HC Deb 16 November 2000 vol 356 cc1105-21

.—(1) The court may make a disqualification order against a person where it appears to it—

  1. (a) that he has been a director of a company which was struck off the register of companies by reason of its failure to deliver company accounts, and
  2. (b) that his conduct as a director of that company makes him unfit to be concerned in the management of a company.

(2) The maximum period of disqualification under this section is five years.".'.

Amendment No. 14, in clause 6, page 4, line 26, at end insert— '(5) Before accepting a disqualification undertaking under this Act the Secretary of State shall prepare a summary statement of the outcome of the relevant investigation. (6) The summary statement prepared under subsection (5) above shall be a matter of public record.'.

Amendment No. 22, in page 5, line 5, at end insert— '(1A) The Court shall only grant an application under subsection (1) above if it is satisfied that there has been a material change of circumstances since the giving of the disqualification undertaking on the part of the person who is subject to the disqualification undertaking.'.

Mr. Chope

New clause 1 would prevent disqualified company directors from setting up and running unincorporated businesses during the period of their disqualification, unless they had obtained the authority of the Director General of Fair Trading.

The new clause evolved from a useful debate that we had in Committee during the fourth sitting on 7 November, when I moved what was originally amendment No. 1 to clause 5.

There was universal sympathy and support for my amendment in Committee. The Minister said: I have a great deal of sympathy with the hon. Member for Christchurch, as the problem of rogue traders is serious. He said that he would be disappointed if, as pundits predict, there was no Department of Trade and Industry Bill in the Queen's Speech, and he said that he and the Government wanted to clamp down on rogue traders, but that my proposal was "not the appropriate vehicle".

In my experience, that form of words is the last desperate line of defence of a Minister who concedes the argument, but has been told by his officials that he cannot agree to the change.

Mr. Eric Forth (Bromley and Chislehurst)

My hon. Friend must be aware that there may well be a general election in the first half of next year. Were that to be so, even if there were a Bill in the Queen's Speech, does my hon. Friend agree that it is most unlikely that it would reach the statute book? If something is not done now—today—we may face a period of two years before it is possible to deal with the matter.

Mr. Chope

My right hon. Friend is right. Throughout their term of office, the Government have said that they would legislate on rogue traders and introduce legislation to protect consumers. There is every prospect that this Parliament will be concluded before they have done anything effective on that front. The modest measure contained in new clause 1 would enable the Minister to go to the people at the next general election and say, "I delivered in part. I was not able to deliver the whole, but I delivered in part."

To develop the Minister's metaphor in Committee that my amendment was not the appropriate vehicle, if Parliament misses this bus, when will the next one come along? That is the point made by my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth).

The Minister told the Committee: Legislation will be properly framed to undertake the tasks that the hon. Gentleman has identified, one of which will be enacted in the new year—[Official Report, Standing Committee B, 7 November 2000; c. 105.] He then referred to the injunctions directive. I do not know whether my right hon. Friend is familiar with that, but if not, he soon will be. The Minister undertook, among other matters, to send all members of the Committee a note about that directive.

In accordance with that undertaking, the Minister duly sent us such a note. As a result of reading it, I have modified the argument that I advanced in Committee. The new clause would make the Director General of Fair Trading the key person who could allow a disqualified rogue director to set up as the principal of an unincorporated business. It also makes the measure less absolute than that proposed in Committee and integrates it into the injunctions directive.

The injunctions directive is to be implemented in the United Kingdom by regulations. It is clear from the Minister's note that the European Union expects us to introduce that directive so that it has effect before 1 January 2001. That target will be missed by the Government, but in paragraph 6 of the note that the Minister kindly provided, he stated: The implementation regulations will designate the Director General of Fair Trading as the lead independent public body who will he empowered to obtain cease and desist orders in respect of all the legislation covered. It is worth noting that the injunctions directive will be far more limited in application than the issue of rogue traders. The Minister gave us a list of other European directives and areas where the injunctions directive would apply, but from my reading of that list, I do not believe that it would deal with the situation that I recounted to the Committee, involving a person in my constituency, Mr. Gary Turley, who runs a business called Be-Secure Windows. He has been going round to various of my constituents, offering to carry out works on their house and demanding large cash sums up front so that he can buy the windows and other goods and materials. The House will not be surprised to hear that having done that, he never provides the windows or does the work. As a result, he is a good example of a rogue trader. He is ripping off people in my constituency and the surrounding area.

I do not know whether Mr. Turley was ever the director of a company, but if he behaved in such a way as a director of a company and he was disqualified as a director of that company, under my new clause he would automatically not be able to carry on business as an unincorporated trader. If the new clause were implemented, it would catch quite a large number, although not all, of rogue traders.

The last desperate argument that the Minister may deploy, as he did in Committee, is that new clause 1 would be piecemeal legislation. In that case, as I said in Committee, the new clause should fit in well with the Bill, which is made up of piecemeal legislation.

New clause 2 is even more important than new clause 1. It would fill a serious loophole in the current law as it affects the accountability of company directors. It builds on a full debate that we had in Committee. The best way of explaining the matter to the House is to give an example of how the gap in the law came to my notice, and the gravity of what was exposed by that experience.

