COMPANIES BILL [H.L.]

HL Deb 23 January 1967 vol 279 cc326-412

2.55 p.m.

Report of Amendments received (according to Order).

Clause 3 [Statement in holding company's accounts of identities and places of incorporation of subsidiaries, and particulars of shareholdings therein]:

THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN)

My Lords, this is the first of a number of formal Amendments. Section 455 of the principal Act states that the word "company" means a company formed and registered under that Act or one of the previous Companies Acts or the Joint Stock Companies Acts. The words "body corporate" are more general and are used to refer to, among other bodies, registered companies, chartered companies and companies incorporated abroad. The correct expression to use when referring to bodies that may be registered companies, chartered companies or companies incorporated abroad is "bodies corporate". The Amendment substitutes "body corporate", or its equivalent, for "company" in the places where the reference is to a body corporate that may or may not be a company within the meaning of the Companies Act. I beg to move.

Amendment moved— Page 2, line 35, leave out ("company") and insert ("body corporate").—(Lord Brown.)

On Question, Amendment agreed to.

LORD BROWN

My Lords, I beg to move Amendment No. 2.

Amendment moved— Page 2, line 36, leave out ("company") and insert ("such body").—(Lord Brown.)

On Question, Amendment agreed to.

LORD BROWN

My Lords, I beg to move Amendment No. 3.

Amendment moved— Page 2, line 38, leave out ("company") and insert ("body").—(Lord Brown.)

On Question, Amendment agreed to.

LORD BROWN

My Lords, I beg to move Amendment No. 4.

Amendment moved— Page 2, line 39, leave out ("company") and insert ("body").—(Lord Brown.)

On Question, Amendment agreed to.

LORD BROWN

My Lords, I beg to move Amendment No. 5.

Amendment moved— Page 3, line 2, leave out ("company") and insert ("body corporate").—(Lord Brown.)

On Question, Amendment agreed to.

VISCOUNT ECCLES moved to add to the clause: ( ) In relation to a subsidiary the shares of which are without nominal or par value, references in this section to a proportion of the nominal value of the issued shares of a class shall be construed as references to a proportion of the total number of the issued shares of that class."

The noble Viscount said: My Lords, when we debated at the Committee stage your Lordships agreed that we should discuss together all the Amendments in the name of my noble friend Lord Polwarth and myself. I hope it may be convenient to do the same to-day, so that the fate of Amendment No. 6 will decide that of Nos. 24, 47, 52, 57 and 103.

On the former occasion we had an interesting debate on the merits of no par value shares. We were surprised at the strength of the support for this proposal. It came from these Benches, from the Back Benches opposite and from the Cross Benches, and the noble Lord, Lord Crown, was good enough to give us his personal opinion as a businessman that there was sense in the reform we were trying to make. The Government expressed their surprise that the support was widespread, and on this side of the Committee we were surprised that the Government had not paid more serious attention to our Amendments. At the end of the day, as your Lordships will remember, I was persuaded by my noble friend Lord Swinton, and the noble Lord, Lord Shepherd, to withdraw them, on the understanding that the Government would have a careful look at our proposal before the Report stage.

In pursuance of that undertaking my noble friend and I were invited to see the President of the Board of Trade and his colleagues. We are grateful for the time which they gave us and for the courtesy with which we were received. Mr. Jay told us that in principle the Government would like to see the system of no par value shares become part of our Company Law. This was a very welcome assurance, and it encourages me to hope that we need not to-day return to the merits of the proposal, since both sides are agreed about that. Ministers were, however, unwilling to see the no par value shares system inserted into this particular Bill, and they were concerned about a number of points to which I will try to do justice.

In the first place, they repeated with emphasis the statement which the noble and learned Lord the Lord Chancellor had made to this House: that this Bill was designed as an interim short measure which should not be enlarged. They foresaw trouble if any additions were made, because, their appetites whetted, the supporters of other Amendments would take the cue and have a go in another place, where they might successfully argue that their Amendments were more urgent than those to which I am now speaking. The result would be to delay the passage of the Bill, which was badly needed to meet the difficulties of the insurance industry. The noble Lord, Lord Polwarth and I, are not exactly beginners in politics, and we fully appreciated this position. But we wondered whether it was really fair to seek to enrol us as a couple of supernumerary Government Whips to assist Ministers to hold off Amendments about which we knew nothing. My own opinion, for what it is worth, is that whatever we do to-day about no par value shares will not have the slightest effect on what Members in another place wish to do, and will do, about the Bill when it comes before them.

Secondly, Mr. Jay and his friends argued that there could be no hurry to place our Amendments on the Statute Book because the changes in taxation required by the introduction of no par value shares were considerable, and as they had not yet been worked out they could hardly be included in this year's Finance Bill. Mr. Jay then asked us to withdraw our Amendments and to wait for a second Companies Bill which he told us he and his friends had every intention—and I fully believed him—of bringing forward in the 1969–70 Session. In that second Bill the Government would be glad to see no par value shares included. My noble friend and I were sensible of the spirit of this offer, but we had reservations and we came away feeling that we ought to ask your Lordships to decide whether the offer was good enough.

Let us then see what the offer means. At best there would be a delay of several years. Supposing that all goes well with Mr. Jay, and he has a second Companies Bill ready for introduction before Christmas, 1969, would it be through both Houses of Parliament before the Budget of 1970? We have read the Jenkins Report, and we accept that the second Bill will be long, interesting and controversial; and very probably we should have to wait for the Finance Bill of 1971 before the changes in taxation required by the no par value shares system could become law. It is impossible to be certain of this timetable, and at this distance who knows what the Government and the legislative programme will look like in 1969, 1970 and 1971?

We have to ask ourselves, taking full note of Mr. Jay's offer, whether it is right deliberately to postpone this reform, which I would remind your Lordships was recommended by two distinguished Committees of Inquiry, the Gedge Committee and the Jenkins Committee, the latter reporting that they had found no evidence against and much evidence in favour of the no par value shares system. More than ten years have passed and nothing has been done, and now an opportunity occurs. Should we take it or let it pass? If the Government were opposed in principle to this reform I should hesitate to ask your Lordships to press its acceptance this afternoon. But we are not in that situation. Ministers have said that they agree in principle, and I feel bound to add that my experience in matters of legislation has taught me more than one sharp lesson, that present opportunities are to be preferred to future prospects.

Now I have a little to say on the Government's argument concerning the relative urgency of our proposal and other recommendations of the Jenkins Committee which are not included in the Bill. I fully expect that some of your Lordships might think other aspects of Company Law at least as important. That is a matter for argument, in which my noble friend and I could reply that the provisions of Clause 18, requiring companies to declare their charitable subscriptions, do not appear to us to be urgent at all compared with a reform in company structure which would be of benefit to British industry. But we do not wish to make this point. Our case is that this is a reform which here and now deserves the approval of your Lordships' House.

It has been suggested that the changes in taxation should be worked out in detail before the provisions required in a Companies Bill are accepted. But which haste come first, the change in Company Law or the changes in taxation? Clearly, unless we first succeed in what we are trying to do this afternoon, no question can arise of changes in a Finance Bill. Surely, we can have every confidence that the Treasury can cope with the no par value system. That great Department of State is not a wilting camel whose back will break by the straw which my noble friend and I gently are seeking to place among its burdens. In any event—and I think this is very important—the timing of the changes in taxation is left to the Government. One of our Amendments, No. 57 I think, gives the Board of Trade the duty of naming the appointed day when the system comes into operation. If, unfortunately, the consequential provisions cannot be included in this year's Finance Bill, the way is left open to wait for the Bill of 1968.

Finally, just one word about the drafting of the Amendments. Your Lordships will recall that on Committee stage the Government were not ready to venture an opinion on the drafting. The new clause and the other Amendments that go with it appear complicated and lengthy. That is because they are designed to express all the recommendations except one of the Gedge and Jenkins Committees. I am ready to listen to any criticisms of the drafting. I am not a lawyer, but I have shown these Amendments to competent lawyers and they think they carry out what Lord Polwarth and I are seeking to do. In the hope that that is so, I beg to move.

Amendment moved— Page 3, line 34, at end insert the said subsection.—(Viscount Eccles.)

3.10 p.m.

LORD POLWARTH

My Lords, having also put my name to this Amendment, I am sorry that I was prevented from being present and speaking to it on the Committee stage. But I was present on the previous occasion on which we discussed this subject. I have Hansard of that date. It is dated January 25, 1955, 12 years ago to within two days of to-day's debate. We debated the Gedge Report most thoroughly on the Motion of the noble Earl, Lord Cromer, who was subsequently to become, and served with such distinction as, Governor of the Bank of England. May I say that I hope that as soon as he is freed from the taint of that Office he will be ready to come back and play his part in your Lordships' House.

What happened on that occasion? The Government of the day accepted the principle of shares of no par value, but we ended up with the same "dusty answer" that we had on the Committee stage, that it could not be implemented because of the complexity of the consequential legislation and the state of the legislative programme, an answer that we have heard many times before. What has happened since that date 12 years ago? Virtually the only objection then raised to the conception that of the T.U.C., has, I understand, disappeared.

Despite all that was said at an earlier stage of this debate, there is a substantially greater volume of support and desire for this innovation, generated largely, I think, by the increased interest in, and understanding of, company accounts, something for which we should be glad. If that should be doubted, may I found on representations that have been made on the subject to the President of the Board of Trade by no less than three bodies, whose experience in this field and whose views must carry, I submit, considerable weight. Each of those bodies has taken the point of the remarks on Second Reading by the noble and learned Lord the Lord Chancellor regarding the content of the Bill and its scope. Nevertheless, each of those bodies has still seen fit to refer to this particular subject of shares of no par value with a strong plea for early permission for them to be brought in.

The first of those bodies is the Institute of Directors, whose members include many thousands of those who are made responsible by shareholders for looking after their interests. Then there is the Association of Investment Trusts, a body which has done a great deal to promote the interests of shareholders, particularly those of smaller resources. If I may quote, after referring to the limited scope of the Bill, they say: The accountancy bodies support in principle the introduction of no par value shares, though they recognise that a number of consequential amendments to the legislation will be entailed. Submission: companies should be empowered to issue no par value shares. Finally, we come to what I might, in some humility, suggest is perhaps the most impressive body, being a member of a part of it myself; that is, the combined three leading accountancy bodies in the country, who between them number over 60,000 members, and whose views, I suggest, represent a great weight of valid opinion. This profession is surely as well placed as any to appreciate the issue. I know that these submissions from the accountants reached the President of the Board of Trade only last week. That, I think, is unfortunate. But I think it is notable in that it is a combined representation, for the first time on a subject of this kind, from all these three bodies. That it has taken so long is, I know, in part attributable to the substantial burden that has been placed on this profession by the tax legislation of the last two years. Nevertheless, I hope that my noble friend opposite will encourage his colleague at the Board of Trade to give every consideration to their representations in another place.

The accountancy bodies, too, put forward a strong recommendation for this reform; and if these combined representations of all these bodies do not constitute a genuine and strong demand for the introduction of these shares, I do not know what can. I would simply commend to your Lordships all that has been said already by my noble friend, and suggest that having waited for twelve years we have waited long enough.

3.16 p.m.

LORD CHORLEY

My Lords, I am sorry to gather from the speech of the noble Viscount, Lord Eccles, that the Government are not prepared to go with him on this matter. I spoke on his behalf on the Committee stage, and I do not want to repeat all my arguments. But I am more and more impressed by the value of American Company Law, compared to our own Company Law, and as a close student of the commercial law of this country and of its history for many years I have been more and more impressed by the importance to commerce and industry of having a really good legal framework in which to carry on business. It is astonishing how few people seem to realise how important that is. In business, and certainly in politics, it is rather rare to find people who are really awake to the fact that a bad piece of legal framework may put one at a real disadvantage in respect of one's overseas activities.

I am quite sure that the American Company Law in almost all the States has been one of the contributory factors—I would not say that it was the most important, but one of substantial importance—in the Americans' getting ahead in so many ways. They have a much more flexible system of Corporation law, as they call it, than we have.

I had the great advantage of working, although not technically, with Professor Louis Loss, of Harvard, who was for many years concerned with the Securities and Exchange Commission which looks after the problems of American Company Law in regard to securities over the whole of the Federal area. I do not think anybody who has been in really close touch with the Americans could have any doubt that they have had a really good and flexible system of Company Law which has been of substantial advantage to them in the tremendous development and progress of their industry and commerce. I do not want to rub that in any more, but what is proposed in this Amendment is one of the things the Americans thought of first, and which they have had for a long time. It is one of the rules in Company Law which Aim sure has helped them to go ahead in this way. I am sure the noble Viscount, Lord Eccles, is right in saying that when it is possible to get a change of this kind made, it should be made at once. It is quite absurd to wait year after year for it, especially at a time when we are not in such an easy situation as regards our industrial and commercial development, and when we ought to have every advantage which a good legal system can give us. And this is one of them.

It is so easy for officials to take up an attitude of this sort. The noble Lord, Lord Hawke, on a previous occasion in connection with this Bill, referred to the informal but extremely useful arrangement which we had in 1947, when the big Bill of that year was before the House. On the Committee stage it became obvious, as I think he mentioned, that there were so many technicalities, particularly in relation to the accountancy provisions, that it was not really possible to carry on the Committee stage effectively on the Floor of your Lordships' House. In effect, it was adjourned into the Lord Chancellor's Room, where we met every morning for several weeks at 10 o'clock.

I have a vivid recollection of this because I was "devilling" for the Lord Chancellor, the noble and learned Viscount (as he then was), Lord Jowitt, and I well remember how time after time the representative of the Board of Trade said that he could not accept some suggestion which appeared to the Lord Chancellor to be a most useful one. It was almost always for some sort of reason of this kind, and to my knowledge quite a few of these proposals are still waiting to become the law of the land. That was twenty years ago, and it shows that when an opportunity occurs to bring in and enact a really sensible and useful change in the law, particularly in a branch on which commerce and industry so greatly depend, advantage should be taken of that opportunity to put the matter on the Statute Book. I therefore hope that, even at this very late stage in this Bill, the Government will see their way to accept this useful Amendment.

3.22 p.m.

LORD CONESFORD

My Lords, may I add a few words to the pleas that have already been made, and welcome very much the speech which has just been made by the noble Lord, Lord Chorley? I was a Minister at the Board of Trade at the time that we appointed a committee under my friend the late Montagu Gedge, Q.C., to make a report on this subject. I shall not say another word on the merits, which have been so admirably dealt with by the preceding speakers. I want only to point out again what has been the advice given continuously to the Board of Trade; namely, that the reform, which was a good one, would require amendment both of the Companies Act and of the Finance Act. Since it requires both, it is almost essential that we should first enact the necessary clauses in the companies legislation. The matter will remain completely in the control of the Government and of another place to decide when the reform shall be made effective.

Under the Amendment which my noble friend will later move to Clause 42, it is quite clear that this Part of the Bill will come into operation, as stated in Amendment 57 to Clause 42, on such day as the Board of Trade may by order appoint. Provided that we make the necessary changes in this Bill, the Government can do their part in the Finance Bill in any year they like. It may be too late for them to do it in the present year, but they can do it next year or any year of their choice. If, however, we do not lay the necessary foundation in the companies legislation, then they will not be able to do so. I think, therefore, that the arguments presented by my noble friend Lord Eccles and those noble Lords who have supported him are over-whelming.

LORD COHEN

My Lords, I do not intend to detain the House long, but I think I ought to intervene because the Committee over which I presided and which reported in 1945, while recog- nising the logic of the demand which is now supported by the noble Viscount, Lord Eccles, felt some doubt, and indeed said that there then appeared to be little public demand and considerable opposition to the proposal. As it appears from the speech of Lord Eccles that those objections have been met, I want to say that, so far as I am concerned, I I will on this occasion vote for the Amendment. I do not feel as qualified as the last speaker to talk about the relative merits of which you pass first, this or the Exchequer Bill, but it seemed to me that, logically, that point was met by the Amendment which Lord Eccles will move later on. It seems to me that there are really no disadvantages in this. It does not offer any opportunity that I can see for higher tax evasion or for any other form of chicanery, if I may use the word. I thought that I ought to say, in view of what I said in my Report, why on this occasion I would vote for the Amendment.

LORD BROWN

My Lords, I rise to speak against this Amendment and I must say that I feel a little lonely. The reason I feel lonely is this: it is because I speak for the Government, who have the responsibility of the legislative timetable, and nobody who has spoken for this Amendment has that responsibility. The Government agree that some substantial arguments can be advanced in favour of the principle of no-par-value shares; and I am grateful to the noble Viscount, Lord Eccles, for agreeing that we need not spend a great deal of time debating the merits and for the fair way in which he treated the argument on my side of the matter. If the present Bill, however, is to reach the Statute Book this Session, we are bound to limit its scope on the one hand to the disclosure of information by companies and on the other to immediately urgent reforms, such as those affecting insurance.

