§ 3.7 p.m.
§ Lord WINTERBOTTOM
My Lords, I beg to move that the Bill be now read a second time. As this Bill is essentially an interim measure designed to deal with certain immediate problems, I should begin by putting it in the context of the Government's overall programme for the reform of company law. The basic principles underlying British company law were laid down last century by Gladstone, and have changed very little since then. As business has become more complex and the number of companies has grown, the ramifications of company law have spread and the legislation has become ever more sophisticated and extensive, but there has been no change in the fundamental approach. The emphasis is still on the protection of shareholders and creditors; the interests of employees and of the wider public are barely recognised. Of course, in practice, most companies do take account of these wider responsibilities, but company law does not require them to do so.
Company law is therefore long overdue for fundamental reform. That is why this Government on coming into office two years ago decided not to go ahead with the Companies Bill introduced by the Conservative Administration in 1973, and which had just started its passage through Parliament at the time of Election in February 1974. That Bill would have perpetuated the traditional attitude on company law and would have done nothing to further the fundamental rethinking which is so badly needed. The Government therefore decided to institute a wide-ranging review of the whole of company law. This is a major exercise and is still going on. It is inevitable that 549 a review of this depth should take some time to complete, as it is essential that a reform which will affect the legal framework within the whole of the private sector operates should be thoroughly examined.
Central to this review is, of course, the question of industrial democracy. This is currently being studied by a Committee of Inquiry under the chairmanship of the noble Lord, Lord Bullock. The Committee's task is to consider how an extention of industrial democracy in the control of companies by means of representation on boards of directors can best be achieved. This brings into question such basic principles as the responsibilities and duties of companies and their directors, and the structure of company boards. The Committee's recommendations will thus lead to a major change in company law, and also to a radical change in the way industry is managed.
The Committee has put out a general invitation to submit evidence, and I hope that all interested parties who have not already done so will put in their evidence as soon as possible. In a debate of this importance, which raises so many complex and relatively unexplored issues, it is vital that all those who are able to make a contribution should do so. This is not just a form of words. Your Lordships' House is a storehouse of knowledge and experience, and any individual or collective contribution to the work of Lord Bullock's Committee would be most welcome. The Committee has been asked to report by the end of this year, and the Government intend to legislate as soon as possible thereafter.
Another subject which the Government are studying is the arrangements for the supervision of the securities market. The Government have been consulting interested organisations in the City and elsewhere and are now considering the views they have expressed. One of the topics which is being examined in this part of the review is ways of stamping out such abuses as insider dealing and warehousing. Any major companies legislation must clearly await the outcome of these inquiries, but, in the meantime, there are a number of urgent matters, mainly of a technical nature, on which legislation is needed now and which cannot safely be left until the longer term inquiries have been completed. It is 550 these matters, none of which will in any way prejudice the outcome of those in-inquiries, with which this Bill is concerned. The Bill's aim is thus very limited. It is not a major reforming measure. It seeks only to deal with particular problems and abuses which all parties are agreed it is essential to tackle as soon as possible. Indeed, I freely acknowledge our debt to the Party opposite. Most of the provisions in this Bill were included in the Bill which they introduced in 1973. The provisions have been the subject of intensive consultation and will, I believe, be widely welcomed as a useful step towards the improvement and tightening up of company law.
Before going on to describe the Bill's provisions, perhaps I might pause to explain why it has the somewhat curious title—Companies (No. 2) Bill. About a week before this Bill was introduced in this House, a Member in another place obtained leave to introduce a Bill. His Bill, which is concerned with non-executive directors, is also called the Companies Bill, and as he got in first, the Government's Bill has become the No. 2 Bill. The Companies (No. 2) Bill has four main objectives. These are: first, to tighten up the requirements about the filing of company accounts and the keeping of accounting records; secondly, to strengthen the position of auditors; thirdly, to give the Secretary of State for Trade power to prevent a foreign company with a place of business in Great Britain from trading here under a misleading name; and fourthly, to deal with certain other relatively minor matters concerning Companies House.
The failure by very large numbers of companies to file their annual returns and the accounts which should accompany them on time has been a serious problem—indeed, a scandal—for many years and has been a matter of grave concern both to this Government and to their predecessors. Out of some 643,000 companies on the register, 186,000 are known to be in default to some degree in filing annual returns. This is despite strenuous efforts by the Registrar of Companies and his staff. The process of pursuing companies in default has now been computerised and this makes it possible to pursue companies much more promptly. Reminder letters are now normally sent out within two months of an annual return being overdue. If the return is still not 551 filed, the directors are eventually prosecuted, or, if no reply whatever is received, the company is struck off the register.
