HC Deb 20 October 1981 vol 10 cc254-60
Mr. Eyre

I beg to move amendment No. 161, in page 164, line 32, column 3, at end insert— 'In section 283(4), the words "and delivered" in each place where they occur.'.

This is a technical amendment and includes in schedule 4 the words that clause 96 deletes from section 283(4) of the 1948 Act.

Amendment agreed to.

Amendments made: No. 162, in page 164, line 37, column 3, at end insert— 'In Schedule 1, Regulation 10 of Table A.'.

No. 163, in page 164, line 37, column 3, at end add— 'In Schedule 1, in Regulation 88 of Table A and Article 38 of Table C, the words "or under section 28 of the Companies Act 1976".'.

No. 164, in page 165, line 5, column 3, at end insert— 'In section 29(1), the words from "This subsection applies" to the end.'.

No. 165, in page 165, line 13, column 3, leave out from 'of' to end of line 14 and insert— 'the 1948 Act, Regulation 88 of Table A and Article 38 of Table C in Schedule 1 to that Act and Schedule 14 to that Act.'.

No. 166, in page 165, line 32, column 3, leave out '18 and 19' and insert '18, 19, 124, 125 and 200'.

Order for Third reading read.

[Queen's Consent and Prince of Wales's Consent signified.]

Motion made, and Question proposed, That the Bill be now read the Third time.—[Mr. Jopling.]

9.8 pm

Mr. Clinton Davis

We have almost reached the final stage in this saga—the Companies Bill 1981. I cannot remember when it began.

First, I thank the outside bodies which made massive contributions to improving the Bill—it certainly needed improvement—and assisted us in scrutinising the clauses, notably in Committee and on Report. I also thank in particular my hon. Friends the Members for Norwood (Mr. Fraser) and for Coventry, North-West (Mr. Robinson). They took a great deal of the burden from my shoulders. I also thank the Minister and his Minister of State for their great courtesy in these struggles. They have been helpful in a variety of ways. The Minister has added to his reputation as a kindly and generous man to whom we all enjoy listening sometimes. I should also like to thank his officials, who at one time were my officials, because they have assisted him to assist us.

We voted against the Bill on Second Reading because we found, in particular, that the provision to abolish the Register of Business Names was, in our opinion and in the opinion of virtually everyone else, apart from the Minister and one or two Back Benchers, a regressive measure. We sought to take every possible step to dissuade the Minister from the destructive course that he has regrettably pursued.

In other respects, as a matter of principle, I think that the Government have sought to engage themselves in trying to deal with a number of prolific and difficult problems. The end product is regrettably a bewilderingly complex Bill. It will create great difficulties for those who advise professionally on these matters and for business men. The Minister says that there is no simple way out of this situation. The hon. Gentleman had a vivid phrase to describe these complexities. It was something along the lines that the Bill cannot be limpid, simple and brief. There are large tracts of the Bill which for many will be incomprehensible. That does not add to the value and the esteem in which the law will be held by many if my view is correct. Maybe, however, the Minister is right. Maybe it is impossible to grapple with these difficult problems without being as complex and sometimes as convoluted as the Bill.

Some brave attempts have been made to deal with a number of abuses and to rectify certain situations. The ability of a company to purchase its own shares subject to suitable qualifications is an advance. So, too, is the effort to deal with concert parties, even though the Minister did not initially wish to handle the matter and wanted to leave it to the self-regulatory bodies which, however, did not want the task. It is possible that the Opposition played some part in changing the Minister's mind. Notwithstanding the remarks I have made about the complexity of the Bill, it is an effort to grapple with a real problem that could have devastating effects on British businesses if not dealt with successfully. The Consolidated Gold Fields case revealed the dangers all too well.

I have complained from time to time about the inadequacies of our procedures for dealing with these matters. I shall not make that speech again. I wish simply to underline that when dealing with this type of legislation involving the sort of changes that are demanded in our business and industrial life and the sort of changes that workers are entitled to request, a method can surely be found that is far more rapid and far more flexible than that permitted by our present techniques in the Chamber, which are wholly antiquated. We have to devise a more sensible system that can deal with the changing demands of a modern industrial society. Some start to that effect has been made by embracing the idea that one can legislate by statutory instrument.