A limited company can be established, it can trade and solicit subscriptions and donations, but after it has achieved its objectives, it can disappear without ever having to file accounts and without the public ever acquiring information about the remuneration of its directors or the value of their shareholdings.

Provided that no creditor is dissatisfied, the authorities in general and Companies House in particular have no penalty or sanction to use against the directors. Such sanctions as are available apply to persistent failure to file accounts. A company may be set up in the knowledge that it will trade and remunerate directors with large sums of money. If it dissolves as a result of a failure to produce accounts, the people who are eager to find out what those accounts might reveal—including the remuneration of directors—will be unable to gain access to that information.

That serious loophole in company law came to my attention two years ago when I inquired about a company called People's Trust Ltd. Some hon. Members may recall that that company was set up in January 1997 with the avowed aim of championing higher standards in public life. However, the records show that it failed to fulfil its obligations under the Companies Acts at the first hurdle: it failed to file its accounts. Two reminders were sent in 1998 and a notice was then placed in the London Gazette—all with no response. People's Trust Ltd. was then struck off the register for failing to file its accounts. It was thereby dissolved and unable to trade legally as a company with effect from the beginning of September 1998.

The founding chairman and main source of funds of that company—to the extent of at least £1 million—is well known to officials at the Department of Trade and Industry and to hon. Members: it is none other than Mr. Fayed. When challenged by The Independent about the failure to file accounts, a spokesman for Mr. Fayed said: It appears that there has been an administrative oversight on the part of our legal representatives. That being the case, we will look to rectify this on Monday morning. It will not surprise hon. Members to hear that nothing at all was rectified. Indeed, that was the last we heard of the company.

I complained to Companies House and suggested that some sanction should be introduced to gain access to the accounts. That was when I was told about the gap in the law, which means that the accounts, which must have existed, continue to remain hidden from the public gaze because when a company is dissolved it no longer has an obligation to provide information. I submit that the failure to file accounts, far being an administrative oversight, was a deliberate and calculated exploitation of the loophole in the Companies Acts, which the new clause would close.

In an article published in The Sunday Telegraph on 30 March 1997, Mr. Fayed commented on the DTI report into Harrods: Ten years ago, just before the 1987 election, the Thatcher Government commissioned a report that called me a liar…The British Government took away my reputation and good family name after 40 years' hard work. I will not go to my pyramid leaving my children under the shadow of a report that is unfair and untrue. I have seen the arrogance of power at very close quarters. I did not like what I saw. I will campaign for root and branch reform. That is why I gave away £1 million last week to the People's Trust, an independent pressure group dedicated to cleaning up politics.

What happened to that £1 million? How much was used to pay the company directors for past services rendered? How much was left when the company was dissolved by default of filing its accounts and what happened to the donations that the company solicited from possibly naive members of the public?

A report in The Guardian of March 20 1997 stated that the trust intended to send out 2 million letters to members of the public asking for £5 subscriptions to support its cause.

Mr. Forth

Does my hon. Friend know whether that company, or another in a similar position, could make political donations before it was dissolved, which also could not be tracked? Does he not think that that is also an important consideration?

Mr. Chope

That is an incredibly important consideration. That abuse—I submit that that is what it was—having been uncovered, it is incumbent on the Government to take immediate action to prevent it from happening again. As my right hon. Friend implied, the more we are concerned with transparency in politics and donations to political parties, the more important it is to prevent people from setting up such a company and using it as a means to change public opinion with the support of large sums of money. As I said, £1 million was involved, although some press reports suggest that the sum was larger.

2.45 pm

We do not know how many donations were given or what was received, if anything, for the £5 subscriptions. All that we know is that no creditor complained, which meant that the company was able to disappear in the circumstances that I described.

It is worth reminding ourselves that People's Trust Ltd. was not a small, insignificant company. It must have had a turnover of more than £1 million, because it had a starting donation of £1 million from Mr. Fayed. It also had prominent public figures on its board. Apart from Mr. Fayed, the board contained Mr. Michael Cole, Mr. Fayed' s then press officer; Mr. Andrew Neil, a former editor of The Sunday Times and still a distinguished journalist; and Mr. Robert Fallowfield, one of Mr. Fayed' s accountants. Lord Alton of Liverpool was also on the board, as was Mr. Alex Carlile, a former hon. and learned Member of the House. Hon. Members will recall that none other than Mr. Carlile was the first to raise in the House the story in The Guardian involving the then hon. Member for Tatton. He did so on a point of order at about 10 pm when he had already been tipped off that The Guardian would run the story the next day, thereby enabling all the other newspapers to carry the story. He provided a service for—

Mr. Deputy Speaker

Order. The hon. Gentleman is straying wide of the mark. He has given details, at some length, about one company and its director, which is reasonable, but I hope that he will relate his remarks rather more precisely to the new clause.

Mr. Chope

I certainly will, Mr. Deputy Speaker. To conclude the point, the company secretary was a Mr. Christopher Graffius, a former researcher for Lord Alton.