The statistics are most interesting. Last year summonses were served on 2,440 directors of 989 companies in default and already this year 700 summonses have been served. In addition, 28,000 companies were struck off in 1975, and over 5,000 have been so far this year, because they failed to respond to the reminders in any way and are presumably no longer in business. This is, of course, only the tip of the iceberg. These represent only those cases in which repeated reminders failed to secure the filing of the annual return—which is naturally the object of the exercise. The longest part of the job is sending out the reminders, which are currently running at some 10,000 a week. Inevitably, such a mammoth operation is expensive. Currently, it costs about £500,000 a year.
But despite this impressive campaign, the defects in the existing law make it virtually impossible for the Registrar to ensure the prompt filing of accounts. He can pursue failures to file annual returns, but the accounts which should be annexed to them present much greater difficulty. There are two main problems: first, the obligation to file accounts only arises after the accounts have been laid before the company. As the Registrar does not know, and cannot find out without expensive and time consuming inquiry, whether accounts have been so laid, he does not know when or even whether accounts should have been filed with him. This makes effective enforcement impossible. Second, the present provisions allow the latest accounts on file at Companies House to relate in extreme cases to events nearly 3½ years old. This is quite unacceptable. Failure to file accounts promptly is not a mere technicality. Limited liability is a privilege, and those dealing with limited liability companies are entitled to prompt and accurate information about their financial state.
The Bill seeks to remedy this situation by creating a specific obligation to file a copy of the accounts within a fixed period after the end of the company's accounting reference period or financial year, and by providing for the determination and notification to the Registrar of each com- 552 pany's accounting reference period. In future private companies will have to file their accounts within 10 months of the end of their financial year, and public companies within 7 months. Companies with overseas interests will be allowed 3 months longer. In order to underline the importance of prompt filing of accounts, and to provide an incentive to companies and their directors to comply with their obligations, the penalties are to be increased substantially so that every director who fails to take all reasonable steps to ensure that the accounts are filed on time will be liable to a fine of £400, plus £40 for each day of default, and the company itself will be liable to a civil penalty which will increase with the length of default, up to a maximum of £450. Clauses 1 to 8 apply these provisions to companies registered in this country, and Clauses 9 to 11 apply similar provisions to foreign companies which have a place of business here.
These provisions will enable the Registrar to identify defaulting companies immediately the default starts and thus to pursue them much more promptly and effectively. They will, however, naturally require some additional staff to administer. It is estimated that about 70 extra staff will be required once the system is in full operation. They will be mainly engaged in pursuing and prosecuting defaulters. There will be some relatively minor offsetting staff savings as a result of other provisions in the Bill, but there will be a net increase of some 60 staff at a cost of about £150,000 a year. Naturally, this increase has been rigorously re-examined in the light of the need to make cuts in public expenditure and manpower. The Government have, however, concluded that the prompt disclosure of accounts is of such importance as to justify the staff increase and that the necessary staff savings will have to be made in other areas of work.
The introduction of the new arrangements for the filing of company accounts will, of course, involve a great deal of work for the Registrar. The exercise cannot, therefore, begin until next year, when the Cardiff office is fully established. The move of the Companies Registration Office from London to Cardiff will begin in less than two weeks' time on 5th April, The various functions of the office are to 553 be transferred to Cardiff in stages. The first stage will cover the section of the office dealing with new incorporations, changes of name and name inquiries. Company files will be transferred in three batches, the first in July, the next in December, and the final one in the following June. The main part of the move should be complete by next October, and the remainder by the middle of next year.
The move to Cardiff was dictated by the vast increase in the scale of operation. Last year 1,400,000 documents were received for examination and filing and 1,900,000 searches were made by members of the public. But the move, together with the associated microfilming of company files, will enable Companies House to provide a much better service to the public with faster and more convenient search facilities. There have been extensive consultations with the major users and the services to be provided in London and Cardiff both for searches and for filing documents have been designed with their requirements very much in mind.
Returning now to the details of the Bill, the next clause, No. 12, deals with accounting records. It is, of course, essential that companies should keep records which enable the directors to ascertain the financial position of the company at any time and which show what transactions it has engaged in. It is from these records that the accounts are derived. The unforeseen financial difficulties which many companies have run into partly as a result of inadequate internal accounting systems underline the need for companies to keep proper records. This clause therefore brings up to date and clarifies the existing requirements as to the keeping of accounting records and provides that such records must be preserved for at least six years.
Clauses 13 to 17 of the Bill are concerned with auditors. Little point will be served by ensuring that accounts are made available promptly to shareholders and the public if those accounts do not give an accurate picture of the state of the company's affairs. Auditors have an essential role in ensuring that accounts do indeed give a true and fair view and that companies' financial affairs are conducted with propriety. In the light of recent events, I do not think that I need to stress this point further. The Bill 554 amends the law so as to strengthen the position of auditors and to ensure that they have the necessary rights and powers to carry out their functions effectively even when they run into difficult situations.