The case for no-par-value shares does not seem to us to be more urgent and important than other changes in the law for which a good case can be made on merits. Indeed, there are one or two Amendments which we have dealt with, or may have to deal with this afternoon, which seem to me personally somewhat more important. It would also involve consequential and complicated changes in tax law for which, in addition, time would have to be found. Since, however, the Government propose to introduce a further and wider Companies Bill in a later Session of this Parliament, and since the question of no-par-value shares falls much more appropriately within the scope of that Bill, my right honourable friend proposes to review carefully, in all its implications, the possibility of legislating on this matter in that second Bill. It is our firm intention to introduce that Bill as soon as the preliminary work has been done and Parliamentary time is available.

I undertook during the Committee stage that this matter would be seriously considered by my right honourable friend the President of the Board of Trade. I can assure the House that it has so been seriously considered. Not only has it been discussed within the Board of Trade, but there have been cross-discussions with other Ministers. I am grateful to my right honourable friend for the fact that he has put me in a position to face this House with the statement that what I said I would undertake has been done. But the fact remains—and I do not like to hang over this House the shadow of what will probably happen in another place, but we have to be objective about this—that if we divide this afternoon and this Amendment is passed, with great respect, we shall be wasting our time—

LORD CARRINGTON

No.

LORD BROWN

—because this Amendment will be cancelled out in another place, not because it has no merit, but simply on the grounds that the opening up of this Bill to extensions of this kind would inevitably lead those who have had Amendments which have been discussed in Government and turned down to propose that their Amendments, which contain at least equal merit, should accordingly be introduced in the Bill. This means an extension of the Bill, it means delay, and, as the House knows, we are all anxious that this Bill should go through as speedily as possible in order that, in particular, we should be able to deal with insurance matters which are pressing upon us.

The noble Lord, Lord Polwarth, has provided evidence of the opinion of some other bodies. These are important opinions, but they are not bodies which have the responsibility of considering the particular Amendments we now have before us, along with Amendments of other types, because they are not concerned with those other Amendments. This is a question of differential judgment which must be made, not by professional bodies, but by Government, in this House and in another place. I am not too impressed with those arguments, and I am suggesting to the House that it would be wise to accept my right honourable friend's undertaking to consider very sympathetically the inclusion of this Amendment in a further Bill, and to leave it at that.

I am very tempted to make great play of the argument that, the Gedge Committee having reported in, I think, 1955, nothing has been done since then; and to point to the fact that a previous Administration, with a comparative degree of leisure to introduce legislation of this sort, failed to do so; and that the Government are now being pressed, at short notice, when they have a very full legislative timetable, to extend the Bill to include measures which were not dealt with before. But I do not think those arguments will prevail upon your Lordships to vote against this Amendment, so for that reason I will not make a great deal of them. I think this matter has been aired fully and decisively. I hope that the movers of the Amendments will withdraw them, and that, if they do not withdraw them, Members of this House will vote against them.

VISCOUNT DILHORNE

My Lords, I have listened to the noble Lord with great interest and not a little sympathy. Of course, it is right to remember that these proposals were put forward on a number of occasions and considered many years ago. I think that some of the arguments then advanced were similar to the arguments that the noble Lord has advanced to-day; namely, that there would be massive consequential legislation involved. But he is not right in saying that it would be any more difficult to legislate now than it was then, and I certainly think it would be much easier to legislate now by scrapping some of the unpopular proposals which the country does not want.

However that may be, the argument which the noble Lord has advanced strikes me as a rather serious one. He has said that, whatever change we make in this direction in this Bill on the Report stage, it will inevitably be cancelled out in another place. I find that rather shocking, because it simply means that even if (and I think it is very likely that this will be so) my noble friend gets the provisions about no par value shares righting this Bill, and they will not come into effect until an appointed day, nevertheless they will be excised in another place because of the view of the Government that there are other matters of more importance. I think that that is quite wrong, and that is an argument which the noble Lord ought not to have put forward.

If I had any doubt left in my mind as to which way to vote on this matter, the noble Lord has convinced me that I should give all the support I can to my noble friend. I hope that he will press this Amendment to a Division. I hope that this House will spend time in putting in good order the provisions with regard to no par value shares, and then I shall be astonished to see the Government calling on the Party Whips to cut out of this Bill proposals which have been carefully worked out, proposals which are recognised on all sides as desirable, and proposals which do not immediately require legislation in the next Finance Bill. I hope that my noble friend will press this Amendment to a Division.

LORD SILKIN

My Lords, I hope that my noble friend will not strain the loyalty of his supporters too far. I am a supporter of the Government, but I should want a better case for opposing an Amendment which is accepted on all sides, even by the noble Lord himself, as being meritorious, and when he himself said not a single world in opposition to the merits of it.

What is the case against it as put forward by the Government? It is simply that to accept this Amendment would involve so many difficult consequential Amendments that it might delay the passage of the Bill. So what! my Lords, as I asked in connection with another Bill: What really is the urgency? Does it really matter whether this Bill is passed in the month of March or the month of April? Surely, we must get it right if we possibly can. When we have the support of the whole House for an Amendment of this kind, are we to be put off by the statement: "It is difficult to amend this Bill to cover all the consequential Amendments, but it will be all right one day. The Government will introduce another measure before the Bill expires, and then perhaps, this will be taken care of?" My noble friend did not even give the pledge that the subject of this Amendment would be introduced into another Bill. My noble friend must do better than this, and I hope he will, in dealing with future Amendments. A Companies Bill is not a case where we want to be 100 per cent. political.

LORD BROWN

My Lords, the noble Lord knows very well that it is no part of the task of the Government spokesman on a matter of this sort to give an absolute pledge on future legislation, and I do not think that comment should have been made. It is not possible to give pledges of this sort, because one does not know the future of the legislative programme.

LORD SILKIN

My Lords, my noble friend did not even give a pledge that, if and when a Bill is introduced, this Amendment—which he accepts as being meritorious—will be included in it. If he had said that, it might have gone someway to satisfying me, but he does not go so far as that. I hope that the Government will do better than this in the future stages of the Bill, and that where an Amendment is put down in good faith and not for destructive purposes it will be accepted in good faith and, if possible, met. My feeling is that the general outlook on any Amendment is: "How can we defeat this Amendment? What can we put up in order to say 'No', because it will interfere with the passage of the Bill which must be passed in the next few weeks, and which may involve difficult consequential Amendments?" If that is the way in which Bills are to be dealt with, I must confess that I for one am not going to support that line.

LORD WAKEFIELD OF KENDAL

My Lords, the noble Lord has advanced the argument that if these Amendments are withdrawn or not discussed further in this House, then it will assist the passage of legislation in another place. But, surely, the reverse will be the case. If we in this House can get these Amendments all straightened out and tidy, that must save legislative time in another place. Your Lordships may be quite sure that, if we do not discuss them here, then another place will spend a great deal of time discussing them. I should have thought, therefore, that passing these Amendments in this House, and getting them straight, would not delay legislation in another place but would assist it. Therefore, I cannot see the validity of the noble Lord's argument.

The other main argument of the noble Lord was the difficulty of consequential legislation, in so far as the Finance Bill was concerned. But as has been pointed out by previous speakers, difficult consequential legislation dealing with taxation can be dealt with on any subsequent year in any Finance Bill. So it seems to me that the two main reasons which the noble Lord has advanced for voting against this Amendment have no validity at all.

LORD TANGLEY

My Lords, a great advantage of sitting on these Benches is that one has not to show any affection for any Government at any time. I greatly regret that the Conservative Government did not deal with this matter in a Companies Bill. But I would ask the Government to consider this one point which I am making, which is this. I am afraid that the reason which has been given yet again for not dealing with this matter will not be thought to ring true outside. We have had years and years of this matter being under discussion. We have had the Gedge Committee; we have had the Jenkins Committee. Every time the story has been the same: "This is a good Amendment; we ought to have it, but not now"—and some reason has been given. Now to-day we have yet a new reason. I would ask the Government seriously to consider, if they wish to be believed in that respect, to take this matter into consideration and to think again.

3.40 p.m.

LORD ERROLL OF HALE

My Lords, may I begin my few remarks by paying a tribute to the noble Lord, Lord Brown, for having so thoroughly carried out the undertaking he gave to the House before Christmas when he said that he would refer the whole matter to his right honourable friend the President of the Board of Trade? This afternoon we have heard from my noble friend Lord Eccles how thoroughly he was able to discuss the matter with the President of the Board of Trade. Also, I think it is right that we should remember how thoroughly the noble Lord, Lord Brown, has honoured his undertaking in this matter at a time when he is taking his first Bill through your Lordships' House and when, as he said, he is in a very lonely position.

We on this side of the House are very sorry that he is so lonely, and that he has lost the noble Lord, Lord Rhodes, who was a very able companion of his at the Board of Trade, and who did such outstanding work. I am glad of this opportunity of being able to say bow sorry we are that Lord Rhodes should have been sacrified on the alter of youth, pressing forward possibly more in another place than in this House. But the noble Lord, Lord Brown, as he will be the first to admit, still has a great deal to learn in the matter of Parliamentary procedure and the ways of the political world, and we on our side find his arguments thin and tenuous, and lacking in real political substance. As several of your Lordships have already pointed out, clearly the change must come in a Companies Bill before the consequential changes in a subsequent Finance Bill, because no Chancellor of the Exchequer is going to find time in a Finance Bill for tax changes which, because the prime change has not yet been made in a Companies Bill, are necessarily of a hypothetical nature.

The noble Lord, Lord Brown, did his best to point out the delays on the part of the then Conservative Administration in implementing the Gedge Committee's findings, but there is a perfectly simple and rational explanation of this. We were informed quite clearly that at that time there was considerable trade union opposition to a change of this sort; but by 1964 the trade union movement had advanced in its thinking, and had virtually withdrawn all opposition to the change. We had not earlier felt that this was an issue on which we should have a row with the trade union movement. We hoped that they would come round to seeing our point of view, as in fact they did. Therefore, by 1964 my right honourable friend the then President of the Board of Trade, Mr. Heath, was able to announce that in a Companies Bill we would introduce no-par-value shares. So it is not a question of needless or senseless delay: we were wise to the political difficulties, and when the right time had come we made the announcement.

Now I come on to this extraordinary question of Parliamentary time. The noble Lord, Lord Brown, makes his case on the ground that there is no Parliamentary time for this addition to the Bill. My Lords, we are taking up the time debating it as it is.

LORD BROWN

My Lords, might I just interject to say that I am not making my case on the ground that there is no time for the inclusion of this Amendment? I am making my case on the ground that if one included this Amendment one would have, in justice, to include a large number of others, and there is no time for this general extension of the Bill.

LORD ERROLL OF HALE

Then the noble Lord does not object to our debating this matter—although he has, if I may say so, very arrogantly suggested that in another place they will throw it out if we put it in. This is a very extraordinary doctrine, that when something really worth while is done by your Lordships in this House it shall automatically be thrown overboard by a rubber-stamp majority in another place. It will be very interesting to see in fact whether they will do so if we decide, as I hope we shall, to make this addition to the Bill.

If the noble Lord makes as his main point that the Government will be unable to resist other Amendments, then there are two points that I would put to the noble Lord. The first is that it is a perfectly recognised and understood technique of Ministers and the Governments to say that, having given way a little, they cannot give way any more. That is a technique which is understood: a little give but not an indefinite runaway. And this, I should have thought, was a first-class defensive position for the Government to take once they had accepted this Amendment. Alternatively, if they really fear this great flood of runaway, Left-Bank or Left-Wing Amendments in another place, let us hear what they are. It may be that some of them are good ones. We should be delighted to examine them in your Lordships' House, and perhaps give our support to some of the more interesting ones—because in this House progress is on this side, not on the opposite side. We are the ones making the progressive suggestions, which are being resisted by noble Lords opposite, though I am glad to see not by all noble Lords opposite.

Now I come to what I think is the most important reason advanced by the noble Lord, Lord Brown. "Do not worry", he says, in effect. "There will be another Companies Bill in this Session". And I think that he believes that. I am glad to see that the noble and learned Lord the Lord Chancellor has been able to stay so long during our proceedings this afternoon because, since he introduced the Bill on Second Reading, I should like to address my remarks as much to him, as a member of Her Majesty's Cabinet, as to the noble Lord, Lord Brown. I am going to suggest that there will be no further Companies Bill in the life of this Parliament, for very clear reasons. If the next Bill is controversial—and we have been told that it is going to introduce a new philosophy about companies—then, when 1969 comes, when the President of the Board of Trade puts it up to his Cabinet colleagues, they will all say to him: "There is an Election coming next year. We do not want to stir up the managements and directors of Britain's business in the year before an Election. We had better leave it over"—and it is surprising how sensitive Cabinets become towards Election matters as the date of an Election approaches.

If, on the other hand, the Bill is of an anodyne nature, introducing only another round of recommendations by the Jenkins Committee, then there will be all the other members of the Cabinet who will say to the President of the Board of Trade, "Come off it, Douglas! You have had one Bill in this Session already."

LORD BROWN

Is the noble Lord speaking from his own rich experience?

LORD ERROLL OF HALE

No; I have a vivid and fairly accurate imagination. Then, probably, the Leader of the House of Commons, or whoever is the appropriate Minister in the Cabinet, will say, "You know, Douglas, there is not much political sex appeal in this Bill of yours, whereas there are some much nicer ones that we have." And I know perfectly well what will happen: the Bill will fail to appear. The noble and learned Lord the Lord Chancellor has a great deal of experience, but one thing of which he has not yet had any experience is the fourth year in the life of a Government, and I venture to put to him that, however sincere his protestations, if he cares to rise to address us to-day, or however sincere the protestations of the noble Lord, Lord Brown, may be, the plain fact remains that they have no knowledge at all of the pressures that will come to bear on the future of the second Companies Bill around the year 1969.

If I am proved wrong by events, and if I am still here, as I hope to be, I shall be the first to stand up and say that I was wrong. I give that as a clear undertaking to your Lordships. But I am quite sure we shall not be seeing a second Companies Bill in the life of this Parliament. Therefore, if we fail to put in these Amendments to this Bill, it is goodbye to no-par-value shares for another five years, at the very minimum. I hope very much, therefore, that noble Lords in all parts of this House will support my noble friend Lord Eccles in his excellent and worthwhile improvement of the Bill.

3.50 p.m.

LORD SHEPHERD

My Lords, I intervene only, first of all, to say how nice it is to see that the noble Lord, Lord Erroll of Hale, is able to come here to-day with such good humour, in spite of his incapacity, and to say that I hope his bad leg will soon be properly mended. My Lords, I thought the noble Lord, Lord Erroll of Hale, was rather hard on my noble friend Lord Brown when my noble friend indicated what sort of advice the Government would give in another place as to the course of action that would be taken should your Lordships pass this Amendment of the noble Viscount, Lord Eccles. I am quite sure my noble friend did not mean in any way to presuppose what sort of action the House of Commons would take. What he was indicating, I think, was the advice that the Government would have to give.

My noble friend has made it quite clear that the Government are not opposed to the principle in the Amendment of the noble Viscount, Lord Eccles. It would be relatively easy to make the necessary provisions by Amendments in the Bill; but it has been recognised on two or three occasions that it would be necessary to amend the Finance Act in, I think, five or six different cases. I have had some consultations in this matter and I understand that the Treasury itself is not sufficiently satisfied that it would be able to amend the Finance Act in order that this Amendment on no-par-value shares could be implemented without perhaps causing other problems.

I believe that this is one of the basic problems that the Government have had to face in this matter. If the Government were to take the advice of my noble friend Lord Silkin and accept the Amendment, it would clearly be wrong for us to do so if we were not certain that we could amend the Finance Acts properly. I do not believe that we have sufficient information or have been able to go into the matter sufficiently thoroughly to say whether this is possible. For that reason, the Government have had to be very careful and have, I think reluctantly, taken the view that in this Bill we cannot meet the suggestion of the noble Viscount, Lord Eccles. It may well be—and I think there is good hope forit—that the point that the noble Viscount made could be included in the second Companies Bill. Certainly, like my noble friend, I am not going to anticipate when and in what way this will be done, but I am sure that there will be a second Bill and that it would be perhaps a better vehicle than this one.

But if that is so—and I think it will more likely be in the third Session of this Parliament and not the fourth—the implementation of the principle that the noble Viscount has in mind would in no way be delayed; because it is clear that if your Lordships pass the main Amendment to this Bill there could be no implementation of that principle for at least two years, for it would not be possible to amend the current Finance Bill. So I suggest to the House that, the principle having been established, the noble Viscount having clearly got his support and having, I think, had the reasonably firm—in all the circumstances—assurance of my noble friend, the noble Viscount should now be content to withdraw his Amendment.

LORD CONESFORD

May I ask the noble Lord a question, merely for clarification? He said that the Treasury were not satisfied that if we pass this Amendment they could make the required changes in the Finance Bill. Does he mean "in any Finance Bill"?—because, if he means simply in the forthcoming Finance Bill, that is amply provided for. Is the noble Lord seriously telling us that it is beyond the capacity of the Treasury and the Government draftsmen to incorporate the changes in any Finance Bill?

LORD SHEPHERD

My Lords, as I understand it—and the noble and learned Viscount, Lord Dilhorne, is more experienced in this matter than I—it is one thing to say, "Let us amend a Bill"; and quite another to do it without widening the field more than is intended. This is a matter which, clearly, the Treasury would be very loth to suggest is possible until they were fully satisfied that it can be done.