Although I have not given examples of other companies, I submit that the case that I have described is sufficient to warrant Government intervention and the incorporation of the new clause in the Bill. One of the main responsibilities of directors, along with the privilege of incorporation, is the duty of full disclosure. Failure to deliver company accounts is a grave breach of directors' duty to make a full disclosure.

The Minister for Competition and Consumer Affairs responded to my argument in Standing Committee. He said that section 5 of the Company Directors Disqualification Act 1986 provides that a director who is prosecuted for not filing accounts can be disqualified on the basis of that single offence.—[Official Report, Standing Committee B, 7 November 2000; c. 124.] In fairness to him, it then became apparent that the advice given to him by his officials, which led him to make that statement, was incorrect. He admitted that he was wrong and that, under the present company law, it is not possible to prosecute a director for a single failure to file accounts, however grave or mischievous that failure might be. He agreed that it might be better to table an amendment to section 3 of the 1986 Act. That is what the new clause represents. I hope that the Minister will agree to the new clause in its revised form, because it meets his concerns. There was general concern in Committee that the loophole needs to be closed.

Mr. John Burnett (Torridge and West Devon)

Hear, hear.

Mr. Chope

I am glad that the hon. Gentleman agrees. I formulated the new clause in such a precise way largely because of suggestions that he made in Committee. I am grateful for his advice and assistance.

Amendment No. 14 arises from debate in Committee—at column 120, on 7 November 2000—on amendments Nos. 5, 7 and 52, which would have made an agreed statement of facts a precondition of acceptance by the Secretary of State of a disqualification undertaking.

The Minister, in reply to that debate, said that it was for the Secretary of State to decide to accept the undertaking, and that it would be unduly restrictive and might lead to delay and increased costs if the Secretary of State could accept an undertaking only when there was an agreed statement of facts.

Amendment No. 14 deals with all the Minister's concerns, and thereby confines and limits the requirement to the production of a summary statement that will be a matter of public record. I hope that the Minister will agree that that is one way of partly satisfying concerns that have been expressed by the Select Committee on Trade and Industry and many other people. Does the hon. Gentleman also agree that the basis on which a disqualification order is made—or an undertaking for disqualification is accepted—should be set out in reasonably full terms, so that it is available to the public and on the public record should a director subsequently seek a variation in his disqualification undertaking or face disciplinary proceedings in any professional body. I hope that he will accept amendment No. 14, too.

Both new clauses and amendment No. 14 are developments from the very useful debate that we had in Committee. I hope that they will find favour with the Government.

Mr. Burnett

Liberal Democrat Members give qualified support to new clause 1 and complete support to new clause 2.

The hon. Member for Christchurch (Mr. Chope) was right to ask why a person who is unfit to run a limited company should be able, either alone or in partnership, to run a business. There is much force in that argument. I have examined in some detail the Company Directors Disqualification Act 1986, and my view is that, in most cases of disqualification under that Act—especially when they relate to criminal offences and the test of beyond all reasonable doubt has been met—the hon. Gentleman is correct in that assertion. Why should such individuals be able to run a service business either on their own account or in partnership with others?

I have nevertheless re-examined in detail section 3 of the 1986 Act. As the hon. Member for Christchurch said, in Committee, we discussed at length section 3, which could be said to be fairly draconian in its treatment of directors. It deals with persistent defaults, which it states can be conclusively proved by showing that in the five years ending with the date of the application he— the director— has been adjudged guilty (whether or not on the same occasion) of three or more defaults in relation to those provisions. I know that there are other tests, but that one is pretty tough on directors—albeit rightly. Nevertheless, I do not think that, as a result of disqualification under section 3 of the 1986 Act, a person should be disabled from, for example, starting his own small business perhaps as a shopkeeper or a window cleaner.

As I said, Liberal Democrat Members give qualified support to new clause 1. Although I believe—for the reasons that I have given—that its terms are draconian and go a little too far, the new clause certainly has merit in dealing with those who have been found guilty of a criminal offence. I hope that the Minister will consider that.

New clause 2 has been tabled to overcome the problem with the word "persistent" in section 3 of the 1986 Act. I believe that, in some cases, the failure to deliver to the Registrar of Companies just one set of accounts can be extremely important and have far-reaching consequences. I therefore support the new clause, which is drawn wisely and subtly.

New clause 2 contains two tests, whereas initially, in Committee, we had only one—which was, as the hon. Member for Christchurch said, draconian. The first of the tests is that a person has been a director of a company which was struck off the register of companies by reason of its failure to deliver company accounts. The second important test which we are now able to debate is whether the person's conduct as a director of that company makes him unfit to be concerned in the management of a company. There are now, correctly, two hurdles. New clause 2 is sensible, and Liberal Democrat Members strongly support it.

Mr. John Butterfill (Bournemouth, West)

I support my hon. Friend the Member for Christchurch (Mr. Chope) on both new clauses. I accept and very much agree with what he said about the spatchcock nature of particular proposals in the Bill.