The first requirement is that those who audit companies' accounts should be properly qualified. The normal qualification is membership of one of the four recognised accounting bodies—the Chartered Institutes of England and Wales, Scotland and Ireland and the Association of Certified Accountants—which are listed in Clause 13 of the Bill. But the 1948 Act also allows the Secretary of State to authorise individuals on the basis of adequate knowledge and experience. This provision is highly anomalous as it enables a person to become an auditor without having first passed the stringent examinations set by the recognised professional bodies or indeed having passed any examinations at all. In view of the importance of maintaining high professional standards, the Bill provides that, one year after Clause 13 comes into effect, no further authorisations shall be granted on the basis of adequate knowledge and experience. The one year delay will allow those seeking authorisation on this basis a reasonably extended last chance to apply. The second change is that under Clause 14 auditors will in future have to be appointed or reappointed every year by the company at its annual general meeting. It is not right that an appointment of this importance, or the continuation of it, should as at present be automatic.
Clauses 15 and 16 represent a major strengthening of the position of auditors who come across evidence of malpractice or are in dispute with the directors about the propriety of particular transactions. Clause 15 provides that an auditor may resign at any time if, but only if, he makes a statement either setting out any circumstances connected with his resignation which he considers should be brought to the attention of shareholders or creditors or stating positively that there are no such circumstances. Clause 16 enables an auditor who has resigned to requisition a meeting of the company at which he can explain his reasons for resignation. These provisions will give a strong auditor a very powerful and effective 555 threat in the event of a dispute with the directors and will force even a weak auditor to face up to his responsibilities as he will no longer be able to evade a difficult situation by quietly resigning and saying nothing.
The final change, in Clause 17, gives the auditors of holding companies the right to require the directors and auditors of subsidiaries to supply information about the accounts of those subsidiaries. This is necessary if the auditors are to be able to reach a properly informed view on the accounts of the holding company. These provisions are among the most important in the Bill. They have been worked out in consultation with the accountancy profession and will make a valuable contribution to ensuring that auditors are in a position to do their job effectively.
The Bill does not deal specifically with any of the accounting and auditing problems which came to light as the result of the investigation into the affairs of London and County Securities. The English and Scottish Institutes of Chartered Accountants have set up a Committee to look into the lessons to be learnt from this case. The Government are keeping in touch with the accounting bodies on this subject and are examining the specific recommendations made by the inspectors. If consideration shows that further legislation is desirable, amendments can be made to the Bill at a later stage.
Part II of the Bill I can deal with rather more briefly, I am glad to say. Clauses 18 to 20 make minor amendments to the law concerning notification to the Registrar of the names of a company's directors and secretary and the whereabouts of its registered office and are, I think, self-explanatory. Clause 21 is concerned with people who continually ignore the legal requirements regarding the filing of accounts and other returns to the Registrar. It is not acceptable that such people should be free to continue to manage companies with impunity. The Bill therefore provides that if a person has demonstrated through persistent default his complete disregard for the law, the Secretary of State may apply to the courts for an order disqualifying that person from acting as a director or taking part in the 556 management of a company for a period not exceeding five years. This provision supplements the existing disqualification provisions in the 1948 Act and those proposed in the Insolvency Bill. It will provide a valuable additional sanction against those who regularly fail to file their accounts and will thus complement the penalties in the earlier part of the Bill.
Clauses 22 and 23 are concerned with the problem of foreign companies which trade in this country under misleading names. Although the names of British companies are subject to control, there is at present nothing to prevent a foreign company using any name it likes and this can seriously mislead those dealing with it. The worst examples have concerned small foreign companies trading under grandiose names which suggest that they are reputable banks. The Bill therefore enables the Secretary of State to prevent a foreign company which has a place of business in this country from doing business here under a name which he considers to be undesirable.
Clauses 24 to 26 deal with administrative matters affecting the work of Companies House, such as the use of prescribed forms and requirements as to the size, durability and legibility of documents. One particular point which I might mention is that the Registrar will be empowered, when he is in a position to do so, to accept information on microfilm. Clause 27 widens the Secretary of State's powers to prescribe by regulation the fees to be paid to the Registrar for the performance of his duties. This clause makes two main changes: first, it will enable the Registrar to charge a fee for services which are not statutorily prescribed but which he provides as a convenience to users; and secondly, it removes the existing limit on the fees payable for the inspection of documents kept by the Registrar. The latter fees were fixed at a maximum of 5p in 1844 and have never been raised. The time has come when they must be reviewed, although it is intended to continue to use registration fees to subsidise search fees to some extent as it is right that most of the cost should be borne by companies which wish to obtain the benefits of incorporation and limited liability. Any new fees or increases in existing fees will be subject to Affirmative Resolution. The 557 remaining clauses deal with various supplementary matters which I do not think that I need go into.
My Lords, as I explained earlier, this is largely a technical Bill. Nevertheless, it deals with a number of important matters and in the fields with which it is concerned it will achieve a valuable measure of reform. It is because I believe this that I have spoken at such length. I commend the Bill to the House.
§ Moved, That the Bill be now read 2a.—(Lord Winterbottom.)
§ 3.28 p.m.