LORD BROCKET

My Lords, as a Back-Bench Member of this House not having the advantage of sitting on the Cross-Benches, I should like to say, having first to apologise for not having been here longer to hear this debate, that being connected with industry and having studied this matter a good many times I hope that the noble Viscount, Lord Eccles, will press his Amendment. We have had a very interesting debate this afternoon and a most persuasive speech from the noble Lord, Lord Silkin, who has great experience. But we have also heard from the noble Lord, Lord Shepherd, that Her Majesty's Government are not opposed to the principle of this Amendment. Now if the Amendments passed in this Companies Bill require further legislation to be put through in the Finance Bill, surely, if the Government are not opposed to the Amendment, it ought not to be beyond their capabilities and those of the draftsmen to deal with this at the appropriate time. I hope, therefore, speaking as one connected with industry, that the noble Viscount will press his Amendment and that it will have a large majority.

LORD MITCHISON

My Lords, I suppose it is the privilege of sacked members of a Government to speak out of turn. I am exercising that privilege; but I will not take long. I have listened to this one-sided discussion—because it has been one-sided—without hearing any argument whatever on the merits of the Amendment. It is assumed, I suppose, that we all know what the argument would be. I say, frankly, that I do not know. I see some objections to what is now proposed, objections in connection with revenue, in connection with reduction of capital, and a number of other points; and all I can say about that is that it does not seem to me to be a question which is so very clear. I am fortified in that view by the fact that there has been expert opinion on both sides at different times.

Moreover, I am not clear that this is a very important or urgent matter. I notice that the House is going to divide on this Amendment, on the ground that the Government cannot be trusted to put this provision in a future Bill. There may not be a future Bill, it is said. I should have thought that when considering the scope of a Bill, especially one dealing with this kind of subject, the Government of the day had a certain right to say: "For public reasons"—which, I think, are not denied—"we do not believe that you can effectively bring this matter within the scope of the Bill without causing considerable delay".

I do not believe the vast mass of the public care very much about whether no-par-value shares are introduced or not. What they do care about are the insurance frauds and the powers of the Board of Trade to deal with them—which is the object of this Bill. They will not like it if this non-elected Chamber proceeds to delay the passage of this Bill on this matter and so delays the powers which the Board of Trade regard as necessary and urgent to deal with something which affects the public very much. I do not understand the reason why it is said that a sufficient case has been made for this particular matter to delay the whole Bill. I listened to the argument; I do not see what it is. I am driven to the conclusion that if this matter really is as urgent as is claimed, it casts more blame and more doubt on the actions and failures of the previous Government which for so many years never dealt with it; while noble Lords opposite now say they were waiting until the T.U.C. changed its mind.

LORD CONESFORD

My Lords, may I raise one matter? I am grateful to the noble Lord for yielding. Does he not agree that it was perfectly obvious that the matter should be delayed between 1960 and 1962 while it was being considered by the Jenkins Committee on Company Law? I am not defending the previous Government for the whole of the delay, but from 1960 to 1962 there was a conclusive reason.

LORD MITCHISON

No doubt; but that is a quibble. The main point is that Tory Governments successively did not deal with it. If it is important and urgent, they ought to have done so. It is a poor excuse to say that during part—and only part—of that time it was under consideration by a Committee, or that they had to wait, for different and inconsistent reasons, for the T.U.C. to change its mind. I do not accept that sort of excuse. Therefore, from one point of view I regret, but from another I must confess that I do not entirely regret, that the House should proceed to divide on a matter of this kind.

May I point out to your Lordships that it is proposed by this series of Amendments to put right Company Law, with the admission all the time that, unless thereafter, and quickly thereafter, Finance Acts are introduced or amended to cover criminal conduct, you will have done only part of the job and left what I think every speaker has admitted is, by itself unworkable. What your Lordships are proposing to do—and I think we should be clear about this before we go into the Lobbies—is to use an Amendment in a Companies Bill to force the Government of the day to tax in a certain way, to make certain Amendments or proposals in Finance Acts and, therefore, to encroach on the province of Supply which, as I understand it, is, and has been for a long time past, the business of

another place. I shall, accordingly, from conviction, and because I believe it to be right, vote against this Amendment, expecting it to be passed by an overwhelming majority in this House and rejected in another place.

LORD POLWARTH

My Lords, with respect to the noble Lord, Lord Mitchison, if the real reason for the introduction of this Bill is the urgency of the situation in the insurance industry—

LORD CHORLEY

My Lords, on a point of order. This is not the Committee stage of this Bill; it is the Report stage. The rule is that one speech is all that you are allowed.

VISCOUNT ECCLES

My Lords, I believe that, although I am allowed to speak a second time, I do not intend to do so because, as the noble Lord, Lord Mitchison, said, it has been a one-sided debate. That is because it is thought by the majority of the speakers that the merits lie on one side. I cannot accept the argument about saving time. It appears to me that, if these Amendments do what I believe they do, the other place need spend no time on them. Of course, if the Members of another place wish to take them out, they will spend a lot of time on them, but I hardly think they will do so when it comes to the point. I do not believe that Members of another place will be deterred from moving whatever Amendments they have in mind because of this Amendment being in the Bill. It is a purely personal opinion, but that is not how Members of the other place behaved when I was there, and I do not think they will behave in that way now. Having said that, and having, if I may, added my sympathy to the noble Lord, Lord Brown (I think he has a very difficult task in accepting the principle of an Amendment and then refusing it on time-table grounds), I must ask the House to vote on this Amendment.

4.3 p.m.

On Question, Whether the said Amendment (No. 6) shall be agreed to?

Their Lordships divided: Contents, 90; Not-Contents, 30.

CONTENTS
Aberdeen and Temair, M.	Aldenham, L.	Atholl, D.
Ailwyn, L.	Ampthill, L.	Balfour of Inchhrye, L.
Airedale, L.	Amulree, L.	Brentford, V.
Albemarle, E.	Arran, E.	Brocket, L.
Brooke of Cumnor, L.	Harlech, L.	Rothermere, V.
Brooke of Ystradfellte, Bs.	Hawke, L.	Russell of Liverpool, L.
Buckton, L.	Hereford, V.	Sackville, L.
Caccia, L.	Horsbrugh, Bs.	St. Aldwyn, E. [Teller.]
Carrington, L.	Howard of Glossop, L.	St. Helens, L.
Cohen, L.	Ilford, L.	St. Oswald, L.
Coleraine, L.	Ironside, L.	Salisbury M.
Conesford, L.	Jessel, L.	Salter, L.
Craigavon, V.	Lindsey of Abingdon, E.	Sandford, L.
Crathorne, L.	McCorquodale of Newton, L.	Selkirk, E.
Derwent, L.	Macpherson of Drumochter, L.	Shannon, E.
Dilhorne, V.	Massereene and Ferrard, V.	Simonds, V.
Drumalbyn, L.	Merrivale, L.	Somers, L.
Dudley, L.	Mersey, V.	Strang, L.
Eccles, V.	Milne, L.	Strange, L.
Elliot of Harwood, Bs.	Milverton, L.	Strange of Knokin, Bs.
Emmet of Amberley, Bs.	Molson, L.	Swinton, E.
Erroll of Hale, L.	Morrison, L.	Tangley, L.
Ferrers, L. [Teller.]	Mowbray and Stourton, L.	Terrington, L.
Foley, L.	Moyne, L.	Teynham, L.
Forster of Harraby, L.	Nugent of Guildford, L.	Thurlow, L.
Fortescue, E.	Ogmore, L.	Tweedsmuir, L.
Furness, V.	Piercy, L.	Vivian, L.
Geddes, L.	Polwarth, L.	Wedgwood, L.
Greenway, L.	Redmayne, L.	Willingdon, M.
Hacking, L.	Remnant, L.	Wolverton, L.
NOT-CONTENTS
Addison, V.	Latham, L.	Royle, L.
Bowles, L.	Leatherland, L.	Shackleton, L.
Brockway, L.	Lindgren, L.	Shepherd, L.
Brown, L.	Maelor, L.	Sorensen, L. [Teller.]
Burden, L.	Mitchison, L.	Stocks, Bs.
Champion, L.	Moyle, L.	Stow Hill, L.
Gaitskell, Bs.	Pargiter, L.	Strabolgi, L.
Gardiner, L. (L. Chancellor.)	Peddie, L.	Summerskill, Bs.
Henderson, L.	Phillips, Bs.	Taylor of Mansfield, L.
Hilton of Upton, L. [Teller.]	Popplewell, L.	Williamson, L.

On Question, Amendment agreed to.

Resolved in the Affirmative, and Amendment agreed to accordingly.

Clause 4 [Statement in company's accounts of identities and places of incorporation of companies not subsidiaries whose shares it holds, and particulars of those shares]:

LORD BROWN

My Lords, with your Lordships' permission, I propose to speak to Amendments Nos. 7 to 23 inclusive, with the exception of No. 16. Clause 4 requires a company to give information in its accounts about certain companies whose shares it holds. In Committee the noble Lord, Lord Drumalbyn, moved an Amendment which would have permitted information about such a company to be omitted if disclosure, in the opinion of the directors of the reporting company and of the Board of Trade, was harmful to the reporting company. The noble Lord withdrew his Amendment on an assurance given by my noble friend Lord Rhodes. These Amendments give effect to that assurance. They apply only to information about a body corporate which is incorporated outside the United Kingdom or, if incorporated inside, operates outside the United Kingdom. Information about such a body corporate may be exempt if, in the opinion of the directors of the reporting company, disclosure would be harmful to the business of the body corporate or the reporting company. The Board of Trade's consent is requred under this Amendment. I beg to move.

Amendment moved— Page 3, line 37, leave out ("company") and insert ("body corporate").—(Lord Brown.)

LORD BROWN

My Lords, this clause requires a company to state in its accounts the number of its employees, not being directors, whose emoluments in the year to which the accounts relate were in each of the bands, £10,000 to £12,000, £12,500 to £15,000, and so on.

LORD DRUMALBYN

My Lords, I am rather at a loss. Is the noble Lord still on Clause 4? I understood him to say that he was dealing with the Amendments to No. 23, with the exception of 16; now he seems to be dealing with something quite different from Amendment No. 8.

LORD BROWN

I am extremely sorry; I have turned over two pages and have been dealing with Amendments Nos. 25 and 26. I have to withdraw all that I said and start again.

My Lords, this Amendment and all the Amendments following, which propose to leave out "companies" and insert "bodies corporate", are drafting. I beg to move.

Amendment moved— Page 3, line 40, leave out ("first-mentioned").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 3, line 41, leave out ("company") and insert ("body corporate").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 4, line 1, leave out second ("company") and insert ("body corporate").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 4, line 6, leave out ("company") and insert ("body corporate").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 4, line 8, leave out ("the accounts of the first-mentioned company") and insert ("its accounts").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 4, line 9, leave out ("the assets of the first-mentioned company") and insert ("its assets).—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 4, line 13, leave out ("company") and insert ("body corporate").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 4, line 16, leave out ("company") and insert ("body corporate").—(Lord Brown.)

4.20 p.m.

LORD BROWN moved, after subsection (2), to insert as a new subsection: ( ) Neither of the foregoing subsections shall require the disclosure by a company of information with respect to another body corporate if that other body is incorporated outside the United Kingdom or, being incorporated in the United Kingdom, carries on business outside the United Kingdom, if the disclosure would, in the opinion of the directors of the company, be harmful to the business of the company or of that other body and the Board of Trade consent to the information's not being disclosed."

The noble Lord said: My Lords, Clause 4 requires a company to give information in its accounts about certain of the companies whose shares it holds. In Committee, the noble Lord, Lord Drumalbyn, moved an Amendment which would have permitted information about such a company to be omitted if disclosure would, in the opinion of the directors of the reporting company and of the Board of Trade, be harmful to the reporting company. He withdrew his Amendment on being given an assurance by my noble friend Lord Rhodes. This Amendment gives effect to that assurance. It applies only to information about a body corporate which is incorporated outside the United Kingdom or, if incorporated in the United Kingdom, operates outside the United Kingdom. Information about such body corporate may be withheld if disclosure would, in the opinion of the directors of the reporting company, be harmful to the business of the body corporate or of the reporting company. The Board of Trade's consent is required for these omissions. I beg to move.

Amendment moved—

Page 4, line 19, at end insert the said subsection.—(Lord Brown.)

LORD DRUMALBYN

My Lords, I should like to thank the noble Lord for fulfilling his undertaking by moving this Amendment.

LORD BROWN

My Lords, I beg to move Amendment No. 17, which again concerns "bodies corporate".

Amendment moved— Page 4, line 21, leave out ("companies") and insert ("bodies corporate").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move this Amendment.

Amendment moved— Page 4, line 25, leave out ("companies") and insert ("bodies").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move No. 19.

Amendment moved— Page 4, line 33, leave out ("companies") and insert ("bodies").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 5, line 1, leave out ("company") and insert ("body corporate").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 5, line 2, leave out ("company") and insert ("such body").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move Amendment No. 22.

Amendment moved— Page 5, line 6, leave out ("company") and insert ("body").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 5, line 7, leave out ("company") and insert ("body").—(Lord Brown.)

VISCOUNT ECCLES moved to add to the clause: ( ) In relation to a company the shares of which are without nominal or par value, references in whatever terms in this section to a proportion of the nominal value of the issued shares of a class shall be construed as references to a proportion of the total number of the issued shares of that class."

The noble Viscount said: My Lords, this Amendment merely makes it possible, when a company has to make a statement about its holdings in another company which is not its subsidiary, if that company has shares of no par value, to make the statement in that form. Perhaps I might ask the noble Lord, Lord Brown, whether he wishes me to make a long explanation on each of the Amendments in the names of my noble friend Lord Polwarth and myself. I am quite willing to do so, but I am equally prepared to save time if the noble Lord would like me to move them as consequential upon the debate we have just had. I beg to move.

Amendment moved— Page 5, line 8, at end insert the said subsection.—(Viscount Eccles.)

LORD BROWN

My Lords, I should prefer the noble Viscount to move them formally. They are consequential on the Division we had on the earlier Amendment, and I shall not resist them.

VISCOUNT ECCLES

I thank the noble Lord.

Clause 8 [Particulars in accounts of salaries of employees receiving more than £10,000 a year]:

LORD BROWN moved, in subsection (1), to leave out "(other than directors of the company)". The noble Lord said: My Lords, this clause requires a company to state in its accounts the number of its employees (not being directors) whose emoluments in the year to which the accounts relate were in each of the bands £10,000 to £12,000, £12,500 to £15,000, and so on. In Committee, the noble Lord, Lord Drumalbyn, moved an Amendment which had as its purpose the exclusion, when ascertaining the number of persons to be shown in any of the bands, of persons employed outside the United Kingdom. I accepted the noble Lord's Amendment in principle. This Amendment (to line 23) is a paving Amendment. The words omitted, "(other than directors of the company)", are brought back into the clause by the next Amendment. The substantive part of the second Amendment is the exclusion, for the purpose of arriving at the number of persons to be shown in a band, of persons who in the year to which the accounts relate worked, when they were employed by the company, wholly or mainly outside the United Kingdom. Thus, a company whose employees who received more than £10,000 consisted of one in London who received £12,000 and one in New York who received £14,000 would comply with the clause by showing one in the band £10,000 to £12,500 and giving no other information. I beg to move.

Amendment moved— Page 7, line 23, leave out ("(other than directors of the company)").—(Lord Brown.)

LORD DRUMALBYN

My Lords, as the noble Lord has said, this Amendment meets an Amendment moved in Committee by myself, and another, moved I think by the noble Lord, Lord Tangley. For my part, I am grateful to the noble Lord for having moved this Amendment, which I think covers the point.

LORD TANGLEY

My Lords, may I take the opportunity of showing just a little affection for the Government and thanking them, also, in this case.

LORD BROWN

My Lords, this is a consequential Amendment on the previous Amendment. I beg to move.

Amendment moved—

Page 7, line 25, at end insert— ("other than—

1. (a) directors of the company; and
2. (b) persons, other than directors of the company, being persons who,—
   1. (i) if employed by the company throughout the financial year to which the accounts relate, worked wholly or mainly during that year outside the United Kingdom; or
   2. (ii) if employed by the company for part only of that year, worked wholly or mainly during that part outside the United Kingdom.")—(Lord Brown.)

Clause 16 [Additional matters of general nature to be dealt with in directors' report]:

4.28 p.m.

LORD BROWN moved, in subsection (3), to leave out "paragraph (e) of subsection (1) above" and to insert: paragraph (c) of subsection (1) above, to a contract do not include references to a director's contract of service or to a contract between the company and another body corporate, being a contract in which a director of the company has or had an interest by virtue only of his being a director of that other body, and the references, in paragraph (e) of that subsection".

The noble Lord said: My Lords, Clause 16(1)(c) requires the directors' report to give information about any contract with the company which subsisted during the year in which a director of the company had an interest. In Committee, the noble Lord, Lord Drumalbyn, moved an Amendment which would have made the paragraph relate only to management contracts. A management contract is one whereby a person, other than a director of the company, undertakes to manage the whole or a substantial part of the company's business. Among the reasons the noble Lord, Lord Drumalbyn, gave for his Amendment were the two following. The first was that the paragraph seemed to require disclosure of a director's service contract with his company. This, he said, was unnecessary, as there was another provision, Clause 25, concerned with directors' service contracts. The second was that, as it was common practice for a director of a company to be also a director of another company that supplied or was supplied by the first company, the paragraph would lead to the directors' report being unduly cluttered up with information about contracts between the two companies. These are the cases of interlocking directorships.