My hon. Friend has been a distinguished member of the Trade and Industry Committee, on which I serve, and which considered the draft Bill in some detail towards the end of last year. In our report issued in December 1999 we broadly welcomed the general thrust of the draft Bill's proposals, but we felt very much that, on some matters, it was somewhat premature to legislate. We particularly felt that, as a general review of insolvency procedures was in progress, it might have been better to leave everything until we could have a more comprehensive Bill.

Nevertheless, the Committee felt that the draft Bill raised some important issues and that, on balance, it was probably right to go ahead with some restricted amendments, subject to various safeguards that we suggested. Although I regret to say that some of those safeguards have not appeared in the Bill, if I am able to catch the eye of the occupant of the Chair, I shall deal specifically with some of them in a later debate. Overall, however, it is right to introduce—as my hon. Friend the Member for Christchurch is seeking to do—the new clauses and amendments. It is very important that the public should be protected.

I must declare a personal position. I was a director of Maples Group Ltd, which went into liquidation a few years ago. Perhaps my experience as a non-executive director of that company will be helpful to the House. I was invited to join the board of Maples Group Ltd—the parent company of Maples Stores plc, the furniture retailer—by CinVen, which is the venture capital arm of the coal industry nominees who administer the coal industry pension fund.

At the time, the directors of CinVen said to me, "We have a company that we backed in a management buy-out and is well-advanced. Although it is not yet profitable, it is very much nearing profit, and it will be near market levels. We want to strengthen the board before the company is floated. Would you join the board, with your experience of general corporate governance and your particular experience of property matters?" I am a chartered surveyor, and the company's main assets were probably the shops that it owned or on which it had leases.

On that basis, I agreed to join the board of the company. Within a few months of doing so, I became very concerned about the figures that the executive directors were giving the board, because the cashflow figures did not match the trading figures that they were reporting to us.

3 pm

Shortly after I joined the board, Mr. Tom Vyner, the then deputy chairman of Sainsbury's, was also invited to join as chairman, to strengthen the board and to consider its trading activities in greater detail. After four or five months, Tom Vyner and I became increasingly concerned that the company's cashflow did not reflect the sales and turnover figures that the executive team were giving us. After four and a half months, we took the most unusual and rather hostile step, as non-executive directors, of calling in investigating accountants. We did so through a little bit of subterfuge: we said that we wanted the investigating accountants to look at a few individual branches to find out why figures were not entirely matching up and to report to the whole board.

As soon as we received the first verbal report of the investigating accountants, we put all the executive directors on gardening leave. When we received the subsequent report, we summarily dismissed them. I have to be careful about what I say, because the executive directors may be subject to legal prosecution and it is important that I do not prejudice that case. Suffice it to say that the duties of directors are paramount and their obligation to protect the public, customers, suppliers and everyone else is their first duty.

It is right that the law should be draconian in such matters and that if directors have misbehaved in any way—whether criminally or simply negligently—the protection of the public should come before the possibility of their continuing to trade in another venture and possibly putting the public at risk. The duty of the law must be, first, to protect the public and, secondly, to consider whether those people should be allowed to trade in another venture. For that reason, I strongly support the new clauses proposed by my hon. Friend the Member for Christchurch.

Mr. Richard Page (South-West Hertfordshire)

I very much support what my hon. Friend the Member for Christchurch (Mr. Chope) has said. He has introduced the real world into our debates by speaking about rogue traders and the impact that they can have on the public.

He asked why the Bill does not contain measures to deal adequately with those people—why they are being missed out and allowed to continue their activities.

As my hon. Friend said, the measure that he proposed in Committee was a little short on certain legal requirements but its thrust and direction were right none the less. We hoped that the Minister would introduce a measure of his own, drafted by the skilled officials who ensure that legislation contains no loophole that can be challenged in the courts. I regret that no such proposal has appeared, but the Minister now has his chance to accept my hon. Friend's proposal, which has been so ably supported by my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) and the hon. Member for Torridge and West Devon (Mr. Burnett). In my own humble and stuttering fashion, I shall return to that a little later if I may.

Before the Minister responds, I should like him to consider an article that I read recently in the New Statesman, which has recently run a profile of him. May I say that it is completely relevant to the new clause, Mr. Deputy Speaker, as I can see that you are on the edge of the Chair, waiting to leap in if I go out of order for 30 seconds? This engaging little piece states: It may have escaped many people's notice that we have a Minister for corporate social responsibility— the Minister who will soon be standing at the Dispatch Box. I hope that he will bear in mind the fact that he has that corporate social responsibility, and consider how he can apply it to stop rogue traders regularly ripping off the public. I regret that the Minister has not introduced such a measure in response to the clear and positive suggestion in Committee.

I want to speak to amendment No. 22, which my hon. Friend the Member for Hertford and Stortford (Mr. Wells) and I tabled. The proposals for expediting and simplifying processes by which directors can be disqualified must be welcome. I accept the figures produced by the DTI and offered by Ministers in relation to the proportion of disqualification orders that do not proceed to court, and their argument about the advantages of arrangements that permit the Secretary of State to accept undertakings from people whose conduct—let us be delicate—has been faulty.