§ Lord LYELL
My Lords, the whole House will be grateful to the noble Lord, Lord Winterbottom, and indeed to the Government, for bringing forward this Bill. Noble Lords will be aware, as we are this afternoon after the speech by the noble Lord, Lord Winterbottom, that a Companies Bill was proceeding through its various Parliamentary stages when the General Election of February 1974 was called. That Bill set out to effect a thorough and a sound reform of company law, but sadly the Government have taken two years to carry on this important work. While we are grateful for having the opportunity to discuss this Bill, we should remember that several recent cases have shown the urgent need to bring our company legislation up-to-date in all respects.
We recognise that the Bullock Committee is due to report later this year, and that it would be unwise for us to deal with the entire spectrum of legislation as it affects shareholders, directors, auditors and creditors when fairly drastic legislation could be necessary as a result of Lord Bullock's Report. The Government will, of course, wish to keep the Bill as uncontroversial as possible and we shall assist the Bill in its onward passage. There are, however, many general and more detailed points that the noble Lord, Lord Winterbottom, could explain to us and we hope that he will be able to give us convicing reasons why the Government have not taken the Bill to cover more points than it does at the moment.
The Bill is intended, of course, to cover most of the points that the Government consider are in need of amendment, but the first and most important question that 558 we want to raise is: when are the Government going to take steps to consolidate company law? Noble Lords will be aware that anybody dealing with such legislation has to dart between the Companies Acts of 1948 and 1967 and has to amend both of those Acts as a result of small measures enacted between times by regulations. Indeed, anybody looking at this Bill will discover numerous occasions when legislation is by reference. The Government will, I am sure, admit that their programme is heavy—too heavy and too ambitious, we feel—but we are sure that the noble Lord, Lord Winterbottom, will notice that it is nearly 28 years since we last consolidated company law. This subject will become yet more complicated now that we have to harmonise our laws with those of the EEC. The noble Lord, Lord Mais, will be initiating a debate on this particular subject in about two weeks' time, so we can let that subject lie for the time being.
A problem which was considered in great depth in the Companies Bill 1973, yet has been omitted from this Bill, is the classification of a public and a private company. Such divisions between these two types will become absolutely vital, possibly in 1977—and if the noble Lord, Lord Bullock, reports at the end of 1976, as we hope—and the EEC Members are proceeding with such classification. Any company with a share capital, turnover or membership of above various carefully defined limits has to set up two-tier boards of directors, and shop floor participation is often compulsory. Many awkward and time-consuming duties must be performed by the management, far and away beyond what we are even likely to regard as reasonable.
Another problem that is touched on, but in the 1973 Bill and not in the 1976 one, is that of insider trading; Lord Winterbottom did mention it. Nevertheless, where persons are closely connected with the management of a company or in a position to be closely concerned with it, and these persons can take an unfair and unreasonable advantage over the shareholders, the work force and the creditors of that company, we believe that legislation is becoming more urgently required. And of all the problems connected with company management, this, we think, is the most difficult to define and, often, to detect. The Stock Exchange 559 and the Law Society are already closely concerned with this problem, while the accountancy bodies have to deal with this and with new problems arising with incredible speed and regularity. We accept that definitions of what is adequate disclosure—what should be disclosed or not, who should receive confidential information concerning a company and how and when such information is released—will receive close attention from the noble Lord, Lord Bullock, and his colleagues, but we feel that the Government have missed the opportunity in this Bill to rectify some of the abuses that have been evident so far.
We come to some more detailed and technical points that could have been covered by the Bill but which so far are not mentioned. One of the first of these points is the definition of distributable profits. The Jenkins Committee stated in one of its recommendations that before revenue profits could be regarded as distributable in, possibly, dividends, past losses had to be recouped from revenue profits. This is reasonable and it is a pity that the Bill does not deal with this particular point. Capital profits are a little more complicated in that the rate of inflation endemic in the United Kingdom now makes nonsense of balance sheet values of assets. There have been too many cases in recent history of items being revalued upwards, the profit on such revaluation accruing to the shareholders; but, owing to some utterly unconnected event, the new value turns out to be unrealistic, and since the profit may or may not have been realised, either there is a major cash shortage in that company or the share values are needlessly reduced. This may be a technical point, but it is important.
There are many more detailed points, some more important than others, but we feel that the Bill has not necessarily followed the suggested measures in the 1973 Bill; perhaps the House will forgive me if I deal with these questions as they occur throughout the Bill which is before us. In Clause 1 we find that accounts have to be delivered to the Registrar and it is stated that they have to be printed. Perhaps the noble Lord, Lord Winterbottom, could reassure us that small companies, which must of course file a copy of their accounts to the 560 Registrar, need not necessarily go to the expense of having these formally printed but possibly they could be allowed to deliver accounts in an acceptable typescript form and possibly even a good quality photocopy. In Clause 2 the Registrar is empowered to decide a company's accounting reference date. I regard this as a horrid term. Is it wise to make this particular date 31st December? Would it not help the Registrar, who will have the problem of sending out to companies possibly half a million reminders in each year, to fix the date for a company's financial year end at some other date, possibly 31st March? This would have the effect of lightening the workload on the Registrar at the particular year end. Could the noble Lord who is to reply give some indication as to the Government's thinking on this small point?