I rejected the proposal that the paragraph should relate only to management contracts, but I undertook to consider whether, in fact, the paragraph as drafted required information to be given about a director's service contract with his company, and whether, if being the director of another company of itself gave a director of the reporting company an interest in a contract between the two companies, it was desirable to limit in some way the scope of the paragraph. The noble Lord then withdrew his Amendment. The Government had not intended that the paragraph should require information about a director's service contract with his company. However, the paragraph as drafted could be construed as requiring that information, and an Amendment is therefore necessary.

On the second point, a reasonable construction of the paragraph would lead to the conclusion that a director of the reporting company should be regarded as having an interest in a contract with another company if he is a director of that other company. At any rate, there is a strong suggestion that many company secretaries would so construe it. That is not to say that a contract would have to be disclosed; it might not be of significance in relation to the company's affairs, or the director's interest in it might not be material. Nevertheless, it might be difficult for directors to decide whether the interest of one of their fellow directors, arising solely from his being a director of the other company, was or was not material. In order to avoid this doubt arising every time, the Amendment seeks to show that the fact that he has a directorship of the other company is not necessarily a reason for disclosing the nature of all the contracts with that other company in the directors' report. I beg to move.

Amendment moved— Page 16, line 12, leave out ("paragraph (e) of subsection (1) above") and insert the said words.—(Lord Brown.)

4.32 p.m.

LORD DRUMALBYN

My Lords, I am grateful to the noble Lord for having gone as far as he has, but I am not quite certain that paragraph (c) of Clause 16(1), on page 14, will do what the noble Lord wants; and I am not quite certain it does not do a little more than is necessary, even with the Amendment he has moved. Paragraph (c) says: if, at the end of that year there subsists a contract with the company in which a director of the company has, or at any time in that year had, in any way, whether directly or indirectly, an interest, or there has, at any time in that year, subsisted such a contract an interest (being, in either case, in the opinion of the directors, a contract of significance in relation to the company's busi- ness and in which the director's interest is or was material)… As I understand it, what the Amendment does is to exclude directors' contracts of service and contracts with firms where the director of the company making the contract is also a director of the company with which the contract is made, provided that he has not a material interest—I think this is the point—in the company with which the contract is made. What I am not clear about is how far the Government think they are implementing the Jenkins Report in doing this. The Jenkins Report said this: the Act should provide that:

1. (i) a director of a company should observe the utmost good faith towards the company in any transaction with it or on its behalf and should act honestly in the exercise of his powers and the discharge of the duties of his office;
2. (ii) a director of a company should not make use of any money or other property of the company or of any information acquired by virtue of his position as a director or officer of the company to gain directly or indirectly an improper advantage for himself at the expense of the company;
3. "(iii) a director who commits a breach of these provisions should he liable to the company for any profit made by him and for any damage suffered by the company as a result of the breach;
4. "(iv) these provisions should be in addition to and not in derogation of any other enactment or rule of law relating to the duties or liabilities of directors of a company".

On the Committee stage, the noble Lord gave as an example of the sort of case that might be caught by this provision that a director might purchase an undertaking and then sell it to the company. It seems to me that that is a case which is covered by Jenkins recommendation 99(a), which I have just quoted. This would be a case—and there have been cases of this description, as the noble Lord said—where a director has negotiated ostensibly on behalf of his company for the purchase of another company, has bought it in his own name, and then proceeded to sell it to his own company. Of course, this is an extremely undesirable thing to do. But it does not seem to me, with great respect, that it would be caught by this particular provision, for the very good reason that the very last thing that the director would do in a case like this would be to disclose to his fellow directors what he had done. Therefore, by definition, this could not possibly go into the directors' report.

We are in a very real difficulty here. I do not know what the answer is; I am putting it to the noble Lord. I do not know whether it was intended to cover that kind of case by this provision. If so, it does not seem to me to do so. On the other hand, what the Amendment now does, as I understand it, is to say that all contracts, where there is a material interest on the part of a director in the contract, have to be disclosed, whether or not that director is a director of the company with which the contract is made. That, as I understand it, is what the provision says. And yet, what Jenkins said here was: Section 199(2) should be repealed and Section 199(1) should be amended to require a director to disclose any material interest direct or indirect in any material contract or proposed contract, including any which do not come before the board to the board of directors at the first meeting of the board at which it is practicable for him to do so. There should be a saving from this provision in cases where a director can show he had no knowledge of the contract and that it was unreasonable to expect him to have such knowledge. The difficulty of the clause as it now stands is that it catches every contract in which a director has a material interest, whether he knows it or not. After all, it is not normally boards that make contracts. These are matters of executive day-to-day business. Therefore, in order to comply with this clause every director would have to look through all the contracts that are made in the course of the year to find out whether there had been contracts, and what they were, with other companies in which he had a material interest; that is to say, in which he had a considerable shareholding. It seems to me that this is an impossible task to lay upon a director. Nor, indeed, is it necessary that the shareholders should know of such cases. I have not moved an Amendment on this, but I think that the noble Lord would do well to look at this particular paragraph, and the interpreting paragraph at the end, again to make certain that he really is providing what Jenkins wanted, or, if he is not doing so, that he is providing what the Government themselves want to provide in this case.

I hope I have made myself clear. I am concerned that it is very difficult indeed if you take boards, say, of a dozen directors. Many may have very wide shareholdings, and some of them very substantial shareholdings, in companies with which they are doing day-to-day business. Contracts are not necessarily subsisting contracts running all the time; and this is not what the clause says. It is not only a contract that subsists at the end of the year, but a contract that took place at any time during the year, that is involved. There may be dozens of these contracts for each director during the course of the year. I am not certain that this is what is required.

LORD BROWN

My Lords, I wonder whether the noble Lord would let me interject? I should like to do so, and it will give him an opportunity of coming back, as this is the Report stage. I am a little puzzled, frankly, by his comments, because the director with the interlocking directorship has only to sec to it that contracts affected by this interlocking directorship appear on the directors' report if he has a material interest in them. This does not mean all contracts. The whole purpose of the Amendment is to make it possible for an individual who has an interlocking directorship to avoid the responsibility of having all of these reported in the event of his own connection with the other company being a directorship. He would only have to see to it that they were registered if his interest in the contract was material and also if the contract was of a material nature to the main company.

LORD DRUMALBYN

I am grateful to the noble Lord. I think I understand that, so far as the case is concerned where a director of company "A" is also a director of company "B", then, as I said at the outset, and as the noble Lord has confirmed, it is only if there is a material interest that the director would have to disclose it. But that is not the only case. It is not only a case of interlocking directorships. I am not sure the noble Lord's Amendment goes so far as it should do, or as the Government want it to do. It is also the case that if the director has any material interest in a contract, that must be disclosed in the directors' report. I am saying that Jenkins recommended that it should be disclosed to the board, and not in the directors' report. I am saying that the reason for that is because there may be very many interests of this kind among directors that would have to be reported in the course of a year. I should have thought it was right to leave it to the discretion of the boards. It may, in certain circumstances, well be right if a director has an interest which is material in a company, not by virtue of his directorship, but an interest whether he is a director or not, that that should be disclosed in the annual report. I should not have thought it was necessary in every case, and I say that where directors of companies have a number of material interests in a number of companies, with all of which they may be doing business, it seems absurd that each separate contract—and I emphasise "each separate contract"—has to be reported. It may be there will be 50 contracts with one company during the year. With respect, I do not think that the noble Lord has got his clause right as it is here.

LORD BROWN

My Lords, I think I may have a point of difference with the noble Lord here. It seems to the Government that where the director has a material interest, because of his ownership of property or his association with some other company—and you will note I am leaving out "interlocking directorships"now—and where the contract is of a material sort (that is to say, he has a material interest in it) and in the opinion of the directors the contract is an important one, it is entirely proper that it should appear in the directors' report. If a director feels that he wants to keep some of these out, I think he will be well advised not to enter into a contract of that sort. There is a well-established tradition in the best of business that these contracts with strings on for the directors are avoided, if they can reasonably be avoided. If you are a director of a large company, it is not a good thing, I submit, to sell property, perhaps, or something like that, to the company, when you stand to gain personally and substantially from it.

We all know of the extreme cases which have appeared of this sort, and of course we all deplore them. But I think there is a case to be made against directors who, as well as drawing their fees or salaries, are getting material gain from contracts that they can bring about in their position of directors: that is a direct personal gain to themselves. I think the clause as it stands is right because it has avoided the extremely onerous results of the previous form of drafting.

Clause 18:

Directors' report to include particulars of contributions for political and charitable purposes

18.—(1) If a company (not being the wholly owned subsidiary of a company incorporated in Great Britain) has, in a financial year, given money for political purposes or charitable purposes or both, there shall (if it exceeded £25 in amount) be contained in the directors' report relating to that year a statement of the amount of money so given and of such of the matters referred to in subsection (3) below as arc applicable in the circumstances of the case.

(2) The foregoing subsection shall not have effect in the case of a company which, at the end of a financial year, has subsidiaries which have, in that year, given money as mentioned in the foregoing subsection, but it is not itself the wholly owned subsidiary of a company incorporated in Great Britain; but in such a case there shall (if the amount of money so Oven in that year by the company and the subsidiaries between them exceeds £25) be contained in the directors' report relating to that year a statement of the amount of money so given in that year by the company and the subsidiaries between them and of such of the matters referred to in the next following subsection as are applicable in the circumstances of the case.

(3) The matters mentioned in subsections (1) and (2) are the following, namely,—

1. (a) the name of each person to whom there has been given money as mentioned in subsection (1) above exceeding £25 in amount or, if it was given for charitable purposes and received by the do nee in a fiduciary capacity, the purposes for which it was given and, in either case, the amount of money given;
2. (b) in the case of money exceeding £25 in amount given for political purposes by way of donation or subscription to a political party, the identity of the party and the amount of money given.

4.45 p.m.

LORD BROWN moved, in subsection (1), to leave out "£25" and insert "£50". The noble Lord said: My Lords, these Amendments are concerned with the modifications to the requirement in Clause 18 to publish details of charitable and political contributions. They implement the undertaking that the limit of £25 would be increased, and they pave the way to an Amendment, the new Clause after Clause 30, which will come later, on the lines proposed by the noble Lord, Lord Polwarth. The first (to line 20) and the third (to line 32) of the Amendments are concerned with the total of the contributions made by a company, or by a company and its subsidiaries, for political and charitable purposes. The effect of the Amendment is that a company comes within the clause if the total exceeds £50 instead of £25. The fifth Amendment, to line 37—

LORD DRUMALBYN

My Lords, would it be convenient, as I think these are separate Amendments, to take them one by one?

LORD BROWN

I am not moving them all now. I wanted to give an explanation of the total effect, and move them separately, if that would suit the noble Lord. I should prefer to go on in that manner.

The fifth Amendment (to line 37) leaves out subsection (3), which is the subsection which requires detailed information to be given in the directors' report about both political and charitable contributions. This paves the way for the new clause after Clause 30, which requires detailed information about charitable contributions to be kept at the company's registered office and to be made available for inspection by members. The full effect of the Amendments is as follows, putting it in perhaps not legal terms but in simple terms. A company which gives £50 or more for charitable and political purposes combined must state so in the directors' report. The directors' report must also contain details of each political contribution in excess of £50, and the identity of the Party and the sum of money. In the case of charitable contributions the details of all contributions in excess of £50 must appear in a register at the company's offices. This register is open to members only. Members may also obtain a copy at 2s. per hundred words. Later details of some of these arrangements appear, of course, in the clause after Clause 30. I beg to move.

Amendment moved— Page 17, line 20, leave out ("£25") and insert ("£50").—(Lord Brown.)

LORD ERROLL OF HALE

My Lords, I should like to thank the noble Lord, Lord Brown, for having gone part of the way to meet the representations which we put on the Committee stage of this Bill, particularly in recognising the forceful representations made by my noble friend Lord Polwarth. We are disappointed that the lower limit should have been raised from £25 to only £50, and I should indeed have appreciated some explanation why our original proposal of raising it to £105 was not acceptable to the Government. There was one point of detail, and perhaps I have misunderstood the noble Lord. He said that if a company's combined charitable and political contribution exceed a total of £50, then they would have to go through all the procedure detailed in a later Amendment. But as I read it, I thought a company was at liberty to make a contribution of up to £50 for charitable purposes and a separate contribution of up to £50 for political purposes before disclosure of totals or the details became necessary.

Maybe it was a slip of the tongue on the part of the noble Lord, but I should like to clear it up, because if the position is as the noble Lord said, then we are not much further away from the original £25, because it would mean £25 for charity and £25 for political donations, making a total of £50, and the whole process of disclosure has to be gone through. But perhaps the noble Lord can give us an explanation on that point. For the rest, it is a considerable improvement that details of charitable contributions above £50 do not have to be put in the directors' report and are made available to members of the company only upon application.

LORD BROWN

My Lords, the noble Lord has raised the question of the £50 and whether the procedure has to be put into force if the political and charitable contributions added together come to £50, or whether it is a separate £50 for each. On my first reading of the Bill I was under the impression that it was £25 for each, but I have gone into the matter and I am advised that, as originally drawn, the Bill called for a statement if the total of the political and charitable contributions was £25—which now becomes £50.

LORD ERROLL OF HALE

My Lords, may I have leave to speak again? As a result of that explanation I feel less inclined to express gratitude than was in my mind earlier, because virtually we are back to where we were before. The noble Lord never explained to us, either on Second Reading or on Committee stage, that in fact if one gave more than £12 10s. each to a charity and a political fund one would then be liable to the procedure under the clause. We now find that that was the situation; and therefore to raise the upper limit, as the noble and now defunct ministerial Lord, Lord Rhodes (defunct, that is, from the point of view of the Front Bench, but with us, I am glad to see, this afternoon), gaily assured us he was going to do, namely to raise it from £25 to a higher figure, perhaps £50, means that in fact we are just where we were before, except that we have been misled, as of course we have been before, by the Government.

LORD BROWN

My Lords, I am sorry; but the noble Lord has not been misled. I stated that I myself was under a misapprehension, and possibly the noble Lord was under the same misapprehension. But I do not think my noble friend Lord Rhodes misled him. At any rate, whether or not we were under a misunderstanding, the undertaking has been given and the amount of £25 has been increased to £50. I am indeed sorry if there has been a misunderstanding, but I have now given my current understanding of the position, and I am advised that this has always been the meaning of the Bill.

LORD HAWKE

My Lords, I am not quite sure how this works out. Suppose a company has given £49 to a charity and £1 to the local Labour Party, how will it show that in its balance sheet; or, vice versa, if it has given £49 to the Conservative Party and £1 to a charity?

LORD BROWN

My Lords, in that event the company merely states that it has in fact given £50 for charitable and political purposes, and there is no requirement to state anything else. It is only when the sums given to political Parties and to charitable institutions exceed £50 in total that there is any need to go into any detail.

BARONESS ELLIOT OF HARWOOD

My Lords, I have been listening to this debate with interest, and I take issue with the noble Lord on this point. I was under the impression that what was intended was that subscriptions for charitable purposes would be listed on one side and those for political purposes on the other, and that there would be a perfectly clear division, because they are, in fact, quite different things. I feel extremely disappointed. When I saw "£50" I thought, "This is very nice. The Government are taking good advice, no doubt from others as well as from those on these Benches". But in fact the matter will be just as complicated, and I think that unnecessary book-keeping and trouble will be caused, because clearly, as my noble friend Lord Erroll of Hale has said, we are back to square one, the only exception being that the figure is now £25 instead of £50. The amount of generosity which we are seeking to discover is still of a very low order, and therefore it will make the situation extremely and unnecessarily complicated.

There is another aspect. I personally dislike very much the idea of lumping together charitable donations and political contributions. I think they are quite separate and quite different, and I hope that the Government may, either in the later stages of the Bill here or in another place, suggest that this is altered to what we all thought it was; namely,£25 originally, but now £50, which would include, on the one side, charitable and, on the other, political donations.

LORD DRUMALBYN

My Lords, I wonder whether I might try to get the noble Lord to make the intention of the Government in this particular clause completely clear. As I understand it, what the clause now means is that if the total contributions for political purposes or charitable purposes, or both, as it says in the clause (it says "or", whereas the noble Lord said "and" when he was speaking just now; and this is where we have been misled) amount to £50, then, so far as the charities are concerned, the new clause after Clause 30 will come into operation, and so far as political contributions are concerned the re-drafting of the existing clause (because that is what it amounts to) will come into operation. In other words, any individual contribution exceeding £50 in amount will have to be reported.

To take an example, supposing the total contributions were £110, and £51 of that was for charity, then the new clause would come into operation and a register would have to be kept.

LORD BROWN

Not necessarily, my Lords.

LORD DRUMALBYN

In that case, so far as the political donations are concerned, supposing the balance of £59 was for political contributions, and of that sum one donation was for £55 and the other for £4, then the one for £55 would have to be reported but not the one for £4. The noble Lord said it was not necessarily the case in respect of the charitable contributions, and it might be convenient if he would explain that.