Of course it is important to safeguard the interests of those who fall within the ambit of the new procedure. On the other side of the coin, it is equally important that the interests of the public should be protected against the premature lifting or termination of disqualification undertakings. I always listen carefully to the Minister, but I did so with special care when he argued in Committee that the court should have a discretion as to whether to reduce a period for which an undertaking should be in force or to provide for it to cease to be in force. The hon. Gentleman tantalised me and, I suspect, mystified the rest of the Committee—perhaps that should be the other way round—with his immortal words: a factor other than a material change in circumstance since the person gave the undertaking may be of sufficient importance to persuade the court to make an order …—[0fficial Report, Standing Committee B, 7 November 2000; c. 122.] The hon. Gentleman never explained what he had in mind. He gave no example to support his argument. I am a great believer in the notion that real-life examples make the case and put flesh on the legal bones. I can think of several facetious arguments about those who have given such undertakings being disappointed or even bursting into tears if their disqualification undertakings are not lifted or shortened, but I can think of no serious ones. I hope that the Minister will be more forthcoming.

If the Secretary of State has good grounds to seek and accept a disqualification undertaking from an individual, there should be significant material grounds for any application to the courts requesting that undertaking to be shortened or terminated. It is no good simply announcing that the courts will have the power to take into account any relevant factors in determining such an application under new section 8A(2). The Bill should include a clear direction to the courts that they must have material justification to alter or end the period of the disqualification undertaking.

Mr. Butterfill

Does my hon. Friend agree that one of the problems is that the prosecution case may take some years to come before the courts? Although the Secretary of State and the Department may be convinced that wrongdoing has occurred, it may not be possible to rely on a conviction in the courts until quite a lot of damage is done in other companies.

Mr. Page

My hon. Friend is correct, but the purpose behind the Bill is to bring about such disqualifications more quickly. That is one of the reasons why we have given it qualified support. The difficulty is that we see written into it the means whereby disqualification could become quicker, which can be to the advantage of a director, obviating the need for huge legal costs. Written into the Bill is a way for the director to get out of the disqualification period under the standard time and for no material reason. I am trying to persuade the Minister to come up with reasons.

I do not share the Minister's rose-tinted view of life; he thinks that the courts will see through all the old lags who are trying to put one over on them. Anyone with business experience, or even experience of dealing with politicians, will know how persuasive and plausible such people can be. It is better that we take specific precautions now than that we find ourselves obliged to take them later.

It is proposed to give the director a second bite of the cherry. Under the new procedures envisaged in the clause, the Secretary of State may accept a disqualification undertaking, which has the same effect as a disqualification order. So far, so good. There is a new procedure for compromising disqualification proceedings without their even being commenced. The present way of compromising such proceedings is by way of a carecraft order. If such an order were made, the director would be bound by it. If he wants to be a director of another company, he has the right, under section 17, to apply for leave to do so.

Under the new procedure, the director would still be able to apply for leave to be a director of another company. However, he is given an additional right by the proposed new section, under which he can apply to the court for the disqualification undertaking to cease to be in force or for the period of disqualification to be reduced. Does this give the director the right to backtrack or to welsh on the bargain previously made by the Secretary of State? [Interruption.] I am sorry to use the word "welsh" like that; I saw the Minister shudder and I wish to withdraw that word.

Any director with any sense will agree to a disqualification undertaking. Having fixed the maximum period for disqualification, he can then can apply, under the new section, to see whether he can reduce the period or get out of it altogether. We know that the period cannot be increased, so he has nothing to lose except the cost of court proceedings. New section 8 is a difficult luxury to justify.

I am realistic and I know that if we tabled an amendment to remove the section, the Minister would more than likely reject it. I have tabled an amendment which could be regarded as a compromise and which may be acceptable to the Minister and the Government. I propose to limit the second bite of the cherry to where there is a material change of circumstances only. The proposal does not go as far as I would like it to but, at the very least, it means that the director will not be able to give a disqualification undertaking and then apply immediately to have it cease or have it reduced. That would prevent a fairly obvious abuse and it would be difficult for the House to object.

To those who are unconvinced, I would say this: why should a director who has freely given a disqualification undertaking have the right to apply to the court to get out of it without there having been a change of circumstance—particularly when he has the right to apply for leave to act as a director of a specific company? If it remains unamended, that is the way in which the measure will operate in more cases than I would care to imagine. From my business experience, I have seen company directors reappear like phoenixes, using the same modus operandi. They have appeared to be almost untouchable. The new clause would give a specific protection to the public which does not exist at the moment.

3.15 pm

Perhaps I would be less sympathetic towards the new clause if I knew that there was to be a consumers Bill in the Queen's Speech. However, the word on the street is that there is to be no such Bill. The Minister can look me in the eye and tell me if I am wrong and, if so, I will withdraw these remarks. A specific promise was given that, in the lifetime of the Parliament, there would be a consumers Bill. One of the areas that such a Bill would tackle is the problem of rogue traders.