Clause 3 deals with the company's financial year end and any alterations that may need to be made to this date. What, however, will be the situation where one company joins a larger group and where this group's accounting reference date is earlier than that of the individual company which is joining it, because it seems to us that there will be two options? One option is for the company which is joining the large group to carry on its accounts until the reference date coincides with that of the group. This could mean a financial period of between 13 and 18 months. The other alternative is for the individual company to change its reference date backwards so that its accounts could be made up for a period of, say, between seven and 11 months. But either way there will be a distortion in comparing the individual company's reports and accounts. I think it is agreed that financial analysts and, indeed, members of the public are not afraid of simple arithmetic.
The second option which I mentioned—that of shortening the financial period of the year—is not at present covered in Clause 3. Do the Government believe that the Secretary of State should have power to authorise a company to produce accounts for, say, 10 months instead of a normal 12-month period? We should be grateful for any indication from the noble Lord. In the same way, should the Secretary of State have power to extend the financial period to more than 18 months, again to avoid the necessity of 561 sending out two sets of accounts to the Registrar and, again, when this individual company is about to become part of a larger group? I am afraid that these are niggling points but they cause concern to those of us who are responsible for company administration.
Clause 6 contains some admirable proposals concerning time limits for filing accounts with the Registrar and the suggestions contained in this clause will make the task of keeping these files at Companies House up to date. This is not always the case at present and I hope that it it not ungracious to ask why the Registrar cannot be considered as another shareholder for the purposes of filing accounts and, indeed, receiving accounts. The generous time limits proposed in the Bill—seven months for a public company and 10 for a private one—could lead to even greater delays in filing accounts than take place at present. Why would it not be feasible to have the companies file accounts within seven days of these accounts being sent to shareholders? This would make company administration much easier as well as permitting the Registrar to have the accounts filed much earlier than at present.
I come to Clause 12 and the important regulations concerning accounts and what these should contain. Recent events in the commercial world have made the modernisation of these regulations very urgent indeed. We feel that Clause 12 contains implicit requirements for adequate information to be available, but we should like to see the regulations more explicit, spelling out in considerable further detail exactly what information must be available to the management—and, in due course, probably the work force as well—so that not only do the accounts and the accounting system provide what we in the profession like to call "a true and fair view" but also these accounts and accounting systems provide management with all the information which indicates the continuing profitability of the company and, equally important, its continuing ability to pay all its debts of all sorts as they fall due.
"A true and fair view," which has, up till now, been the accepted definition of a respectable set of accounts for a company, will show what has happened, whereas we feel that more explicit details as to the form of the accounts and the 562 books of account will do much to prevent companies from getting into difficulties. We acknowledge that the Government have gone a long way to filling some of the more obvious gaps. Clause 12 contains detailed references to stocks in trade. One or two points of definition will need clearing up even on this. I understand that there is considerable difficulty in the accountancy profession as to "dealing in goods". However, I hope that these definitions will be cleared up and, indeed, I am quite sure that, as the Bill proceeds through Parliament, these points can be settled.
We believe that a great effort has been made to clear up the definition of the information which is mandatory in company accounting systems. I understand that in many cases where companies are in financial difficulties and also in cases where there has been evidence of fraud, the accounting records are not only years in arrears but the systems are woefully inadequate. For these important reasons, we welcome Clause 12.
At this stage in discussing the Bill, I have to declare my own personal interest. I am a member of one of the four bodies mentioned by the noble Lord, Lord Winterbottom—the Institute of Chartered Accountants in Scotland—but it is a number of years since I was involved in the auditing of public or, indeed, private companies. Clause 13 contains very important provisions concerning the qualifications of those who may and may not audit a company. The profession is very happy with these provisions and it hopes that the Government are likewise satisfied. However, I hope that the noble Lord who is to reply will be able to reassure us that the reciprocal privileges granted to members of the profession throughout the EEC will be continued. We welcome the clear definition of auditors' qualifications, and I can assure the House that all the professional bodies concerned are very conscious of their obligations and duties to everyone—the shareholders, the creditors and the general public at large.
Clause 14 brings us to the appointment of a company's auditor. I hope that the House will bear with me briefly as there are one or two complicated and rather technical questions which we hope that the noble Lord, Lord Winterbottom, will be able to answer either now or later. We 563 welcome the repeal of Section 159(2) of the 1948 Companies Act, which will put an end to the automatic reappointment of the retiring auditor. Thus, the shareholders will have to take a positive step in appointing a new auditor who will act as their watchdog. There has been a feeling on the part of some company lawyers that automatic reappointment would be invalid where a firm had undergone partnership changes during the year, but these doubts will no longer exist as the company will have the chance to appoint auditors on a year to year basis and can then ask the auditors whether there has been any change in the firm during the preceding year.