LORD BROWN

My Lords, by that remark I simply meant that if the amount given to charity had been £50 in total it might have been composed of a number of sums less than £50, in which case there would not necessarily have been a detailed record. Otherwise the statement made by the noble Lord is correct, as I understand it. Perhaps I might just say that if one reads Clause 18 carefully (and I confess that I failed to do so originally) I think it is reasonably clear that, as originally drafted, the figure of £25 referred to the total of charitable and political contributions. I think it is a little hard, if I may say so, to suggest that noble Lords opposite have been misled. I sympathise with the fact that the clause has been misunderstood, because it is difficult to understand.

5.0 p.m.

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 17, line 21, leave out from ("year") to end of line 24 and insert (", in the case of each of the purposes for which money has been given, a statement of the amount of money given therefore and, in the case of political purposes for which money has been given, the following particulars, so far as applicable, namely,—

1. (a) the name of each person to whom money has been given for those purposes exceeding £50 in amount and the amount of money given;
2. (b) if money exceeding £50 in amount has been given by way of donation or subscription to a political party, the identity of 370 the party and the amount of money given.")—(Lord Brown.)

LORD POLWARTH

My Lords, if it is in order for me to rise at this point, I should like to thank the noble Lord for having persuaded his colleagues of the wisdom of the provision which this Amendment achieves, because it will remove a requirement which would have been onerous to many companies and invidious in respect of charities seeking corporate support. I should also like to thank all noble Lords who supported me in the debate at the previous stage, and so helped to achieve what I think is a victory for common sense.

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 17, line 32, leave out ("£25") and insert ("£50").—(Lord Brown.)

LORD ERROLL OF HALE

My Lords, perhaps I might use the fact that there are a number of Amendments on this point to get round the prohibition on speaking more than once to an Amendment on Report stage. In that way I can return to what I regard as a very unfortunate affair, that in earlier discussions the noble Lord in charge of the Bill admitted that he did not understand what the phrase meant. I can only say that his ignorance of the precise details was shared not only by my noble friend Lady Elliot of Harwood, but also by the professional and other bodies who have studied this part of the Bill. Certainly in the extensive reading I have undertaken of the various comments on this somewhat controversial clause it has never been brought to the readers' attention by any expert that what was said to be £25 is in fact £12 10s. 0d. If that is not misleading, nothing could be. I am very sorry indeed we should have been deprived of what we thought was a major benefit by being told at this late stage that we were discussing, not £25, but £12 10s. 0d.

LORD PARGITER

My Lords, I have come from another place, and I have always thought it to be the duty of the Opposition to make clear what it means as well as the Government; in other words a responsibility of Parliament as a whole. Therefore if in a particular case someone does not think something means what it says, and someone else does, they should take it up at the time. It is a little late now. When the clause speaks about giving money for political purposes or charitable purposes or both, the "both" includes the two. That is the normal construction, in my experience, of any Act of Parliament. The fact that noble Lords have come to a different conclusion does not alter the normal practice in any respect. If it was not clear to noble Lords opposite, it was up to them to raise it at the time. It certainly seems late now.

LORD DRUMALBYN

My Lords, if it had said only political or charitable purposes, and you had given for both, the clause would not have covered it, so that really disposes of the argument that "or both" means total. It did not; it could not. It would mean that the clause would bite whether you gave it for political purposes or charitable, or both for political and charitable purposes. That was how it was read, and I think it was legitimately read in that way.

May I give your Lordships another reason why it was read in that way? It my memory serves me correctly, when this Bill or a similar Bill was introduced in another place the amount was for £25, and it covered political purposes only. I think it was reasonable to suppose that the £25 would still be the amount for political purposes. Along come the Government and they raise it to £50, that is, £25 for each, if you like, and we are back to where we started. There is really no concession here at all. I hope the Government will be prepared to reconsider this, and we might give them an opportunity to reconsider it on Third Reading.

LORD HAWKE

My Lords, I think it is not altogether a very late stage in this Bill; there is Third Reading in this House, and a considerable time in another place. I think the unfortunate position arose from the Government's juxtaposition of these two strange bedfellows, charitable and political purposes. We on this side do not regard political contributions as charity; I presume noble Lords opposite do. In the eyes of the general public, I think it would be much better at the next stage of the Bill to separate these things. As the Bill has been drafted after this misunderstanding, in practice it means that every political contribution down to one guinea or so will have to be shown, because there must be very few companies who in the course of the year do not give £50 or more to charities in one way or another. When they get the chance I beg the Government to separate these two entirely different contributions and put some modest minimum on both before they have to be shown.

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 17, line 33, leave out from ("year") to end of line 36 and insert (", in the case of each of the purposes for which money has been given by the company and the subsidiaries between them, a statement of the amount of money given therefore and, in the case of political purposes for which money has been given, the like particulars, so far as applicable, as are required by the foregoing subsection.").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved—

Page 17, line 37, leave out subsection (3).—(Lord Brown.)

LORD BROWN

My Lords, this Amendment states that for the purpose of the clause—that is, Clause 18—money shall be left out of account that was given for charitable purposes by a person ordinarily resident outside the United Kingdom. The money may have been given by the company itself if it had a branch abroad or by a subsidiary, which might or might not be incorporated abroad. In Committee, the noble Lord, Lord Derwent, moved an Amendment on behalf of the noble Lord, Lord Tangley, which would have made the clause not apply to money given for charitable purposes by any company or body corporate outside the United Kingdom. This Amendment which I am now proposing largely gives effect to the proposals made by the noble Lord, Lord Derwent. I beg to move.

Amendment moved—

Page 18, line 15, at end insert— ("(4A) For the purposes of this section, money given for charitable purposes to a person who, when it was given, was ordinarily resident outside the United Kingdom shall be left out of account.").—(Lord Brown.)

LORD TANGLEY

My Lords, I was most grateful to the noble Lord, Lord Derwent, for moving the Amendment at Committee stage in my unavoidable absence. I am very grateful to the Government for meeting the point as I think this Amendment does in fact meet it.

LORD DRUMALBYN moved, after Clause 18, to insert the following new clause:

Prohibition of discrimination against companies giving money for political purposes

".—(1) No person shall refuse, neglect or cease to negotiate, contract, employ or trade with, nor shall discriminate in any other way against any company, nor treat, trade or deal with any company differently from any other company or person, by reason of the fact that the company has or has not given money for political or charitable purposes within the meaning of Section 18 of this Act.

(2) If any person does any act in contravention of subsection (1) of this section it shall be a tort actionable at the suit of any company affected thereby.

(3) If any person induces or attempts to induce any other person to act in contravention of subsection (1) of this section, it shall be an offence punishable on summary conviction by a fine not exceeding £500 or in the case of an individual not acting in agreement or combination with any other person or in support of any political party or charity £100.

(4) Subsection (1) of this section shall not apply to any political party of the United Kingdom or of any part thereof or to any charity or to any subsidiary organisation or directly supporting unit thereof or to any person who is carrying on or proposing to carry on any activities which can be reasonably regarded as likely to affect public support for such a political party or charity.

(5) In the application of this section to Scotland the expression 'tort' means any wrongful or negligent act or omission giving rise to liability in reparation and the words ' actionable at the suit of any company affected thereby' shall be construed accordingly."

The noble Lord said: My Lords, this Amendment is a new clause which provides that No person shall refuse, neglect or cease to negotiate, contract, employ or trade with, nor shall discriminate in any other way against, any company, nor treat, trade or deal with any company differently from any other company or person, by reason of the fact that the company has or has not given money for political or charitable purposes within the meaning of Section 18 of this Act". It goes on to provide that, if anybody does so, it shall be a tort actionable at the suit of any company affected there-by (with a Scottish application of that), and that if any person induces or attempts to induce any other person to act in contravention this will be an offence.

I would accept that a case can be made out for the disclosure of political and charitable contributions in the directors' report. What is perhaps not so clear is why these two particular kinds of expenditure which directors may think fit to make in the course of their duty to further the interests of their company or to protect those of their shareholders should be picked out for special mention.

I am not concerned with the motives of the Government in insisting on disclosure of this particular information; I am concerned with the effects of its being so. Apparently, it is conceded—I say "apparently" because there is nothing against this in the Bill—that trading bodies, such as companies and co-operative societies, have a right to give money to any organisation which seeks to influence the votes of electors in the direction which accords with their own trading interests. The sole purpose of such disclosure is to give shareholders an opportunity of challenging the policy of the company in respect of political and charitable contributions, as in any other, if they so wish. Any shareholder who finds himself in a minority will neither be able to compel the company to make a contribution to a political Party or a particular charity nor to prevent it from doing so. All he can do to mark his disapproval is to dispose of his shares and invest in a company which contributes to the charity or to the Party of his choice, or indeed to no charity or no Party at all.

But the disclosure in the directors' report will have the effect that such contributions become known not only to the shareholders but to the public at large. What, in the view of my noble friends and myself on this side, would be intolerable is that anybody should be penalised because he has or has not contributed to a particular Party or charity or, for that matter, to an organisation which supports or opposes the policy of the Government of the day. Whether that organisation is charitable, political, economic or commercial, or whether it is a trade association, experience has shown that there is a risk of victimisation. Some local authorities, in inviting firms to tender for contracts, have asked whether the firms contribute to a political Party. Clearly, they would not ask for such information unless, in their view, the answer was relevant to their position: that is to say, unless the fact that a firm had or had not contributed to a certain political Party would be taken into account.

In my view, it is not relevant to the decision and it ought not to be taken into account. The sole test should be efficiency, price and ability to meet the tender conditions. In the same way, firms ought not to be discriminated against because they have or have not contributed to a particular charity—for example, one connected with a particular locality or a particular religion. Those of us who have lived and worked abroad are familiar with the sort of blackmail exercised on firms to contribute to the funds of particular charitable and political organisations. We do not want to see that happening here.

I hope that nobody will be so disingenuous as to say that this clause would be unenforceable. To take the case of local authorities, it would prevent them from overtly refusing to award contracts to a company—this, at the least—because it had or had not contributed to a particular organisation. It would plainly be the duty of the clerk to the council to advise the council on the law. Of course, it is never possible to prevent what the law forbids from being done, but at least law-abiding people will know how to behave. I hope also that nobody will say that we ought not to add any more clauses to the Bill, and argue on that account in this regard, because it would be wrong not to add a clause to prevent an abuse to which a clause actually in the Bill is especially liable to give rise.

It would be very odd indeed, in my view, if we in this country were to take steps, as we do. to prevent racial and religious discrimination, while at the same time we were to insist on information being published which could give rise to discrimination, and refuse to do anything about that sort of discrimination or victimisation—a form of discrimination that, in my view, could undermine political freedom in this country and be a potent cause of bitterness and hatred. If we sincerely believe that individuals and organisations, be they friendly societies, co-operative societies or companies, should be free to promote the interests of their members by contributing to organisations of their choice, we must ensure that that freedom is not undermined or damaged in any way. I beg to move.

Amendment moved—

After Clause 18, insert the said new clause.—(Lord Drumalbyn.)

5.16 p.m.

LORD SILKIN

My Lords, in principle I would support this clause. I think it is right that there should be no discrimination, either because a person contributes or does not contribute to a charity or a political fund; but I am a little worried as to how it is going to be worked. I have in mind the example of a local authority, which the noble Lord opposite himself quoted. It is quite a common thing to those who have experience of local government for a local authority to go out to tender and to say in terms in the tender that they do not bind themselves to accept the lowest tender. That is done for a good reason. The lowest tenderer may be a concern that is quite incapable of carrying out the contract which it undertakes. It may be putting forward an unreasonable price, or there may be a variety of other reasons, not necessarily because it has contributed or failed to contribute, for not giving the contract to the lowest tenderer. But will not this clause enable such a person, who thinks he is aggrieved because, having put in the lowest tender, his tender had not been accepted, to use this provision to say that he has been victimised and to take proceedings, and consequently to cause ill-feeling? I do not know whether that is a conclusive answer to this argument, but I put it forward as, in my view, a genuine difficulty, and I should be most interested to hear what is the answer.

It is always difficult to establish the state of mind of a person or a body. How do you establish the state of mind of a local authority in refusing to accept the lowest tender? Of course, if there are speeches and votes, then you can infer from what is said; but these things are often done in committee and behind closed doors, and it is difficult to infer from the non-acceptance of a tender that this is a breach of a provision of this kind. So I should like to make sure that there will not be victimisation of the person who is supposed to be the possible offender if a clause of this kind is accepted. Perhaps noble Lords opposite would consider this point and how they think it could be dealt with.

LORD BROWN

The explanations in subsection (1) of the meaning to be given to discrimination show some of the problems involved in trying to legislate on a matter of this kind. Discrimination would often take the form of not doing something: a person would discriminate against a company if he neglected to trade with it, or if he did not trade with it when he did trade with another company, if his reason for neglecting to trade or not trading was that the company had or had not given money for political or charitable purposes. These are some of the obvious difficulties with legislation of this sort. It seems to me that the Amendments are drawn very much too widely to be acceptable.

I would say, however, that the Government are in a sense wholly in sympathy with the feeling behind these Amendments, for they would specifically deplore the action of a public body which expressly stated that it was going to refuse to place contracts with companies which had or had not given political or charitable contributions in a particular direction. Such an action would be wholly deplored, as I say. But the attempt to introduce legislation to prevent such things happening is analogous to the attempt to legislate about racial discrimination. This House knows very well that, while we are all agreed in our detestation of racial discrimination, all Members of the House are certainly not agreed on the fact that more and more detailed legislation is the right way to tackle the matter. I am convinced that we should not attempt to tackle this problem, which has not raised its ugly head in any profusion, by legislation. I have heard reference to a few cases—but they are very few. I think it would be much better to leave the matter to the judgment of public opinion and the Press, and see whether it is possible by this means to exclude any growth of this behaviour, if such a growth is incipient—and I do not suggest that it is. Let us use that means of keeping it at bay, rather than take the problem too seriously and attempt to legislate in this way, which might, indeed, even stimulate it. Therefore, whilst accepting the feeling behind this Amendment, I suggest that the House should not accept it.

5.24 p.m.

LORD ERROLL OFHALE

My Lords, I have listened with great interest to the arguments advanced by the noble Lords, Lord Brown and Lord Silkin, but I should like to put the following points to them. The first is that we have an entirely new situation as compared with the past; namely, that the charitable and political contributions are going to be made public. It may be that there was very little evidence of discrimination in the past, but that was because it was so difficult to find out what companies and individuals were giving. But in future these gifts are going to be made public, and therefore there is a new factor.

As the clause is drafted, it is for the person or company who feels aggrieved to take up the matter in the courts, and it will be for the court to decide whether or not he has a case. I think that a person would have a good case to take to the court if, for example, he had enjoyed a contract with a local authority for a number of years and then, within one year of his having to publish the fact that he had given a contribution to a political Party which was not the Party composing that council, he found that he had lost that contract to his rival, who quoted a higher price and, incidentally, contributed to the funds of the political Party of the same complexion as the council. That would be a very good case to take to the court. That is the sort of case we have in mind. I feel that this would be a perfectly easy case for the courts to decide upon.

It may be said that that sort of case would be very unlikely to occur. But the whole purpose of a "watchdog" clause of this sort is to make it more difficult for this sort of discrimination to occur. A local authority which might be tempted, in its exuberance after a particularly successful election result, to do these things would be warned by the town clerk, or the clerk of the council, "You must not do this. It is forbidden under this subsection of the Companies Act and you can be taken to court." Of course, we are against racial discrimination—in fact against all forms of discrimination; so let us be against this type of discrimination, too, and accept the new clause.

I have an interesting case to relate to your Lordships, involving a personal experience, which shows how concerned Government departments are already about the possibility of discrimination in the charitable field. I happen to be chairman of the Westminster Hospital research trust fund appeal, and I thought it would be a good idea to write to the principal suppliers of the hospital saying that we had this research appeal and would be very glad if they would care to contribute to a worthwhile research project. I thought that that was quite an innocent and laudable thing to do. Not so the Ministry of Health: they were after me straight away. They said, "You must not write to these people, because they might feel that if they failed to contribute to your fund they would be discriminated against in regard to their award of contracts subsequently". This is not a fiction; this is an actual experience which I myself have been through.

At any rate, I did a deal with them. I said, "I will not mention the fact that we know they are suppliers. I will give you an undertaking that details of any monies received or not received from suppliers would not be passed on to the committee which awarded contracts. It was only on that basis that I was able to write to the suppliers to the hospital. It shows that discrimination, even in charitable matters, is felt to be a real enough danger for a Government Department to take up the matter. How much more dangerous is this going to be when all these charitable donations of any size are going to be made public.

I have stressed the charitable side, but that situation will be even worse with the political donations, where there are local councils of a distinct political flavour one way or the other. I suggest that the noble Lord might care to think again about this clause, which is put forward in all sincerity, and that he should agree to have it in the Bill.