Mr. Forth

My hon. Friend is being far too charitable. Even if the Minister felt able today to anticipate the Queen's Speech and assure my hon. Friend that there would be a consumers Bill in the Government's programme, the Minister could not guarantee that that Bill would reach the statute book because the Prime Minister might intervene and call the election ahead of the time at which he needed to. My hon. Friend would be left in a position where an undertaking would have been given—perhaps in good faith by the Minister—which could not be fulfilled. I hope that my hon. Friend will not feel obliged to back off even if the Minister gives an undertaking about the Bill today.

Mr. Page

I am frequently accused of being too charitable but that's the way it is: I am one of those creatures who go through life being charitable.

Mr. Forth

Well, I am not.

Mr. Page

I well know that my right hon. Friend is not charitable. He is a very hard man. I realise that any political party needs a balance of the soft and the hard. The soft version is at the Dispatch Box; the hard version is one or two rows behind.

The matter raised by my hon. Friend the Member for Christchurch is serious. If the Minister can assure us that there will be a consumer Bill, we will look at it and give it whatever support we can to ensure that the public are protected from rogue directors. We will see what we can do to get the Bill on the statute book as quickly as possible—subject to a reading of the small print. I would hate to give a carte blanche undertaking here without seeing the specifics of the Bill. I am given to understand that a section in a consumers Bill could deal with these matters.

I draw my remarks to a close by thanking the Minister for sending to every member of the Committee the injunction directive and the directives that will be covered by the measure. According to his letter, there are 11, although I have not counted them to see whether that is so. The notice sent with the letter states: Further directives, including the proposed directive on distance selling of financial services will be added in due course. That may prevent a certain amount of distress to members of the public caused by directors not acting correctly in that area. However, measures are already in place that make it difficult for rogue traders to operate in limbo in that area. I thank the Minister for his letter and look forward very much to what he has to say, bearing in mind the fact that, according to the article in the New Statesman he is in a position of "corporate social responsibility". I hope that he can find it in his heart to accept amendment No. 22 and give serious consideration to new clause 2, tabled by my hon. Friend the Member for Christchurch.

The Minister for Competition and Consumer Affairs (Dr. Kim Howells)

By my standards, we have had a lengthy debate on this group of amendments. May I congratulate the hon. Member for South-West Hertfordshire (Mr. Page) on the superb intelligence that he gets from my Department or wherever the Queen's Speech is being drafted? He knows what is in the Queen's Speech, although I do not. I am sure that my hon. Friend the Member for Coventry, North-West (Mr. Robinson) will be delighted to know that the hon. Member for South-West Hertfordshire has helped to boost the circulation of the New Statesman by purchasing a copy of that estimable organ. I have seen my portrait in the magazine and, if the hon. Gentleman was using a Library copy, I shall report him.

At the beginning of his speech, the hon. Member for Christchurch (Mr. Chope) said that I am in danger of missing the bus in relation to implementing enforcement measures against rogue traders. However, I fear that the hon. Gentleman has missed the point of the legislation. For the benefit of those who were not present in Committee when amendments similar to the hon. Gentleman's were debated, I shall reiterate that the main purpose of the Company Directors Disqualification Act 1986 is to provide the public with protection against those who abuse the privilege of limited liability. Sections 6 and 7 of the Act allow the Secretary of State to apply to court for a disqualification order against a director of an insolvent company whose conduct in relation to the company is such as to make him unfit to be involved in the management of a limited company.

In response to the hon. Member for Bournemouth, West (Mr. Butterfill), I was glad to press ahead with the provisions in the Bill—limited though they are, according to him—and am pleased that he gave us the benefit of his experience of a company that found itself slipping into insolvency and receivership. The hon. Gentleman illustrated clearly why the relevant laws should be tough in relation to the honesty and probity of company directors. Section 8 of the Company Directors Disqualification Act enables the Secretary of State to apply for a disqualification order against a person who has been the subject of a statutory investigation, as provided for in that section, and in the case of whom it appears to be expedient in the public interest that the person should be disqualified. Similarly, clause 6 of the Bill will allow the Secretary of State to accept a disqualification undertaking in such circumstances under sections 7 and 8 of the 1986 Act.

I repeat that I have some sympathy with the concerns of the hon. Member for Christchurch, but the 1986 Act is not the appropriate measure with which to try and address the issue of rogue traders. Those concerns need to be dealt with in other ways, and we are doing that through, for example, the useful directive that the hon. Gentleman told us about; better enforcement of consumer legislation, including measures on e-commerce; pursuing issues that cause particular concern, such as the servicing and repairs of cars; as well as the scheme that the hon. Gentleman mentioned, in which someone purporting to sell windows in his constituency is just operating a scam. We shall also deal with rogue traders through an important series of measures to modernise consumer advice networks. As I indicated in Committee, the impending EC injunctions directive should be of some help in that area too.

Whatever the hon. Member for Christchurch thinks about disqualified directors being able to trade as sole traders, it would be inappropriate for the 1986 Act to go any further by restricting a person's right to do so. Such restrictions need to be dealt with in other ways. New clause 2 deals with issues relating to that and, as the hon. Gentleman said, is similar to the amendment that he tabled in Committee, although he revised the amendment's drafting in the light of our debate there. New clause 2 would introduce a new clause into the 1986 Act and would allow the court to make a disqualification order against someone when the court considers that he or she has been a director of a company which was struck off the register of companies because it failed to deliver company accounts, and it considers that the person's conduct as a director of that company makes him or her unfit to be involved in the management of a company.