Another and more important point regarding Clause 14 concerns the annual general meeting of the company at which the auditor is of course appointed. Many of these annual general meetings are very poorly attended and it would be quite simple for a number of directors and some of the shareholders present to pass an ordinary resolution among those members of the company who were present to the effect that the retiring auditor be not reappointed. We understand that such a manoeuvre is quite possible, in that Clause 14(3) does not preclude voting an unsatisfactory auditor out of office. Clause 14 sets out rules for the appointment of an auditor and presumably a company could appoint any other person who was duly qualified as an auditor under the heading of a "casual vacancy occurring". If that happened, aggrieved shareholders could call a further general meeting to fill the casual vacancy. That case would be covered under Clause 14(2) and the company would have a further chance at that stage to consider whether or not the retiring auditor should be reappointed. However, we do not wish to preclude the appointment of a new auditor by the directors when the current auditor has died or cannot continue in office. A casual vacancy can be filled, but the company members will have their opportunity to appoint a new auditor on a year to year basis at the next annual general meeting.
Clauses 15 and 16 are, we consider, some of the most important in the Bill. At last, an auditor can take steps at any time to notify the shareholders immediately of any malpractice that he 564 discovers in the management of the company. If he wishes to resign at any time between annual general meetings, he is quite free to do so; but, if he is unwilling to continue to act as auditor to a company whose directors refuse to keep the accounting systems up to date or are involved in what he believes to be flagrant commercial malpractice, he may re sign also.
In either case, he must append a statement to his notice of resignation that there are no circumstances which he considers should be brought to the notice of members of the company or, indeed, of the creditors. The alternative is that there are certain facts which should be presented to the company and, in due course, to the creditors. In that case the company is obliged, under Clause 16, to call an extraordinary general meeting so that the auditor who has resigned can explain his reasons for resignation and can answer questions from the members. This is an admirable step and the professions are full of praise for the Government in taking this measure very seriously, because it gives considerably increased strength to the auditors and, we believe, much more power to individual members of the company to be informed before the management of a company can take steps or persist in commercial malpractice.
Auditors in general welcome these measures, but is it too much to hope that the clauses covering the resignation of an auditor could be extended to cover what I shall call "passive resignation"?—that is, where an auditor declines to allow his name to go forward for reappointment at the annual general meeting. I feel that the noble Lord, Lord Winterbottom, will allow that members of the company should have the opportunity of receiving a positive statement that all is well with a company's accounts and records.
While we are finishing these clauses, can the noble Lord, Lord Winterbottom, confirm that statements sent out to shareholders are privileged, albeit in a qualified way, as far as the views which the auditor is expressing statutorily are concerned? Simply, it comes to this: could an auditor be sued for libel by directors and others who might come under implied criticism in such a statement, especially when the fears expressed by the auditor are later 565 found to be true? We should be grateful to have some confirmation from the noble Lord.
Two other small points arise on Clause 25. Can the government give an indication of the standard form of accounts, together with the size and the format, and can we be assured that the regulations will not preclude the efforts of companies everywhere in the United Kingdom to make their accounts and reports to the shareholders much more amusing, interesting, and informative, with, if necessary, photographs and pictures and details of the company's operations? We believe that this is very important to many shareholders, and let us hope in future that it will be important also to the employees and to members of the public.
Clause 25 also contains a small provision giving the company 14 days to comply with the regulations as to size, legibility and format. I believe that the noble Lord will agree that the printing of new accounts might take a little longer than 14 days. I wonder if he feels that the Secretary of State could have powers to extend this limit so far as may be reasonable—possibly to a month or six weeks.
Company law is a most complicated subject. I hope that it is not boring or dull. It can contain very great dangers. We believe that the Bill is admirable so far as it goes. However, as I have pointed out, there are items which we consider important and which are not to be found in the Bill as at present drafted. Doubtless the Government and the Department of Trade are waiting with great interest for the Bullock Report, as indeed are we. There is a great need for a major consolidation of company law for, at present, the secretaries of all companies—particularly the smaller ones—have to look at at least four Acts and numerous regulations.
§ Lord BROWN
My Lords, if I may interrupt the noble Lord for a moment, I have noted the pressure upon my noble friend to extend the purpose of the Bill in the early part of the noble Lord's speech, as well as the emphasis upon the question of consolidation. I should like the noble Lord to bear in mind when drawing up Amendments to extend the Bill that over a period of 40 years the Party opposite has never produced any 566 major legislation on companies at all. The only two major Acts which are now in existence are the 1948 and 1967 Acts, both of which were introduced by the Party of which I am a Member.
