reckoning that period any day that is a Saturday or Sunday or a bank holiday in any part of Great Britain)'.—[Mr. Eyre.]

Mr. Eyre

I beg to move amendment No. 150, in page 158, line 22, at end insert '(whether as it has effect in relation to an investigation under any of sections 164 to 166 of the principal Act'.

This is a drafting amendment to make it clear that an answer given by a person to a question put to him in exercise of powers conferred by section 167 of the 1948 Act, as amended by clause 81, in investigations under sections 164 to 166 of the 1948 Act, section 172 of that Act and section 32 of the 1967 Act is admissible in evidence against him.

Amendment agreed to.

Amendments made: No. 151, in page 158, leave out lines 29 to 31.

No. 152, in page 158, line 42, at end insert— '34A. In section 29(1) of the 1976 Act (register of disqualification orders)—

  1. for the words from "that a person" to "in the order" there shall be substituted the words "under section 188 of the Act of 1948 or section 9 of the Insolvency Act 1976;"; and'
  2. the words from "This subsection' to the end shall cease to have effect.'.—[Mr. Eyre.]

Mr. Eyre

I beg to move amendment No. 154, in page 159, line 19, at end insert 'and the following subsection shall be added at the end of that section—' (13) In relation to any offer to allot any securities required by subsection (1) above or by any provision to which subsection (3) above applies references in this section (however expressed) to the holder of shares of any description shall be read as including references to any person who held shares of that description on any day within the period of twenty-eight days ending with the day immediately preceding the date of the offer.

This amendment to section 17 of the 1980 Act, which secures the pre-emption rights of existing shareholders of a company when shares are allotted by the company, provides that for the purposes of the section the shareholders may be any persons who held shares within a 28-day period preceding the offer date for the new allotment.

Amendment agreed to.

Mr. Eyre

I beg to move amendment No. 153, in page 159, line 26, leave out paragraph 40 and insert— '40.—(1) In section 24 (valuation of non-cash consideration before allotment), for the words from the beginning of subsection (2) to "that class" there shall be substituted the words "(2) Subject to subsection (2A) below, subsection (1) above shall not apply to the allotment of shares by a company in connection with— (a) an arrangement providing for the allotment of shares in that company on terms that the whole or part of the consideration for the shares allotted is to be provided by the transfer to that company or the cancellation of all or some of the shares, or of all or some of the shares of a particular class, in another company (with or without the issue to that company of shares, or of shares of any particular class, in that other company);". (2) The following subsection shall be inserted after subsection (2) of that section— (2A) Subsection (2)(a) above does not exclude the application of subsection (1) above to the allotment of shares by a company in connection with any such arrangement as is there mentioned unless it is open to all the holders of the shares in the other company in question or, where the arrangement applies only to shares of a particular class, to all the holders of shares in that other company of that class, to take part in the arrangement. In determining whether that is the case, shares held by or by a nominee of the company proposing to allot the shares in connection with the arrangement, or by a nominee of a company which is that company's holding company or subsidiary or a company which is a subsidiary of its holding company, shall be disregarded. (3) In subsection (3) of that section—

  1. for the words from the beginning to "those purposes" there shall be substituted the words "For the purposes of subsection (2)(b) above"; and
  2. after the word "shares", in the last place where it occurs, there shall be inserted the words "or other securities".
(4) The following subsection shall be inserted (11) of that section— (11A) It is hereby declared for the avoidance of doubt that subsection (1) above does not apply by reference to the application of an amount for the time being standing to the credit of any of a company's reserve accounts or to the credit of its profit and loss account in paying up (to any extent) any shares allotted to members of the company or any premiums on any shares so allotted; and in relation to any such allotment references in this section to the consideration for the allotment do not include any such amount so applied.". (5) In subsection (12) the following paragraph shall be inserted before paragraph (a)— (aa) In this section "arrangement" means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with section 206 or 287 of the 1948 Act).

This amendment provides a relaxation from the requirement in section 24 of the 1980 Act for an independent valuation of a non-cash consideration in a takeover or merger for schemes of arrangement, as defined in clause 38, for the purposes of merger accounting and for mergers in which securities other than shares are involved.

Amendment agreed to.

Amendments made: No. 185, in page 160, line 10, at beginning insert '(1)'.