LORD OGMORE

My Lords, before the House decides on this clause, there are one or two points that I should like to make from these Benches. First of all, we entirely agree with the object of this new clause; and if there is, as there seems to be, a danger that in any political or charitable matter a company might be discriminated against, then it is a matter which the House should look at and decide upon. The only point is that the proposed new clause is a little vague in subsection (1). I do not quite know how any person can "neglect" to negotiate, or contract, or employ, or trade with somebody: he either does this or he does not do it. It is difficult to see how anybody can "neglect" to do it. In fact, it would be extremely difficult even to prove that anybody had refused to trade with somebody. Here again, unless concrete evidence was available from a local authority, it would be extremely difficult to prove.

If the noble Lord is going to press this Amendment, we shall support him, because we believe in the principle of it. But we would suggest, both to the noble Lord, Lord Brown, and to the noble Lord, Lord Erroll of Hale, that before the final stages of the Bill in this House some consideration should be given to tightening up the wording a little. I feel that as it stands it would, if adopted, cause a lot of trouble in future. This sort of discrimination will not only be a civil action in tort; it will be a criminal matter, too. A person can be charged, in a magistrates' court presumably, with neglecting to do something—neglecting to negotiate. If Her Majesty's subjects in this country are to have to meet a charge of neglecting to contract or trade with somebody, they will be placed in considerable difficulty. For these reasons, while we support the principle of the Amendment we hope that, before the Bill finally leaves your Lordships' House, the wording will be tightened up a little.

LORD PARGITER

My Lords, as so much has been said about local authorities, and since this may be a crucial point, I should like to look at the safeguards which already exist. If a local authority requires capital works, it needs loan sanction. The general practice is that, although the authority says it will not necessarily accept the lowest tender, if the lowest tender is not accepted the Government Department concerned, before issuing loan sanction, usually wants to know why the lowest tender was not acceptable. Therefore, there is that safeguard, in respect of a local authority, at any rate, so far as political discrimination is concerned.

There is a further question. Let us assume that an annual contract is in question; and, after all, annual contracts go out to tender and are very frequently subject to change. If a local authority do not accept what might appear to be a reasonable tender, there is the district auditor to consider. He will want to know why the authority have not accepted a particular tender, which might be lower than another and perhaps from someone who is doing satisfactory work. I hope that this provision could be put on a different plane from that of the local authorities, because, so far as they are concerned, it seems to me that there are adequate safeguards already.

LORD HAWKE

My Lords, the principle of this clause is unexceptionable, and so far as political purposes are concerned I think it might deter certain bodies from passing resolutions which they ought not to do. But I think that in regard to charitable purposes the clause might have some rather unfortunate repercussions. I suggest that my noble friend withdraws "charitable" from the purposes covered, because in the charitable world—and I am thinking particularly of the church at the moment—it is a quite normal thing to deal with those people who support and help you. If one is going to be hauled up before a court because one does not buy from somebody or insure with somebody who does not support you, although he frequently happens to be cheaper, that would be very unfortunate. I do not think this clause ought to apply to charitable purposes.

VISCOUNT ECCLES

My Lords, I also agree with the principle, but I cannot really see how the clause would work. If a supplier suddenly finds that he is no longer on the list after he has published his contribution to a political Party or to a charity, it will be very difficult to prove that that is the reason why the person placing the contract or the order has changed his mind. It seems to me that all kinds of other reasons could be advanced. It would be very difficult to bring this to a legal decision.

In my view, so far as local authorities are concerned the right remedy is, first of all, for the Conservative Party to capture the local authorities—they could then give the contracts to whom they wished—and, secondly, to have far more light shed on the debates of local authorities. The real safeguard for the public is knowledge, and if the Press were always allowed in, then the cases where any "funny" business went on would be far fewer. In a democracy like ours, we ought to go for freedom of the Press and proper information for the public. Also, I think that when these clauses go through, far from there being fewer political contributions there will be more, because a great many people will be quite glad to be able to say, "Well, I am doing this in the open and now I know I am all right". I think this will be a boomerang for the Party opposite, and I am longing to see it on the Statute Book.

LORD BROWN

My Lords, with the permission of the House I should like to say a few words more. I think there is absolutely no question of there being a division of opinion in this House over the deplorable situation which would come about if this sort of discrimination arose. But there is a division on what to do about it. I can remember vividly the year 1931–32, when I travelled down from the North. I am not making a political point and I hope your Lordships will believe that, but if as a young man you were a member of the Labour Party and exposed that fact to your employers you were extremely likely to be discriminated against. I hope your Lordships will accept that. If at that time the Labour Government had become concerned about that discrimination and had proposed to introduce legislation, there would have been very strong grounds for doing so, in view of the number of cases. However, thank God they did not do so!

What has been happening in society over the years is a retreat from this unhealthy sort of discrimination towards more sensible attitudes throughout. The noble Lord, Lord Erroll of Hale, referred to the experience he had recently with the hospital fund. It will not be unknown to him that, going back to before the war, many companies used to take the opportunity of writing to their suppliers and seeking support for their football clubs or for their canteen funds and heaven knows what. This put all their suppliers in a very awkward position, and it was tantamount to a form of discrimination at that time. But I am glad to say, again, that this rather stupid, ridiculous behaviour has receded until it almost does not exist to-day. It is possible that we could get a little discrimination in this direction, but it is equally true, I think, that public opinion would quickly be against it. If I understand them aright, the noble Lords on the opposite Bench are most concerned about political discrimination by public bodies. These are the cases which get publicity, and I think public opinion will deal with them.

It is on these grounds that I beg those who moved these Amendments not to press them. With respect, they are much too wide. They would give opportunities for all sort of cranks to bring cases before the courts, claiming that they had been discriminated against, and it would be extremely difficult legislation to operate. So, while we are not in disagreement in principle to any extent at all, I suggest that legislation is not the correct way of dealing with this issue and that the temper of society will, in fact, prevent its happening.

LORD DRUMALBYN

My Lords, I am grateful to noble Lords who have made contributions to this debate. I think we all agree that it would be quite undesirable if there were discrimination, and what we have to consider is the proper means, by legislation or otherwise, of preventing or discouraging it. If I may say this to my noble friend Lord Eccles, the fact that it is difficult to prove whether or not an offence has been committed is not necessarily a reason for not making something undesirable an offence. As the clause stands, the offence lies in inducing or attempting to induce another person to act in contravention of subsection (1).

As my noble friend Lord Erroll of Hale said, it would be for anybody who thought he had been discriminated against under this clause to proceed by civil action in the courts. The noble Lord, Lord Brown, says, "This will give rise to a lot of cranks taking proceedings." But if they like to throw their money away in that way, let them do so. However, I should have thought it was extremely unlikely that that would happen, unless somebody had very good grounds for thinking he had a case. This is exactly where the point of my noble friend Lord Eccles comes in. It is difficult to prove, but if someone thinks he has proof, then he should proceed. In my view, this would be the right course to take in order to stop this kind of mischief, and by so proceeding in such a case a person would ensure that it did not occur so much in the future.

I do not think I would disagree with the noble Lord, Lord, Brown, in saying that up to a recent time, at any rate, there has been a retreat from the controversialist position—I do not know exactly how he described the former position—towards a more healthy attitude. This would probably be true up to some three years ago. Unfortunately, some agitation then arose, and that has caused the whole matter to flare up and, of course, in part, I think one must admit that this particular clause is a consequence of that. I agree that the number of cases which have come to my attention is not great, nor is the number of cases which have come to the attention of the noble Lord, Lord Brown, but it was more difficult earlier to get the information.

What I was complaining about was the fact that some councils had gone out of their way to ask about contributions. Whether they did it merely as a deterrent or whether, as I suggested, they intended to make use of that information, I do not know. I do not suppose the noble Lord, Lord Pargiter, could answer that one either. I respect his great knowledge of local authority affairs and I quite understand that, where the lowest tender is refused, reasons have to be given. It may be that the reasons are the right reasons, or it may be that they are the wrong ones, but reasons certainly have to be given for refusing the lowest tender.

LORD PARGITER

My Lords, I am very grateful to the noble Lord for giving way. It really is too bad to suggest that people would deliberately put forward wrong reasons in order to justify an action which they had taken. We must remember that officers are involved at this particular stage, not members. I am sure that the imputation was not intended, and I hope it will be made quite clear that it was not.

LORD DRUMALBYN

I think it is quite possible to put forward reasons which may appear to be valid while the real reasons are not stated. I think it is possible that this could occur. I do not think I can give any particular example of this: indeed, I could not, in the nature of the case. The point I am trying to make is that up to this time people have had to go out of their way to try to find out whether political contributions have been made, with the implication that they were going to make use of that information. This must be the implication. Now, if the information is presented to them in directors' reports, the information will be there, and the temptation to make use of it will be very much greater. Noble Lords may say, "Let public opinion operate on this". But ought not the law to express public opinion? Ought we not to express what we consider ought or ought not to be done, and what should be avoided? And if real damage is done to an individual company by discrimination in this way, ought it not to have a remedy? Is it enough merely that publicity should be given to this? I would say not. I think a company ought to have a remedy. This clause gives a remedy in tort, and I think this is right.

As to anybody inducing such a contravention, I think that by the same token this should be a criminal offence. I think that the deterrent effect of this will be very great indeed, and it will show the determination of Parliament that discrimination shall not take place. It is not enough simply for the noble Lord to say that the Government specifically deplore it. We have an opportunity here of taking steps to make absolutely certain that the position of Parliament is made quite clear in this regard. My Lords, I feel inclined to press this Amendment to a Division.

LORD SHEPHERD

May I ask the noble Lord a question? I have not listened to all of the debate, but do I understand this to be the argument? If two companies tender for a contract with a local authority, one of which makes contributions to the Conservative Party and the other of which does not, and if the local authority were to decide, for whatever reasons it may be, quite apart from the political considerations, to place the contract with the company which did not make such contributions, then the company which had made the contributions would have a right and, in fact, a case, merely because it did not get the contract, to go to court? Is that what the noble Lord is suggesting?

LORD DRUMALBYN

No, my Lords, of course not. It is only if the council, if it is a council, has definitely for that reason decided not to allot the contract to the company which has made a contribution.

LORD SHEPHERD

But does the Amendment say that? This is the trouble. I have just read the Amendment. That is why I made the point to the noble Lord.

LORD DRUMALBYN

If the noble Lord will read it again, he will see that it says: No person shall refuse"— et cetera, by reason of the fact that the company has or has not given money for political or charitable purposes.. It is only if the reason for their refusing to treat or refusing to give a contract is because of political contribution that they will then be liable in tort. In other words, they must not use the fact that a person has or has not made a political or charitable contribution the reason for refusing neglecting or ceasing to negotiate.

I am sorry I did not deal with the point which the noble Lord, Lord Ogmore, raised but the word "neglect" was put in because it will be quite possible for a council—we have talked about councils throughout and it is probably easier to go on talking about councils—not to say specifically that they were refusing to allot a contract, but simply not to do so. For example, they might have laid that aside on the ground that they knew that a political or charitable contribution had or had not been made. If they did that, then, of course, they would be in exactly the same position as if they had said to the person, "I am not going to allot this contract to you because you have made a political contribution". I shall be very willing to look at this point again, but it seems to me that some word must be put in to take account of that particular case.

LORD OGMORE

If I may suggest it, I think the noble Lord might have to surrender that case, for what it is worth, because from a practical point of view it will be almost impossible to prove that somebody had neglected to do something when the effect under another subsection might be that somebody might be charged with the offence of neglecting to do this, or of persuading somebody to neglect to do it (although how on earth he does that I do not know), and be liable to a penalty of £500. I think that Parliament should be more precise when it is creating offences, or is even creating new causes of action for damages. It should be more precise. As I say, I am entirely with the noble Lord in his objective, but I should think that perhaps he might drop this bit of it.

LORD DRUMALBYN

I should be very glad to consider that suggestion if the House passes this Amendment. We can do that, of course, at the next stage; but, meantime, I feel that we ought to proceed with this Amendment.

LORD BROWN

My Lords, I wonder whether I could offer—

LORD DERWENT

No. This is Report stage. It would be the noble Lord's third speech.

LORD BROWN

With the permission of the House, may I proceed? I merely wish to say that, had this Amendment appeared with reference to expressed conditions of discrimination, short as the time was, I should have seen that it was considered by my right honourable friend the President of the Board of Trade. It was the broad nature of the Amendment which caused me to come to the conclusion that it really was not a viable proposition. If the noble Lord is prepared to withdraw this Amendment I will under-take that some other clause is considered which narrows it considerably. I cannot give any undertaking that this will be moved in another place, but I will undertake that it is seriously considered, there being no dispute in principle. I am not making a very strong offer, but it may prove sufficient to enable the noble Lord to withdraw his Amendment, and I undertake that it will be very seriously considered in a more limited form.

LORD CONESFORD

My Lords, I wonder whether I might add my plea to my noble friend not to press this to a Division, having regard to the offer that has just been made. There is, I think, a considerable body of opinion that certain forms of discrimination would be wrong. I am one of those who have urged at various times that to legislate against discrimination is much more difficult than most people realise, and I am not happy about the present Amendment, either on the criminal point, to which the noble Lord, Lord Ogmore, has alluded, or even, on the civil side, on this question of tort. Far be it from me to try to discourage actions that would give employment to my profession, but I really find it very puzzling to know how an action for tort would work. What would be the measure of damages for the tort? Would it be that, but for this fact, the plaintiffs would have got the contract and are therefore entitled to an estimate of what would have been the profit derived from the contract? And how will they prove that the contract would necessarily have gone to them but for the discrimination? I see the greatest difficulties in this.

I may say that I also feel a further doubt. I have always regarded the joint stock company as one of the great inventions, and have thought that this country has immensely benefited from the whole institution of joint stock companies. I am in favour of its being possible to trade as a joint stock company with a maximum of freedom. I am not concerned with, and never have been a director of, any joint stock company; but, if I were, I am not at all sure that I should not use such influence as I had upon the board to prevent them from giving a very profitable contract to a company which I knew was giving £10,000 to the Communist Party. I think this matter requires a great deal more consideration than that which it has hitherto received. I think the Minister has shown that he is aware that there are certain possibilities of abuses and that he will consider whether and how far it is possible to deal with those abuses by appropriate Amendments.

I am certain it cannot be done without the assistance of the most skilled Government draftsmen. I am therefore strongly in favour of accepting the undertaking by Her Majesty's Government, and I should like to say, since it has been called in question, that in general I believe that there is much in what was said by my noble friend Lord Eccles. I believe that the main remedy against certain of the abuses we fear is publicity. I think that that provides the best chance of a remedy in addition to whatever may be designed by the most highly-skilled draftsmen to deal with abuses. One reason I take the unaccustomed course of questioning something introduced by my noble friend on the Front Bench is this. I am convinced that the Amendments which we have hitherto fought for and succeeded in putting into the Bill are, in general, right, defensible and well considered. I should much regret it if we spoiled our record by putting in something which, because of faulty draftsmanship, lowered the merits of our general achievement.

LORD DRUMALBYN

My Lords, may I, by leave of the House, speak again in order to deal with the points which have been raised by my noble friends and by noble Lords opposite? I am grateful to my noble friend for his advice on this matter. It is always the case that complicated matters of this kind are very difficult to draft from the Opposition side; but this does not always prevent us from putting down and carrying an Amendment that is, in part, imperfectly drafted. If it is considered that the object is right, we often proceed to put an Amendment, even though the drafting is imperfect. I should have thought that what the House would have to consider was whether this was such a case. As it happens, the noble Lord, Lord Brown, has really conceded that there is a case for something—even though this Amendment may be too wide and perhaps imperfect, not only in drafting but to some extent in conception. He accordingly made the offer that if we withdrew it at this stage he would, in another place, introduce or consider the introduction of an appropriate Amendment.

LORD BROWN

My Lords, I do not wish to mislead the noble Lord in the slightest way. I have not consulted my right honourable friend, the President of the Board of Trade, on this matter. I think there is a possibility that an Amendment along these lines might meet with the favour of the Government. I do not wish to mislead the noble Lord into assuming, however, that a corresponding Amendment will be introduced in another place. I think it is possible—no more. I hope I have made myself clear.

LORD DRUMALBYN

My Lords, in that case we are left in a good deal of uncertainty, because, as I understand it, we are now in the position that we are all agreed that there should not be discrimination but there is no certainty that the opportunity will be given in another place to consider an Amendment which is devised by the Government. When pressed by noble friends with such experience as Lord Eccles and Lord Conesford, I am reluctant to invite the House to express an opinion on this point. Nevertheless, with the support I have had from the Liberal Benches, I am bound to say that it seems to me that the feeling of the House is very strong that there should be some provision that prevents discrimination. I believe this warrants the House expressing an opinion whether that provision should be made in the Bill.

I quite agree that there may be imperfections in this particular Amendment, but when I was on the Government Front Bench I was told many times: "We are not dividing on the particular merits of a particular Amendment but on the principle behind it". My view, a very firm view, is that if the Bill requires disclosure of information which can give rise to the sort of victimisation and discrimination that I have in mind, it follows that we should put into the Bill a clause to prevent such discrimination, to make it quite clear that the will of Parliament is that such discrimination should not take place. In these circumstances I feel that I must ask the House to divide and express an opinion on that issue.

LORD HAWKE

My Lords, before the noble Lord sits down, may I ask one question? I asked him earlier whether he would withdraw the application of this Amendment to charitable purposes, because I thought this would have a most unfortunate effect in certain fields of charitable work. I could not possibly vote for this Amendment if it included charitable purposes. Does the noble Lord intend to withdraw that?