§ Lord LYELL
My Lords, with the greatest respect to the noble Lord, I must say that there was one Act in 1973, which was much more far reaching than the present Bill. The present Government, for reasons which seem reasonable to them—
§ Lord LYELL
May I finish what I am saying? I have given way once already, and I am coming to the end of my remarks. We believe that the 1973 Bill was as far-reaching as it could have been at that time. We accept that the Bill now under discussion is admirable, so far as it goes, but there are gaps. We consider that there are other points which are not covered in the Bill, and we simply regret that this opportunity has been lost to deal with these. Commercial life is very competitive throughout the world, and often the management of companies, who are responsible for handling the public's money, can be tempted. That is quite enough; there are risks. All of us here regard the need for updating these commercial company laws as paramount, and certainly for this reason we welcome the Bill.
§ 3.51 p.m.
§ The Earl of LIMERICK
My Lords, I, too, am grateful to the noble Lord, Lord Winterbottom, for the helpful way in which he introduced this small, yet very important Bill. It is a Bill which I very much welcome, and my regrets are entirely not for what is in the Bill but for what is not in it. I am not embarking on any controversial course. The noble Lord said that company law was long overdue for fundamental reforms, and there are many who would agree that reforms are needed. I do not know how fundamental a reform has to be before it qualifies. Certainly when we were drawing up the 1973 Bill there were passages in it which, at the time, were regarded as controversial to a degree where one could hardly conclude that they were not 567 fundamental. Nevertheless, I know what is in the mind of the noble Lord, and we shall await the further proposals.
The noble Lord went on to say that the 1973 Bill perpetuated traditional attitudes to company law and that there was not very much rethinking in it. I am glad to learn—indeed, one has been aware of this—that there was rethinking going on and that we may expect to hear more of this subject in the not too distant future. But I have a rather sinking feeling when I hear the phrase that a "thorough-going review is proceeding". We know that company law is always the Cinderella in any legislative programme, and we must all express the hope that these reviews will not be too protracted. Thus, whatever view may be taken about certain omissions, I think that I could refer to some technical points in the 1973 Bill which many of us would have wished to see reintroduced at this stage.
One point has already been mentioned by my noble friend Lord Lyell; namely, the distinction between public and private companies. There is also, for instance, the question of interests of directors in associated companies, the prohibition of loans to connected persons, and the question of a minimum paid up capital, which I should have thought was very much bound up with the provisions for strengthening the arm of Companies House in dealing with the plethora of registrations, the policing and the maintenance of records. There is also the prohibition of non-voting shares, the question that shareholders' consent should be obtained for the disposal by directors of the whole, or a substantial part, of a business or undertaking, and many other matters which I would classify together as "the rest of Jenkins".
The Jenkins Report contained much extremely useful thinking on company law. Some of the recommendations were legislated in 1967, but many of them were not. In 1973 we felt that it was almost the last opportunity to incorporate many of those useful measures. I can imagine the type of debate that has been going on about the length of the present Bill. Nevertheless, it must be a matter for regret that the opportunity for much tidying-up is being lost.
568 The noble Lord, Lord Winterbottom, used a phrase that I myself intended to use. He said that limited liability was a privilege. I believe that this is at the heart of what we are talking about in a good part of this Bill. With that privilege are carried substantial duties. It becomes essential to control and deter frivolous registrations, to prune dormant companies from the register and, most important, to enforce timely filing of accounts and information, because this grants the privilege of limited liability, behind which those who register and run these companies have chosen to operate. This is the only protection to the creditors of the company, who can decide whether they would wish to deal with these people, notwithstanding that they are trading with limited liability. That point was very amply underlined by the figures quoted by the noble Lord, Lord Winterbottom, of the numbers of companies in default and the terrifying number of reminders which have to be issued from Companies House.
I should have wished to speak in the debate if only for what I am now to say; that is to pay a very warm tribute to the Registrar at Companies House and his staff. I had the pleasure of working closely with them for two years when I was at the Department of Trade and Industry. I believe that, in difficult circumstances, they have done a very good job which deserves our recognition and thanks, and that Mr. Westley is, at the same time, one of the most over-worked and under-appreciated of civil servants—
§ Lord DAVIES of LEEK
My Lords, may I interrupt the noble Earl for a moment? I wish to endorse completely what he said. But I wish to add, briefly, that some of us regret the movement out of London, in view of the importance of Companies House. I believe that this move will limit the amount of inquiries and work that can be undertaken.
§ The Earl of LIMERICK
My Lords, I am grateful to the noble Lord, Lord Davies of Leek, for raising that point, but I do not share his apprehension. On the contrary, when the filing section of Companies House has been moved, as it will be very shortly, to Cardiff, then, with a much more efficient mechanism for information retrieval, the whole process of inquiry will be speeded up. There 569 will continue to be a London search office as previously, unless there has been a variation, of which I am unaware, in the proposals which were put forward. This was a point which was very carefully gone into, and no doubt the noble Lord, Lord Winterbottom, will say something about this in his winding-up speech. But I should be both surprised and disappointed if the move is not helpful to the users of Companies House. I spent last night in Swansea, and early this morning I came through Cardiff in the train; I thought that there would be compensations in being decentralised to Cardiff.