As I explained in Committee, directors can be disqualified for failure to file their company's accounts under sections 3 and 5 of the 1986 Act for defaults in relation to various provisions of company legislation, including failure to file accounts at Companies House.

Mr. Burnett

Will the Minister give way?

Dr. Howells

In a moment. I accept that neither provision would allow for disqualification following only one default, as the hon. Member for Christchurch said.

Mr. Burnett

Will the Minister give way?

Dr. Howells

If the hon. Gentleman can contain himself, I will give way in a second.

It is not clear how the amendment would allow for a disqualification after one default, either. Nevertheless, disqualification on default would be going too far in any event.

Mr. Burnett

Does the Minister agree that, in some cases, the failure to deliver just one set of accounts can be of the greatest importance? Surely, a person who fails to do so on being given notice or who is judged guilty of conduct that makes him unfit should be disqualified.

Dr. Howells

I shall try to deal with that in a moment. The two matters are not directly related and I shall try to make it clear why that is so in relation to the legislation.

It is not our intention to revisit in the Bill what constitutes unfit conduct for the purposes of achieving a disqualification. Where there are concerns about the failure of a company to file accounts, another remedy exists. A complaint made to the Registrar of Companies, who has enforcement responsibility in this area, will result in him taking appropriate action against the company. If the company is carrying on business or is in operation, the registrar will take enforcement action to secure delivery of the documents, up to and including prosecuting the directors in the magistrates court or, in Scotland, referring the matter to the prosecuting authorities.

In addition, the late filing of accounts attracts an automatic civil penalty. If, in the registrar's opinion, the company is not carrying on business or is not in operation and is defunct, he can initiate statutory action to dissolve it and strike it off the register.

In Committee, the hon. Gentleman raised the fascinating case of the People's Trust, and he may wish to know that it is currently up to date with all its filing requirements at Companies House. Indeed, I started to dig around a bit on the hon. Gentleman's behalf, given his fascination with that company. The trust was incorporated on 22 November 1996, but failed to file accounts or annual returns as required by the Companies Act 1985. It failed to respond to statutory letters inquiring whether it was still in operation or carrying on business under section 652 of the 1985 Act. It was struck off and dissolved on 8 September 1998 and was restored to the register after a relatively short period, on 5 November 1998. All outstanding documents filed at the time of restoration are up to date with all current filing requirements. I would be the last person in the world to defend Mr. Fayed, but that should be on record as it is perhaps an additional piece of information that I am sure would interest the hon. Member for Christchurch.

3.30 pm
Mr. Forth

Perhaps the Minister could clarify something. He seems to be saying that all the required information is available from 1998 onwards since the company was restored to the register. Is he also telling us that we now know everything that we need to know and should know about the company between 1996 and 1998, as that is the period of the most interest to my hon. Friend the Member for Christchurch?

Dr. Howells

I understand that the relevant information is there, but I am sure that the hon. Member for Christchurch could find out very quickly by accessing the terrific new computerised filing system in Companies House. He need merely get on to his PC—

Mr. Chope

I do not have a PC.

Dr. Howells

That has certainly thrown me. It would be good if the hon. Gentleman had a PC, but if he does not have one he cannot access the files online. I suggest that he travels to Cardiff, which is an excellent city, goes to Companies House and talks to the estimable staff there, who will do the job for him. By the way, I understand that there are even short courses to help people access files via their PCs, if the hon. Gentleman is interested, but clearly he is not.

Amendment No. 14 would require the Secretary of State to prepare a summary statement of the outcome of the relevant investigation before accepting a disqualification undertaking from a director, and to make that summary a matter of public record. I am not at all sure that the hon. Member for Christchurch would like the effect of the amendment, were it accepted. It would seem to impose a duty on the Secretary of State to make public a summary of the unfit conduct he alleges against a director following the completion of his investigation.

Although I would ask which investigation the hon. Gentleman needs to refer to, that is not at all clear and only section 8 of the Company Directors Disqualification Act expressly refers to investigations. That summary would include any allegations that the Secretary of State was prepared subsequently to withdraw before accepting a disqualification undertaking.

Let me remind the House of how we envisage the process working. When inviting a director to offer an undertaking, as a matter of practice, the Secretary of State will put the unfit conduct that he alleges to the director concerned so as to give the director the opportunity to respond to it. It might be that the director is able to demonstrate to the satisfaction of the Secretary of State that one or more of the allegations made no longer stands up—in other words, that the case that the Secretary of State is putting to him is not accurate in one or more respects. A director may be able to introduce new evidence which puts an entirely different complexion on the conduct concerned. Where that occurs, the Secretary of State may withdraw that allegation and consequently be prepared to accept an undertaking for a lesser period. In those circumstances, if the amendment were agreed to, the public record would disclose an allegation of unfit conduct that had subsequently been withdrawn. I am sure that the hon. Member for Christchurch would agree that it would be unjust to place a director in that position. It does not seem right to us and we do not consider that the amendment should become part of the Bill. We remain of the view that the public record at Companies House should only show particulars of disqualification undertakings accepted by the Secretary of State.