5.57 p.m.

THE LORD CHANCELLOR (LORD GARDINER)

My Lords, before the noble Lord makes up his mind, as I have not yet spoken and as the noble Lord, Lord Erroll of Hale, referred to the working of the courts, perhaps I may intervene. It has been made plain in all parts of the House how much we deprecate any discrimination of this kind. We feel strongly about it. Some of us feel even stronger about racial discrimination; yet my noble friend Lord Stonham recently advised the House to vote against the Second Reading of the Racial Discrimination Bill introduced by my noble friend Lord Brockway, with the principle of which a great many of us had every sympathy. He did so partly because my right honourable friend the Home Secretary was awaiting the Report of a Committee and wished to consider that first, but partly also because the terms of the Bill made its chance of passing into legislation absolutely hopeless. It would have given to a council powers greater than any court in England has had since the Star Chamber. So widely and impossibly was it drawn that the Government took the course of advising the House to vote against the Second Reading of the Bill.

The Amendment says: No person shall refuse, neglect or cease to negotiate, contract, employ or trade with… What words could possibly be wider than that'? And yet it goes on to provide that even if you do no "refuse, neglect or cease to negotiate, contract, employ or trade with", you may be liable to unlimited damages if, as it goes on to say, you discriminate in any other way against… In what other way? No attempt has been made to explain what this can cover. It must be some way other than to: "refuse, neglect or cease to nego- tiate…"; some other way than to "refuse, neglect or cease to…contract;" some way other than to "refuse, neglect or cease to…employ"; and it must be some way other than to "refuse, neglect or cease to…trade with". What is it? What is it talking about? Nobody has explained it.

It does not stop there, because, apart from that, it goes on to say: …nor treat, trade or deal with any company differently from any other company or person, … No explanation has been given of these impossibly wide words. If you do any of these things, some of which cannot be explained, you are liable, under subsection (2), to unlimited damages. The effect of subsection (3) is that if, and it expressly says not acting in agreement or combination with any other person or in support of any political party… but just as an individual, saying what you think, you say to a member of a Conservative council which is thinking of contracting with some people, "I don't like those people; I think they are Communists", you can then be convicted as a criminal and fined £100.

My Lords, the noble Lord, Lord Drumalbyn, has spoken of the great support he has had from the Liberal Benches, but, as I understood him, the noble Lord, Lord Ogmore, said he was, in effect, also expressing the view that, as this Amendment stands, it is quite hopeless. I therefore hope that before finally making up his mind, and when replying to the further point (which I wish respectfully to stress) as to its applying to charities, the noble Lord, Lord Drumalbyn, will really consider the undertaking which my noble friend Lord Brown has given; and that he will discuss this matter further with my right honourable friend the President of the Board of Trade, to see whether we cannot devise something which would be sufficiently tight—so tight as to be reasonable and enforceable.

LORD COHEN

My Lords, may I ask one question of the noble Lord, Lord Brown? Will his undertaking stand whatever the result of a Division? I am hesitating very much, quite frankly, whether to abstain or about which way to vote. I should be influenced by the fact, if it be the fact, that this matter would be considered, whatever the result of a Division.

LORD CONESFORD

My Lords, may I point out one slip made by the noble and learned Lord the Lord Chancellor? He referred to a certain Bill and said that its rejection was suggested by the noble Lord, Lord Stonham. Unfortunately the noble Lord, Lord Stonham, was not with us on that occasion, and it was another member of the Government who spoke in his place.

THE LORD CHANCELLOR

My Lords, I apologise. I remembered that it was a Home Office Bill and I thought that at that time the noble Lord, Lord Stonham, was with us.

LORD BROWN

My Lords, I must answer the question which was addressed to me. I think that in a technical sense in the event of a Division taking place I should be released from the undertaking which I gave. I think that is quite clear. However, if there is a Division, I do not think it would alter the fact that I should ask the President of the Board of Trade to look at this matter; although I am hound to confess that, personally, as I have already stated in the debate, I believe that the subject is best left to see whether it will not cure itself without legislation.

LORD DRUMALBYN

My Lords, if I may, I will speak once again in answer to the suggestion made by the noble and learned Lord, the Lord Chancellor. I take it that the noble Lord, Lord Brown, will be willing to discuss the matter further with me. In view of the doubt whether this particular Amendment should cover charitable contributions, and in view of the doubts as to its drafting expressed by the noble and learned Lord the Lord Chancellor and by my noble friend Lord Conesford, and in view also of the fact that there has not been very long to consider this matter and the House would probably like to consider and discuss it further, I think the right course at the present time would be not to press this Amendment at the moment; although, if necessary, I may revert to it in some form or other at the next stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.4 p.m.

Clause 19 [Directors' reports to include, in case of certain companies, particulars of exports]:

LORD ERROLL OF HALE moved to leave out Clause 19. The noble Lord said: My Lords, I beg to move Amendment No. 35 standing in the name of the noble Lord, Lord Drumalbyn, and myself. Clause 19 puts on the boards of companies the duty to include in the directors' report particulars of exports. There are one or two exceptions. Companies manufacturing less than £20,000 worth of goods a year are exempt, and only companies manufacturing goods are to be included. Noble Lords, I think, are entitled to wonder what is the object of this clause. Why should this information he compiled, and why should it be put in the directors' reports for everybody to see?

At an early stage of the proceedings on this Bill the noble Lord, Lord Brown, indicated that his Department would not do anything about this information: it would just be there; it was to be a kind of exercise in self-denigration. The idea was that a company which had only a 1 per cent. export record would feel very shamed-faced at being able to show in the directors' report only 1 per cent. of its products as having been exported; that, shamefacedly, the board would meet afterwards, and say, "Boys, we must do better than this next year." That, apparently, is to be the object of this very laborious exercise which is to be carried out every year by some 400,000 companies in this country.

There are further disadvantages in this clause. It is manifestly unfair. First of all, there will be companies which in one year will export extremely well. In another year, through no fault of their own (a particular export market may have dried up) perhaps they will not export anything. In the third year the exports may mount again. Someone will come along and ask why the exports went down and what the company propose to do about it. If it is not the Board of Trade, it will be the British National Export Council, or some other body, who will start quizzing around and wasting the time of these people, simply because the firms will be under an obligation to put the percentage figure of exports for the year in the directors' reports.

Then there is a very large range of companies whose business it is to supply components and assemblies to the finishing companies who do the exporting. These component companies may not export very much in their own right, apart possibly from some spares exported direct; but they make a vital and essential contribution to the export drive by supplying quality components delivered on time in regular quantities. They, too, are to be subjected to this curious procedure of having to admit that they are not exporting and, presumably, therefore, are failing the nation. Then there is the small firm whose directors know that they would make awful asses of themselves were they to try to export. Such a firm similarly has to be shown up with a 0 per cent. figure in the directors' report. The chairman of the B.N.E.C., in a speech only last week, said that exporting is not a business for amateurs. How right he was! But an excess of exhortation and amateurish pushing of this sort is going to lead into the export game some firms who ought not to be there; and I suggest that the disclosure of this figure will do no good at all and may well do some harm.

This is not a bee in the bonnet of this noble Lord. I find that a few days ago I was fully supported by the three accountancy bodies who submitted joint representations to the right honourable gentleman the President of the Board of Trade. They were wholly against the disclosure of this figure for a number of reasons, some of which I have given myself. Indeed, I think they must have read my earlier speeches on the subject. I can, therefore, pray them in aid in appealing to noble Lords to reject this clause.

There are one or two further points that I should like to make. First of all, it will, of course, be quite impossible for the Board of Trade to police this provision. Although companies will be fined if they do not provide this information, some 300,000 firms will have to do it for the first time in their lives. The Board of Trade say, "We shall be able to do a spot check" but if there was anything like a sit-down strike by one-sixth of these firms the Board of Trade would be faced in a single year with something like 30,000 prosecutions for failure to disclose this information. That, manifestly, would be impossible. So it is not practicable to enforce this clause; and it will be meaningless, when it is done. The clause, moreover, is going to create unfairness, and in some cases (which were argued cogently by some of my noble friends during the Committee stage) it will reveal to importing countries information about the scale of our exports which might lead to retaliatory action against our exports, or against individual firms that are doing so well with particular exports.

I know that it may be said: how strange that I should be against exports by seeking to delete this clause! That is a facile argument and totally unfair. We on this side of the House are as keen as noble Lords opposite to see exports increased. But we do not think that this is the right way to achieve such an increase. We see this as an entirely bad exercise.

I venture to suggest to your Lordships that this is one of those curious things that comes up in a Government Department now and again—a bright idea. And when the Minister has a bright idea, it is usually a very dangerous thing. Looking at this clause, I feel more and more that this is a bright idea of the noble Lord, Lord Brown. I do not think that any of the officials could be bothered to stop it. They know all these arguments perfectly well, because this sort of proposal has been put by outside bodies before and turned down, for good reasons. I do not suppose the President of the Board of Trade could be bothered to stop it. He said, "Oh, well; here is a new Minister. We must allow him to have a bit of fun. If he can get it through the Lords, we will put one of the Ministers of State on to getting it through the other place. If it does not come off, well, he will be learning." So there is nobody in the Department prepared to put a stopper on this bright idea. I am all for bright ideas, but I equally believe that there should always be someone who is prepared to put his foot down on a bright idea when it is not a good one. I submit that this is not a good bright idea and that we ought to put our feet, whether fit or in plaster, firmly on this clause and reject it. I beg to move.

Amendment moved—

Leave out Clause 19.—(Lord Erroll of Hale.)

LORD HAWKE

My Lords, I subscribe to every word spoken by my noble friend on the Front Bench, but it seems to me that he could have gone even further. What will happen if this clause is passed is that every company who can put a reasonable amount of exports in their report will consider that they have achieved some sort of status, while all those numerous firms who do not export directly, but sell components to other manufacturers who do export, will immediately badger those other firms to get some sort of figure out of them as to the amount of their components which has been exported. This will be an intolerable burden on the direct exporters, such as the big motor car firms. They would have to put on a number of accountants to try to satisfy their numerous component manufacturers. The vast majority of firms already put in their annual reports what they are doing in the way of exporting and they are proud of it. I am perfectly certain that the proper way of doing this is by example. If the smaller firms see that the bigger ones say how much they are exporting, they will take to doing it themselves. But compulsion would be extremely bad law.

LORD POLWARTH

My Lords, may I entirely support what has been said by the last two noble Lords who have spoken? Surely this is not a matter of Company Law—if, indeed, it is a matter for law of any kind. I think that it is a good idea, put forward with the best of motives, but for the worst of reasons. I cannot see whom this is going to benefit, or what action or result it will achieve. If it is supposed to be for the Government's benefit, I would point out that they have the information already, through the returns. If it is for the shareholders, what difference is it going to make to them? Are they to go along to the annual meeting and ask, "Why have we not exported more?" I suggest that they will go along and say, "Why have you not made more money?"—regardless of how it had been made.

Whom is this information for, then? It will not reach a large number of the public, though individual items, if they are interesting or spectacular, may be picked up by certain organs of the Press. If the object is to give public recognition to those firms who have done well—or the opposite to those who have not done well—let us stick to schemes like awards, with emblems on the notepaper, flags that fly over the office: the bigger the exports, the bigger the flag; or a different colour, or whatever you like. As somebody said the other day: if exports should be recorded in this way, why not imports as well, so that we can judge whether they have been good boys in importing less, or bad boys in importing too much.

6.17 p.m.

LORD MITCHISON

My Lords, there ought not to be any difficulty in finding the value of a company's exports. Where do the Board of Trade statistics about exports come from? Are they invented? I should have thought it reasonably practicable to put into the directors' report what is exported.

LORD POLWARTH

My Lords, before the noble Lord continues, may I say that I never raised the practicability of this requirement? I raised the desirability and value of doing it.

LORD MITCHISON

Perhaps I should have said that I was thinking of the noble Lord, Lord Erroll of Hale, at the moment. He characterised this as amateurish, which I thought was rather funny, because my noble friend Lord Brown has, I suspect, a great deal more practical experience of running a company than most people, at any rate, in this House. He ran one for a long time with such success that he made it well known even to ignorant people like myself.

I cannot see the difficulty in putting in the amount of exports every year. I begin to wonder what the fuss is about. Surely these companies have some sense of public duty, and are not merely moneymaking machines. It is my impression that public companies nowadays, in return for the statutory privileges of limited liability, and the rest, which they get, usually know very well what they are doing and have due regard to the public interest. The difficulty arises only where there is some conflict between public and private interests. I cannot see that in this case. These insurance frauds are having a bad effect on people. They are beginning to wonder if all those who do an obviously respectable business, such as insurance is supposed to be, are as public-spirited as all that.

I should like to defend these limited companies and allow them to show that they do take their share of public responsibility for the export drive, the necessity for which we all acknowledge, and we fully recognise (this is for the noble Lord, Lord Erroll of Hale), that noble Lords on the Benches opposite, too, have regard for the necessity of exports. Looking at it from that point of view, there is something to be said for people coming out into the open about this. I agree with the noble Lord, Lord Polwarth, that not everybody will read the directors' report; but some people will. If there are varying efficiencies or a very fine record, people will know of it.

As it is the fashion nowadays to give people rewards and credits for taking their part in the export drive, why not let them say so in their reports? Why not say so, so that others may be made to do likewise? With great respect, I do not think that directors of companies should be the sole judges of what, in the public interest, should be put in their annual reports. After all, if that were the position, half the provisions of the Companies Act would not be there at all. It is because Parliament recognises the responsibility of directors and companies, and their duties to the public, and not merely to shareholders, in return for the statutory privileges they have, that Parliament has always assumed the right to control companies; and to do so, I hope, broadly and generally, in the public interest. This seems to me to be a fair case for exercising that right. I cannot see why the companies, or any of them, should object. I do not believe that most of them will; but if they do, and do it for some of the reasons which occur to one as possible, then, frankly, I think they ought to be shown up, and I am not afraid of saying so.

I do not see why the directors of a public company should have any lower standard of obligations than those of a good, decent citizen trading on his own. I believe that if you asked him to say what he had exported in a year, if he had done well he would be proud to say so; and if a company had done rather badly, then on being pressed for the information it might be led to improve its performance. I therefore hope that the Government will not drop this clause. I do not think it is of vital importance, but I remain unconvinced by such objections as have been raised.

LORD BROWN

My Lords, I must deal with one or two points made by the noble Lord, Lord Erroll of Hale, before proceeding on to the main argument for rejecting this Amendment. The noble Lord raised the question of the 400,000 companies which would have to state their export figures or make a declaration of their exports. The clause limits the obligation to those with a turnover of £20,000 or over, and while I am not certain that there are not 400,000 companies with a turnover of £20,000, I am as near certain as possible that there are not. I feel that this is a gross exaggeration of the number.

The noble Lord also raised the question of how we are going to enforce this provision. I would merely say that there are 500 clauses in the Companies Act, and we know how they are enforced. They are enforced by a certain degree of sampling, to see whether companies are carrying them out. Otherwise we rely on the integrity of secretaries of companies to see that things are done correctly, and on auditors who see that the secretaries do their job. These things are known to the noble Lord as well as they are to me, and I do not see why this point has been brought up. It is suggested that this is a bright personal idea of mine. Let me assure the noble Lord that this idea existed before I joined the Board of Trade. But I would not say that it would not have been just as good an idea if it had come from me instead of from someone else.

These arguments, put forward rather facetiously on a matter of importance, lead me to the view that the real division of opinion is simply this: that some Members in this House are all for as much secrecy as possible, especially on matters like this, and others are not. I stand on the side of breaking down secrecy. I do not think there was ever prima facie a good case for secrecy qua secrecy. There are issues on which it remains better to have secrecy; but a case has to be proven for them. If companies consistently publish export figures in the future —and many already do publish them—it will mean that every board of directors will know the export performance of their own company, possibly for the first time. I know that some noble Lords in this House may not believe this, but one can find plenty of directors who simply do not know whether the companies of which they are directors are exporting. It will certainly mean that managers employed by the company will know—and they do not at present—and also that employees will know. It will mean, also, that a larger number of the members of the public will be brought face to face with the fact that our standard of living in this country is seriously tied up with the export efforts of our industrial companies, which is not sufficiently realised at the moment.

LORD HAWKE

My Lords, could I ask the noble Lord this question? If he gets his clause, and the publishing of export figures becomes compulsory, will he also produce at a later stage in the passage of the Bill figures to show how much invisible exports these companies have earned overseas?—because that is a much more important figure.

LORD BROWN

It is an extremely important point. The matter has already been seriously under discussion and investigation in the Board of Trade, to see whether we cannot get more publicity on this matter. Unfortunately, as the noble Lord probably realises, the complexity of invisible export earnings does not seem at the moment to yield to statistical treatment in this way. If it had been possible, I think it would have been important to show the invisible export earnings of this country.

These are the reasons why I believe that this is an important clause. We must make people more conscious of the importance of exports, and one result we shall gain by compelling firms to publish these export figures is that many companies will look to see what their activities in the export field are; and I certainly believe that this is a competitive stimulation. I am surprised that this blunt Amendment to delete Clause 19 should have been put forward, and I hope it will be withdrawn.