We should not go too far in that respect, because there would be a danger of the House being debased, but when we are dealing with this sort of legislation which involves technical changes, the use of statutory instruments could be invaluable, subject always, of course, to suitable safeguards. I welcome the speech of the hon. Member for Tynemouth (Mr. Trotter), who said earlier that it would be useful if limitations of time did not impress themselves on us so much when we are considering these matters.

We have debated a massive number of amendments to the Bill. The Opposition are not guiltless, because we tabled some of our amendments late in the day. We had thought that it would be best to deal with them all at once and we were waiting to see whether the professional organisations wished us to table amendments, but perhaps they were satisfied with the consultations that have taken place.

However, it is grossly unsatisfactory that Government amendments and new clauses were put down at the last moment. That was not the fault of the Ministers or their officials. It was caused by the constraints of time.

It was wrong that we should have been driven along as we were because the Government had to get the Bill through Committee by a particular time and out of the House just before the end of the Session. There were many technical provisions and they could easily have been stood over to the next Session, as the hon. Member for Tynemouth suggested.

We have seen another demonstration that our procedures are ill-equipped to deal with Bills such as this. If we had a little more time we could avoid some of the gobbledegook that passes for legal requirements in so many statutes, and not least in the Bill.

The abolition of the Register of Business Names is a retrograde step. The changes on which the Minister has embarked may operate as a rogue's charter. Time will tell. I hope that he is right and I am wrong, but I do not believe that the matter was carefully thought out by the Government.

I do not know what my constituents would think if they knew that I was talking in the House about concert parties. I do not know what will happen at my reselection and whether I shall be asked about my attitude towards concert parties. It is an important matter, but I wish that he had a better name to describe the abuses that have taken place. The accountancy bodies still believe that the clauses are too complex.

My hon. Friend the Member for Norwood said in Committee that we should allow the company court a little more discretion. Perhaps we should rely more on civil remedies, because we have to be stringent when applying criminal sanctions and ensure that judges are able to exercise discretion more along the old equity lines. That would be a useful approach. It is certainly something which we should contemplate, because we are bogged down by extremely complex and possibly unenforceable procedures.

We included in the previous Companies Act insider dealing sections that are so complex and difficult to operate that I doubt whether we shall get any successful prosecutions. There are so many hurdles for the prosecution to surmount that I fear that those sections will be found to be unworkable.

All that the Minister can hope for is the creation of an atmosphere in which this abuse will not be perpetuated. However, it will go on. Insider dealing will go on, and it will go on unpunished, largely because there are no effective civil sanctions to deal with it, and the criminal sanctions cannot operate. The same, I fear, will happen with concert parties. I wish that there were more draconian steps, the kind of steps that we outlined previously. In my view, the Minister's contribution in this connection was inadequate. We need more draconian steps to destroy the effects of illegal action taken by persons abroad. Time will tell whether the Government have taken the proper and adequate steps.

I do not believe that the legislation covers satisfactorily the case where two or more people act together by procuring a third person to buy shares but do not inform him of their agreement. Apparently, the Department has considered the matter but is not persuaded that it accords with the practical aspects of planned share purchases. What happens if the Department is wrong? What happens if considerable damage is done? How quickly can the defects be remedied?

Another important defect is that although companies undertaking their own investigation into the ownership of shares have extended powers under the Bill, I doubt very much whether those powers would enable them to look to third parties to carry out the investigations that they require. So our view is that the Bill has many deficiencies.

In conclusion, not only must we look to the House of Commons to try to remedy abuses in the way that the Bill seeks to do, and improve upon that but we must try to change the whole self-regulatory system that is applied at present in this country. I shall not go into the matter, beyond saying that the self-regulatory system has been shown to have failed in case after case in our recent history—not only the Dowgate case, but many others like it. We need our own form of Securities and Exchange Commission, based upon our own experiences and requirements. I believe that a Labour Government should feel impelled to do that and show that the whole miserable and flimsy structure that we have in this country for dealing with abuse must be rectified. I am sure that that is right. Having said that, we do not propose to vote against the Bill tonight.