I now turn briefly to amendment No. 22, which was addressed by the hon. Member for South-West Hertfordshire. It is the same as amendment No. 71, which we debated in Committee. For those who have not had the opportunity to read Hansard, I shall repeat the point that I made. We do not consider that the court should be restrained in the way that is proposed under the amendment. It would be far more appropriate for the court to have a discretion on whether to reduce the period for which an undertaking is to be in force or provide for it to cease to be in force. It could be that some factor other than a material change in circumstances since the person gave the undertaking—a change in law, for example—would be of sufficient importance to persuade the court to make an order under new section 8A. According to the text of the new section, the court will be able to take into account any factors that it considers relevant when making such an order. The court will be helped in reaching a view by any matters that the Secretary of State calls to its attention under subsection (2) of the new section. With that, I urge the hon. Member for Christchurch to withdraw his amendment.

Mr. Chope

I am grateful to the Minister for his response, although I find it disappointing in some respects. He argued that my amendment No. 14 could cause injustice to directors because the statement of facts might subsequently be proved to be inaccurate. That is why, when we made the original proposal in Committee, we said that we wanted an agreed statement of facts. The Minister raised all sorts of objections to that. He said that it might cause delay or that it might be difficult to get an agreement. We then moved an amendment to overcome those obstacles and now, in typical civil service fashion, the Minister raises objections to the idea that there should be a non-agreed statement of fact. It is desirable to have more facts available on the public record than there will be under the Government's proposals. That is my concern.

As for the Minister's arguments in relation to new clauses 1 and 2, first, I am grateful to him for letting us know that the People's Trust has become a phoenix rising from the ashes. Back in 1997 there was an enormous amount of press comment saying that the People's Trust was no longer trading, had gone out of business and had vacated its luxurious Knightsbridge offices. It was reported that the disappearance of the People's Trust marks the end of Mr. Fayed's third foray into public morals. That is how the Evening Standard described the situation on 8 August 1997.

Perhaps the resurrection of the People's Trust suggests that there is yet another foray on the way. I shall look with interest at the contents of the documents to which the Minister has drawn our attention, but I do not think that the fact that they have now been filed alters the burden of my argument. I illustrated my contention that there was a gap in the law and the Minister agreed. However, he then recited a series of sanctions which, although they might apply to different cases do not apply to a case in which somebody makes only one serious breach of his duty to file accounts.

Mr. Page

If my hon. Friend is in the slightest bit worried about finding examples to prove his point, I can spend an hour or two with him after the debate giving him the necessary names.

Mr. Chope

I do not think we need any more examples. The examples that I quoted are sufficient. The fact that the Minister has not been able to show us what remedies are available demonstrates that there is a gap in the law that needs to be filled.

Mr. Burnett

The hon. Gentleman is quite right. Not only should there be a duty to file accounts, but there should be a duty to file one set of accounts in good time. In the case of the additional clause which is qualified, as new clause 2 is, there should be a draconian sanction for failure, and there is not one now.

Mr. Chope

The hon. Gentleman is absolutely right. I am very grateful to him for his involvement in the promotion of new clause 2. My right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) spoke earlier about the implications for limits on party political funding. It is no good if people say that they will not file the accounts, and the company is then dissolved and struck off, and, at some stage in the future, when the time for investigating the funding of parties in a general election campaign is over, the company is resurrected.

I was caught out because I had assumed that, once a company's accounts were no longer available because it had been struck off and dissolved, that was the end of the matter. Now the Minister says that, in this specific case, the company came back later. That is no good. The people responsible for that appalling default of their obligations under company law have carried on with impunity. New clause 2 would put an end to that loophole.

The Minister made a rather feeble response to new clause 1. We are talking about serious issues of rogue traders. The Government purport to be on the same side as us in campaigning against rogue traders and the injustice that they cause to the hapless individual. An early-day motion has been tabled on the subject and the hon. Member for Luton, South (Ms Moran) promoted a ten-minute Bill supporting action against rogue traders.

I tabled the new clause to take action on the matter, and the Minister's response is that it is not appropriate. That is not good enough. The people will decide on this. The Government have been going on about how they will do something against rogue traders, but they are merely paying lip service to people's concerns. They are not legislating to close the loopholes.

I thank my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) for introducing into the debate a pertinent example drawn from his own experience as a non-executive director and as a member of the Trade and Industry Committee; I thank my hon. Friend the Member for South-West Hertfordshire (Mr. Page) for his support for my new clauses and amendments; and I thank the hon. Member for Torridge and West Devon (Mr. Burnett) for his help and advice.

It would be a gross indulgence to divide the House on more than one of the new clauses. As new clause 2 would remedy the greatest mischief straight away, and there is no complaint about its drafting, that will be the right one on which to have a vote. I hope that hon. Members will support it when I give them the opportunity to do so. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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