LORD ERROLL OF HALE

My Lords, the noble Lord has not said very much to reinforce my belief in the value and efficacy of this clause, particularly when he is factually incorrect on so many points. The directors' report does not normally go to employees unless they are shareholders. Employees will not know about this great figure which is going to be made public by the application of Clause 19. I cannot see responsible boards of directors seeking to obtain the directors' reports of other companies to see whether they are one up or one down in the league table of exports in goods. This, to me, is a puerile approach to an important matter. I share the noble Lord's view as to the importance of exporting, but this clause is descending to the level of gimmickry. Some of the Government's proposals for boosting exports have been verging on gimmickry, in my opinion. I am not certain that this is nothing more than a gimmick. It will do no good. It will be manifestly unfair, and it will be harmful in certain individual cases. But as my attitude towards this clause is one of facetiousness and contempt, it would not be right for me to invite noble Lords to go through the Division Lobbies on a clause of this sort; and if your Lordships agree, I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 20:

Limitation of operation of Sections 16 to 19

20. None of Sections 16 to 19 (both inclusive) of this Act shall apply to a report attached to a balance sheet of a company laid before it in general meeting in respect of a financial year ending before that section comes into operation.

6.28 p.m.

LORD DRUMALBYN had given Notice of an Amendment to add to the clause: "or 30th June, 1968, whichever is the later". The noble Lord said: My Lords, I beg to move this Amendment in the following amended form: Page 19, line 10, at end insert ("or 1st July, 1968, whichever is the later").

I have given notice to the Minister, and also to the noble and learned Lord on the Woolsack of my intention to move the Amendment in the revised form.

On the Committee stage, the noble Lord, Lord Rhodes, explained the way in which this clause would work in conjunction with Clause 42(1)(b), and made it clear that, as the Bill now stands, the information which Clauses 16, 17, 18 and 19 require to be included in a directors' report would not have to be contained in any report which related to a financial year which ended before those clauses came into operation, and that they would come into operation six months after the day on which the Bill became law. In other words, if the Bill became law (and I take an extreme case) on June 29, the information would not be required in accounts for a company's financial year which ran from April 1 to March 31, but would be required if the company's financial year ended June 30, the day after the Bill became law. If the company's financial year ended on June 30, as I understand it, the information would be required to be given.

There are two propositions on this point which I desire to put to the Government. I do not think anybody can doubt that directors' decisions will be influenced in some cases—and I think one would have to admit that this is likely to be so in the case of political contributions—by whether or not contributions will have to appear in the directors' report. I think one has to accept this as a matter which boards will consider, and that their decisions will be affected. One may regret that their decisions will be influenced in this way, but I think that one has to accept the fact that they will be—not in all cases, but at any rate in some.

So it follows that, where the Bill requires certain types of action to be disclosed for the first time, the requirement should apply only to such action taken after the Bill becomes law. In other words, the action should not bite until the Bill has become law, and this plainly requires a complete year so far as, at any rate, the reporting of political and charitable contributions is concerned before the reports are required in the directors' reports.

The reason why I put this forward is that I think the citizen should act in accordance with the law as it is, and not as it may be at some future date; but, as the Bill now stands, the decisions which directors are now making as to political and charitable contributions will almost certainly have to be recorded in the directors'report—for example, according to the calculations which the noble Lord, Lord Rhodes, gave. The indication was that they would have to be recorded in the directors' report for the year ended December 31, 1967 that is, this year. That was the position he envisaged, assuming the Bill becomes law in June or July. That is the first point.

The second point is that, since companies' financial years normally finish at the end of a quarter, and particularly on March 31 and December 31, though some of them finish at the end of another month, the date on which these clauses should come into effect should, if possible, be the first day of a quarter. I submit that this would be a sensible way of dealing with the matter. It is, of course, possible that the Bill will not be passed until the tail end of the present Session, possibly at the end of July. But I would accept that, if it does not reach the Statute Book until after July 1, it would be asking too much to suggest that these clauses should not come into effect until October 1, 1968. But it seems likely that they will come into operation some time between April 1 and June 30, and therefore July 1 seems the appropriate date, if you are going to take the first day of a quarter, and if you are not going to cause any decision made before the Bill comes into effect to be compulsorily reported in the directors' report.

If I might once again summarise the principles on which I have been suggesting that this Amendment should be based, they are, first of all, that it is preferable that the clauses should bite from the first day of a quarter; and, secondly, that in any case they should apply only to accounts for financial years which start after the Bill has become law. If those two propositions are assented to as reasonable, I think July 1, 1968 would be the appropriate date after which all directors' reports must contain this information. I beg to move.

Amendment moved— Page 19, line 10, at end insert ("or 1st July 1968 whichever is the later").—(Lord Drumalbyn.)

6.36 p.m.

LORD BROWN

My Lords, whatever the reason for this Amendment, there is no question but that it would have the effect of delaying the coming into effect of Clauses 16, 18 and 19, probably for some months on any reasonable timetable of the operations. This is a serious matter. I do not think that time is always on one's side, and I should very much dislike seeing this delay, which will in any case be extensive when we take account of the length of time it takes to prepare company accounts to-day. So one must turn to the reasons given by the noble Lord for these changes.

I confess that the second group of arguments he put before me did not ring a bell with me to any great extent. It may be tidy to put it at the end of a quarter, but so many things do not happen at the end of quarters or half-years that it does not seem to be worth while. But when I turn to the first part of his argument, candidly I should like time to think about it. The point has not struck me before; it has not been put to me before. I refer to the idea that one should not, so to speak, introduce legislation in such a manner that acts which took place before it have to be shown as a result of legislation which followed the acts. I think that is a rather bowdlerised version of the rather more elegant argument the noble Lord stated. I cannot say which way my mind, or my right honourable friend's mind, will jump after we have considered this; and so, as I say, I should like to consider it.

I wonder whether I might ask the noble Lord to withdraw his Amendment on the assurance that it will be considered? I am not going further, because I want to think about it. This is a complex issue. The other way is to insert it and to consider whether we want to support it on its merits in another place later on. It is only the first part of the noble Lord's argument which has affected me in this way, and that is about all I can say at this stage.

LORD DRUMALBYN

My Lords, I am grateful to the noble Lord, and I hope that he will allow me perhaps to discuss this with him, in the same way as the other clause, because I think there is a substantial point here. I do not say that my first argument (as he calls it) affects equally all the points covered by Clauses 16, 17, 18 and 19; but it certainly covers Clause 18 for the reason he stated—namely, that before a Bill becomes law, it is clear that the contents of the Bill are not publicly known, and yet it seems that the decisions that might be taken if the contents were publicly known could well be different. It is on those grounds that I think it would be well to consider, in those cases covered by these clauses—and I would not suggest it otherwise—whether it would not be better to give a full 12 months after the Bill has become law.

As to whether it should be at the end of a month or not, I should think this would be tidy. I would commend it again to the noble Lord. It is so easy to put into the Bill; even if it were the first day of the month following the date on which the Bill becomes law. I think it would be tidier and easier for a great many companies whose financial years normally run from the beginning of one month to the end of a month 12 months later.

LORD MITCHISON

My Lords, may I ask the noble Lord one question? Is he aware that I have considerable objections to this Amendment, but I do not propose to take up the time of the House in stating them?

LORD DRUMALBYN

My Lords, I have yet to put down an Amendment to which the noble Lord has not considerable objections; I have never known one yet. I am quite certain he has, but perhaps he will put his objections to the noble Lord, Lord Brown, and I shall put my reasons in greater detail to him in a private session. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD BROWN moved, after subsection (2), to insert: ( ) Nothing in this section shall be taken to penalise a person who buys a right to subscribe for shares in, or debentures of, a body corporate or buys debentures of a body corporate that confer upon the holder thereof a right to subscribe for, or to convert the debentures (in whole or in part) into, shares of the body.

The noble Lord said: My Lords, Clause 24 prohibits a director from buying options on the shares or debentures of his company or of a company in the group to which his company belongs. Fears were expressed in Committee that the prohibition extended to the buying of a right to subscribe for shares and to the buying of convertible debentures. The noble Lord, Lord Drumalbyn, moved an Amendment designed to ensure that transactions of this kind were not prohibited; and the noble Lord, Lord Erroll of Hale, moved a different Amendment which had much the same purpose. My noble friend Lord Rhodes said that the Government would be willing to consider whether some addition to the clause was necessary in order to limit its scope. The Amendments were withdrawn.

The Amendment before us now is a clarifying Amendment. It states that the clause does not penalise a person who buys a right to subscribe for shares or debentures, or who buys convertible debentures. I beg to move.

Amendment moved—

Page 20, line 29, at end insert— ("( ) Nothing in this section shall be taken to penalise a person who buys a right to subscribe for shares in, or debentures of, a body corporate or buys debentures of a body corporate that confer upon the holder thereof a right to subscribe for, or to convert the debentures (in whole or in part) into, shares of the body.").—(Lord Brown.)

LORD DRUMALBYN

My Lords, I should like to thank the noble Lord for having moved this Amendment, which covers a point put forward by my noble friend Lord Eccles and myself at an earlier stage.

Clause 25 [Directors' service contracts, or memorandums thereof, to be open to inspection at company's registered office]:

6.42 p.m.

LORD BROWN moved, at the beginning of subsection (1) to insert: "Subject to the provisions of this section". The noble Lord said: My Lords, in speaking on this Amendment I shall also be speaking on Amendments 39, 40 and 41. In the Committee stage, the noble Lord, Lord Drumalbyn, moved to exclude from the register of directors' contracts of service, contracts expirable or determinable without compensation or determinable within one year. Secondly, he wanted to exclude contracts that were dealt with in the articles, and thirdly he wanted to exclude contracts with private companies, or wholly owned subsidiaries; that is, directors' contracts. The first three Amendments of these four, Nos. 38, 39, 40, are paving Amendments. The fourth Amendment, No. 41, means, in effect, that there will be no requirements to contain in the register of directors' con- tracts, contracts of less than 12 months' duration, or contracts where the unexpired portion of the contract is less than 12 months, or contracts which may have a longer unexpired portion than 12 months, but where they are determinable within 12 months without compensation.

This series of Amendments, I think, meets the noble Lord's first point. I think it probably, in effect, meets most of his second point, because I confess to being a little puzzled about these directors' contracts contained in the articles. I think that most of them are probably for a year or less, and so would be met. But it does not meet his third point, for, I think, a very good reason. The reason is this: if one were to exclude from the register of directors' contracts those made by directors with subsidiary companies, then I think it would open up an avenue of chicanery, because it would enable contracts of an undesirable kind to be hidden altogether if they were not even registered in the proper place in the subsidiary company's affairs. Admittedly the Amendments do not completely force disclosure of a desirable kind even if contracts are so registered. But at least the secretary of the company will have to see that they are available to the directors, and this will help to ensure that this form of chicanery does not take place. As I say, I think these Amendments meet the substance of the objections made to the original clause, and I beg to move.

Amendment moved— Page 20, line 30, at beginning insert ("Subject to the provisions of this section").—(Lord Brown.)

LORD DRUMALBYN

I am again grateful to the noble Lord for going so far to meet the points I made. On the point regarding the directors of subsidiary companies, very often they are employees of the major company who are paid a salary. They serve as directors of the subsidiary company. It did not seem to me that this was the sort of case the noble Lord had in mind. If he has discovered that this opens a way to chicanery, perhaps it is better not to deal with it. In point of fact, most of these directors that I am speaking of do not get paid anything at all for their services as directors of subsidiary companies, so the point may really solve itself. However, I do not wish to pursue it further. I am much obliged.

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 20, line 36, leave out ("such copy and memorandum") and insert ("copy and memorandum required to be kept by the foregoing subsection").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved— Page 21, line 6, at beginning insert ("Subsection (1) of").—(Lord Brown.)

LORD BROWN

My Lords, I beg to move.

Amendment moved—

Page 21, line 7, at end insert— ("( ) This section shall not require there to be kept a copy of, or memorandum setting out the terms of, a contract or a copy of, or memorandum setting out the terms of a variation of a contract at a time at which the unexpired portion of the term for which the contract is to be in force is less than twelve months or at a time at which the contract can, within the next ensuing twelve months, be terminated by the company without payment of compensation.").—(Lord Brown.)

Clause 26 [Obligation of director of a company to notify it of interests of his in shares in, or debentures of, the company or associated companies]:

LORD BROWN

My Lords, this is purely a drafting Amendment. The beginning of the paragraph refers to shares in, or debentures of, the company or any other body corporate, being the company's subsidiary, or holding company, or a subsidiary of the company's holding company. The reference made at the end of the paragraph should, therefore, be to the company or any other such body corporate as aforesaid. I beg to move.

Amendment moved— Page 21, line 20, at end insert ("or any such other body corporate as aforesaid").—(Lord Brown.)

Clause 27 [Rules for giving effect to section 26(I)]:

LORD BROWN

My Lords, in speaking on Amendment 43 I am also covering the area of No. 44. Perhaps I might deal with this matter very rapidly. It has arisen as a result of the very helpful points raised by the noble Lord, Lord Drumalbyn, when he drew attention, to the fact that Clause 27 might cause directors of companies who are placed under the requirement of reporting their shareholdings so that they may be registered, of having also to report the holding of proxies normally obtained for general meetings. This, of course, is a very helpful point. The purpose of this Amendment is to relieve them of this liability. I beg to move.

Amendment moved— Page 24, line 42, leave out ("or debentures") and insert ("in, or debentures of, a company").—(Lord Brown.)

LORD DRUMALBYN

My Lords, I should like to thank the noble Lord for moving this Amendment.

LORD BROWN

My Lords, I beg to move Amendment No. 44.

Amendment moved— Page 25, line 5, leave out from ("entitled") to the end of line 7 and insert ("otherwise than by virtue of his having been appointed a proxy to vote at a specified meeting of the company and at any adjournment of that meeting) to exercise any right conferred by the holding thereof or is entitled to control the exercise of any right so conferred.").—(Lord Brown.)

LORD ERROLL OF HALE

My Lords, may I add my thanks, too?

Clause 28 [Provisions for securing that information furnished under section 26, and certain other information about directors' interests, is recorded and made available]:

LORD BROWN moved, in subsection (8), to leave out "sixpence" and insert "two shillings". The noble Lord said: My Lords, I am not over-familiar with the Rules of Procedure in this House. I was going to suggest that we should make this the last Amendment. I wonder whether we could make the Amendment now in front of us the last to be considered to-day and thereafter—

LORD DRUMALBYN

My Lords, I do not propose to move the next one, if that will help.

LORD BROWN

That is what I had in mind. I will deal with Amendment 45, with your Lordships' agreement. Clause 28 is concerned with the register of shareholdings of directors, and the Amendment seeks to increase the charge made to members of the company or members of the public who require copies of the register, from 6d. per 100 words to 2s. This is in accordance with the undertaking given by my noble friend Lord Rhodes during the Committee stage. I beg to move.

Amendment moved— Page 27, line 15, leave out ("sixpence") and insert ("two shillings").—(Lord Brown.)

LORD MITCHISON

My Lords, in the name of the impecunious shareholders and of the coin of 6d., which is having a difficult time nowadays, I desire to protest. One can get so little for 6d. now; one cannot even get a 'bus fare, because they jump from 4d. to 8d. When one looks at the monetary proposals of the Government it is the 6d. that gets the raw deal every time.

LORD DRUMALBYN

My Lords, as the noble Lord will recall, I previously moved an Amendment that the figure should be 2s. 6d. I am quite satisfied with 2s. With respect to the noble Lord, Lord Mitchison, I think that to get copies of the reports for 6d., including, I should imagine, postage, is asking a bit much.

LORD MITCHISON

My Lords, it is 6d. per 100 words.

LORD DRUMALBYN

Yes, but the first 6d. would presumably have to include the postage.

If I may have the attention of the noble Lord, Lord Brown, for a moment, as the same point arises again it may be of assistance to the House to know that as we have now discussed this matter in principle it could be put formally in the case of the other Amendments.

LORD BROWN

My Lords, perhaps we can note the fact that the other Amendments are Nos. 48 and 54.

Clause 29 [Obligation of persons to notify company of acquisition, changes in amounts of, and disposal of shares in the company carrying unrestricted voting rights]:

VISCOUNT ECCLES

My Lords, I beg to move.

Amendment moved—

Page 31, line 43, at end insert— ("( ) In relation to a company the shares of which are without nominal or par value, references in this section in whatever terms to shares comprised in the relevant share capital of a company of a nominal value equal to, or more or less than, one tenth of the nominal value of that share capital shall be construed as references to shares comprised in the relevant share capital of that company of a number equal to, or, as the case may be, more or less than, one tenth of the total number of shares comprised in that share capital.").—(Viscount Eccles.)

Clause 30 [Provision for securing that information furnished under section 29 is recorded and made available]:

LORD BROWN

My Lords, this is another Amendment concerned with the increase of the charge per 100 words from 6d. to 2s. In this case it is concerned with the copies of the register of persons with substantial interests in the shares of the company. I beg to move.

Amendment moved— Page 32, line 31, leave out ("sixpence") and insert ("two shillings").—(Lord Brown.)

House adjourned at five minutes before seven o'clock