9.23 pm
Mr. Bill Walker Perth and East Perthshire)

I wish to speak to a new schedule that I tabled, but which regrettably we were unable to debate. It refers to public companies.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Order. I have not had the advantage of being present throughout the Bill's proceedings. Is this in the Bill? If it is, it is in order.

Mr. Walker

I simply want to place on record my thanks to the Minister for the consideration that he gave me when I raised the matter. It is unfortunate that we were alerted to the difficulties so late. I refer to the description of a public company in the Companies Act 1980. Public companies are required to change their name and to delete the word "Limited" as the concluding word of their name and substitute the words "public limited company", or the abbreviation PLC.

That requirement gives rise to considerable administrative expense, particularly in re-registering patents and trade marks, where registration fees become payable. Difficulties may also arise from the name of the goods and products in existence before the change of name.

However, my main concern is for the companies which have many places of business abroad, or that have trade marks and patents throughout the world. My new schedule was designed to provide the companies with the opportunity of adding after their existing name the description "public limited company". In my judgment that would have been sufficient to comply with the directive, which would mean straight descriptions rather than changed names. A person who purchases a product or commodity is not usually worried about whether the supplier is a public or a private company. The same applies to names embossed on plant and machinery.

Many of our major firms with extensive activity abroad might be faced with costs involved in the re-registration of patents and trade marks. The fees will have to be paid overseas to patent offices and foreign Governments. That could involve a sterling outflow of between £10 million and £20 million and could create a problem in terms of cash flow out of the United Kingdom. In addition it could place a financial burden upon companies whose funds are already savagely and sorely affected by inflation and world depression. I look to the Government either to introduce legislation soon or to do what they can to mitigate the effects.

I have no doubt that in Europe the effects will not be so savage. My concern is for what might happen in other parts of the world, particularly the Third world where companies will be required to re-register their patents as they come up for renewal. There will be questions about the change of name. The problems will not be easily resolved unless the Government can find ways to smooth the path.

9.26 pm
Mr. Eyre

I am obliged to Opposition Members for their personal courtesy during the long passage of the Bill and for providing an opportunity to reflect on the Bill as a whole. I commend it to the House.

The last two years have been remarkably productive for company law. The hon. Member for Hackney, Central (Mr. Davis) and I spent much effort on the subject in that time. I am conscious that two successive Bills of the size and range of those that we have considered have tested to the full, and at times strained, the capacity of the House and people outside to give the legislative proposals the fullest scrutiny. That is Parliament's function. The Bills will be our battle honours.

All hon. Members will wish to pay tribute to the people outside the House who interest themselves in company law. I refer to the law societies, accountancy bodies, the CBI, other representative organisations and to the many individuals who have taken a keen interest in particular aspects of our work. The hon. Member for Hackney, Central paid tribute to them. I am glad that he did. We know from our experience how deserved that tribute is. Such input is indispensable. It ensures that we are not allowed to forget or ignore the practical impact of our measures. The expertise and experience available are formidable. I like to think that my colleagues and I and the Department are open and responsive in our approach to company law. Of particular benefit to me on this Bill has been the advice of the advisory panel on company law which was established last year, and of Professor Gower, who was appointed in 1979 as the Department's research adviser on company law.

A number of references were made yesterday to the prospect of an annual Companies Bill. We have no intention of introducing another such Bill in the immediate future. The hon. Member for Swansea, East (Mr. Anderson) referred to a pipeline of legislation in Brussels. The obligation to implement the second and fourth directives has been among the factors, but not the sole factor, in triggering off both the previous Bill and this measure. A number of Community instruments are at various stages of consideration in Brussels. Community legislation is a new factor which we have to take into account.

We have made our views on the company law harmonisation programme clear. We believe that it should concentrate on instruments that fulfil a real and practical need for harmonisation and that the Community must temper its ambitions to the capacity of the national legislatures and administrations to cope with new and additional requirements. There are signs that that view is meeting with increasing sympathy in the Community.