No. 186, in page 160, line 18, at end insert— '(2) The following subsection shall be inserted after that subsection— (4A) Subject to section 43(7A) of this Act, any consideration by the directors of a company of the value at any particular time of any fixed asset of the company shall be treated as a revaluation of that asset for the purposes of determining whether any such revaluation of the company's fixed assets as is required for the purposes of the exception from subsection (4) above has taken place at that time; but where any such assets which have not actually been revalued are treated as revalued for those purposes by virtue of this subsection that exception shall only apply if the directors are satisfied that their aggregate value at the time in question is not less than the aggregate amount at which they are for the time being stated in the company's accounts.

No. 155, in page 160, line 25, after '(2)', insert '(i)'.

No. 156, in page 160, line 26, at end insert 'and (ii) in paragraph (b) for the word "proper" there shall be substituted the word "reasonable".'.

No. 187, in page 160, line 28, leave out 'and' and insert—

'(bb) the following subsection shall be inserted after subsection (7)— "(7A) Where subsections (3)(a), (5)(a) or (6)(a) above applies to the relevant accounts, section 39(4A) of this Act shall not apply for the purposes of determining whether any revaluation of the company's fixed assets affecting the amount of the relevant items as stated in those accounts has taken place, unless it is stated in a note to those accounts—

  1. that the directors have considered the value at any time of any fixed assets of the company without actually revaluing those assets;
  2. that they are satisfied that the aggregate value of those assets at the time in question is or was not less than the aggregate amount at which they are or were for the time being stated in the company's accounts; and
  3. that the relevant items affected are accordingly stated in the relevant accounts on the basis that a 253 revaluation of the company's fixed assets which by virtue of section 39(4A) included the assets in question took place at that time.";and'.—[Mr. Eyre.]

Mr. Eyre

I beg to move amendment No. 157, in page 162, line 10 after 'accounts)', insert— (a) the following subsection shall be inserted after subsection (2)— (2A) Subsection (2) above does not apply, in relation to the accounts prepared by any company in respect of any relevant period, to transactions, arrangements and agreements made by the company or any of its subsidiaries for any officer of the company if the aggregate amount outstanding at the end of that period under the transactions, arrangements and agreements so made for that officer does not exceed £2,500.";and '(b)'.

Mr. Deputy Speaker

With this it will be convenient to take Government amendment No. 158.

Mr. Eyre

The amendment provides a de minimis exemption from section 56 of the Companies Act 1980, which requires disclosure in the accounts of the aggregate amounts outstanding under certain credit and loan arrangements made by the company or any of its subsidiaries for officers other than directors.

Amendment agreed to.

Amendment made: No 158, in page 162, line 14, at end insert— '50A. In section 58 (transactions, etc. excluded from sections 54 and 57) the following subsections shall be substituted for subsection (3)— (3) Subsections (1)(c) and (2)(c) of section 54 above do not apply, in relation to any accounts prepared by a company in respect of any relevant period, to any transaction or arrangement with a company or any of its subsidiaries in which a director of the company or of its holding company had, directly or indirectly, a material interest if—"

  1. the value of each transaction or arrangement within subsection (1)(c) or (2)(c), as the case may may be, in which that director had, directly or indirectly, a material interest and which was made after the commencement of that relevant period with the company or any of its subsidiaries; and
  2. the value of each such transaction or arrangement which was made before the the commencement of that period less the amount (if any) by which the liabilities of the person for whom the transaction or arrangement was made have been reduced;
did at any time during the relevant period exceed in the aggregate £1,000 or, if more, did not exceed £5,000 or one per cent. of the value of the net assets of the company preparing the accounts in question as at the end of the relevant period for those accounts, whichever is the less.".—[Mr. Eyre.]

Mr. Eyre

I beg to move amendment No. 159, in page 162, line 22, at end insert— '51A. In section 64(4) (application of section 28 of the 1967 Act to section 64(3)) for the words "subsection (3)(b)" there shall be substituted the words "subsections (4A) and (4B)".'.

This is a technical amendment and is consequent upon the amendment to section 28 of the Companies Act 1967 being made to schedule 3.

Amendment agreed to.

Mr. Eyre

I beg to move amendment No. 160, in page 162, line 36, at end insert— '54A. In section 72 (penalties for breach of sections 68 and 69 of the 1980 Act) for the words "or 69", in both places where they occur, there shall be substituted the words "69 or 70".'.

The amendment rectifies an omission from section 72 of the Companies Act 1980.

Amendment agreed to.

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