The hon. Member for Hackney, Central referred to the broader question whether our parliamentary procedures were capable of providing adequate scrutiny of complex and technical Bills. That raised far wider issues than it would be appropriate for me to discuss tonight. The hon. Gentleman's sentiments will have struck a chord with hon. Members who have been closely involved in both this and the previous Bill. Perhaps they will provide food for thought for the House as a whole. I thank the hon. Gentleman for the efficient and considerate manner in which he has conducted business during our protracted proceedings. I also thank the hon. Members for Norwood (Mr. Fraser) and Coventry, North-West (Mr. Robinson) for their useful contributions.

My hon. Friend the Member for Perth and East Perthshire (Mr. Walker) raised the problems of patents, trade markings and so on, resulting from the requirement of the 1980 Act that old public companies should change their names to include "public limited company" if they wished to remain public companies. That matter was raised in Committee by my hon. Friend the Member for Dorset, North (Mr. Baker). I assure the House that the Government are sensitive to the possible additional burden on industry. That problem has been identified only during the past few months. It would not have been appropriate to make the radical change to the basis of re-registration that was set out in the 1980 Act in the middle of the transitional period for the new arrangements, especially as so many companies had already acted on that basis.

The Government are taking measures that we are advised will resolve any problems in the area mentioned by my hon. Friend the Member for Perth and East Perthshire. As to potential difficulties with certain overseas patent offices, we cannot legislate to ensure that they deal sympathetically with those matters. We shall use our influence both in the Community and on a national basis to seek to minimise the problems for British industry and commerce. I hope that that will provide some reassurance for my hon. Friend.

The hon. Member for Hackney, Central raised the question of insider dealing. He will be relieved to know that a conviction has been secured already. I shall be glad to let him have further details of that if he wishes.

The immediate future does not hold the prospect of further primary legislation. However, in the near, if not the immediate future—and it is of tremendous importance as it arises from the Bill—there is the prospect of consolidation. I am pleased to say that under clause 103 the process of consolidation is well under way. Both the 1980 Act and the Bill make consolidation imperative, and that is recognised by the Government. To that end, an experienced former parliamentary counsel was appointed last year to undertake what is by now a Herculean labour. Clause 103 introduces an important new provision under which amendments to the Acts may be made by Order in Council if the Law Commission recommends that they are desirable for the achievement of a satisfactory consolidation. My Department will be consulting shortly on whether the consolidation should take the form of one mammoth Act or, for better management, several Acts, and, if the latter, how the Acts should be divided. I saw the eyes of the hon. Member for Coventry, North-West light up at the prospect of serving on the Committees that will deal with those measures.

In due course we shall also be consulting on the contents of the consolidation, on which I understand that the draftsman is making excellent progress. All in all I can now offer a much more concrete proposal of consolidation actually taking place. It is, of course, a mammoth exercise. I am advised that it is the largest consolidation ever. However, I share the wish of all concerned with company law that it should be achieved as soon as possible and that this will be a major priority for the future.

We have had good debates on the Bill. We have had our differences on some of the provisions in the Bill as well as on what is not in it. However, for the most part—as happily remains characteristic of Companies Bills—there is a large measure of agreement on both sides of the House on the objectives of different parts of the Bill. It will come as no surprise to the House if I say that, in my view, it is a good Bill. What I like about it is the practical contribution that it will make in its own way to the development of commerce and industry in this country and to the restraint of malpractices which have adversely affected industry and commerce.

I greatly look forward to the enactment, very shortly, of a measure that will enable small and medium-sized companies to take advantage of reduced accounting disclosure requirements, streamline the registration of company names, replace an inadequate system for the registration of business names with a more direct self-policing system of obligations, enable companies to purchase their own shares, remove undue commercial impediments imposed by sections 54 and 56 of the 1948 Act, strengthen the law on the disclosure of interests on company investigations and with regard to the proper practice of directors and at the same time pave the way to the much-needed consolidation of the Companies Acts. That is a notable list of virtues and they can reasonably and properly be claimed on behalf of the Bill. I commend it to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed, with amendments.