I now wish to echo the plea by my noble friend Lord Lyell for some form of consolidation. The situation is difficult for those in practice. I should say that, like my noble friend, I am a member of the Institute of Chartered Accountants in Scotland, although of a slightly more ancient vintage than he. Some of the points I intended to make have already been taken up by my noble friend, which is not surprising; we may even have had a similar inspiration. Thus I can shorten this section of my remarks. Perhaps the best way to illustrate what I have in mind is to point out that although the aims of this Bill are modest, as the noble Lord, Lord Winterbottom, said,—it being concerned with only four areas—it nevertheless requires 35 clauses, three Schedules and 40 pages of print. Much of this will have to be looked at by reference to other Acts of Parliament. It is becoming increasingly difficult for practitioners, and still more so for laymen, to find their way around in this jungle, and I hope that the question of consolidation has some priority in Government thinking.
I have from what is left by my noble friend just three points, which do not need any immediate reply. First, I wish to echo the point made by my noble friend Lord Lyell on the question of alterations to accounting years, and to say that I very much agree there may be circumstances in which a company would have legitimate grounds (perhaps when it has been acquired by another company) for wanting to be able retroactively to change its accounting dates, and I think that some discretion in the Secretary of State might give the necessary flexibility. Likewise, possibly in similar circumstances, I think that a company might be 570 allowed a specific dispensation from the normal requirement that no accounting period should exceed 18 months in duration.
I would also echo that I believe we should consider whether there should not be some specific requirement for accounting records to be maintained in sufficient detail for directors of companies to assess current trading trends and, in particular, to satisfy themselves of the ability of the company to continue paying its debts. My last point—again, it is one touched on at greater length by my noble friend Lord Lyell, but I am dealing with only one specific aspect—is on the reappointment of auditors. I agree that there is an anomaly and that if an auditor decides not to seek reappointment at an annual general meeting there should be some comparable duty on him to explain the circumstance so that shareholders and others concerned with the company may satisfy themselves that nothing is amiss.
My Lords, I end by saying this, straying a little beyond the terms of the Bill in front of us, regarding the radically new approach to which the noble Lord, Lord Winterbottom, referred: fine—let us look at it; there is much that needs looking at. But may we please have a Green Paper and ample discussion? There are going to be complexities which will not be foreseen at the earlier stages, and they will take time to become apparent; and if we get to really far-reaching legislation, changing the relationship among shareholders, directors, creditors and so on, in addition to the Green Paper, in time to discuss it, may we have a draft Bill which can be commented on by those most interested before we have to deal with the matter in Parliament?
My Lords, the Bullock Committee has been mentioned, and many of us are contributing in some way to its work and are looking forward to its findings. But I think that many of us equally feel that if the Bullock Committee confines itself, as we hope it will not, strictly to its terms of reference, then it will produce a very disappointing and in many ways an unsatisfactory document which is not going to produce any sense of completion in its work and in the way people regard its work. It is a curious situation that we are in regarding the Bullock Committee in that the only way in which it can fulfil its objective, it seems, is to exceed 571 its terms of reference. I believe that the members of the committee are very much aware of this point, and we shall await with great interest to see how they are able to deal with it. My Lords, these points are for the future. This afternoon I would wish just to welcome this small but useful Bill.
§ 4.4 p.m.
§ Lord MONSON
My Lords, there has been a clerical error, as they say. It is I who put my name down to speak this afternoon, and not the noble Lord, Lord Molson. In consequence of correcting this, I am afraid I missed the first three minutes of the speech of the noble Lord, Lord Winterbottom, for which I apologise. Like other noble Lords who have spoken this afternoon, I warmly welcome this Bill. I have one or two minor doubts, which I hope the noble Lord will be able to assuage, plus one tentative suggestion. The doubts concern, first, the scale of penalties proposed in Clause 4(l)—£400 plus £40 a day. Such penalties are by no means too high where fraud is involved: but where fraud is involved there will surely be a prosecution and, therefore, separate or additional penalties. Where fraud is not involved, the omission is likely to be due to laziness, forgetfulness, illness or absence abroad, and I would think these penalties somewhat on the high side—particularly for a first offence—in such cases.
My feelings about this are reinforced by the requirements of Clause 25, which gives the Secretary of State power by Statutory Instrument to require the annual returns or the accounts to be produced on paper of a certain size, weight, quality, or colour, and with a certain size type or colouring of lettering. Therefore, if directors inadvertently send in their annual returns or their accounts on paper of the wrong colour or in type of the wrong size on out-dated forms, they will be in default and hence liable to a penalty. My second doubt—and this is a simple query—is in connection with the word, "printed" in Clause 1(7)(a). It specifies that there shall be delivered to the registrar of companies "a printed copy of every document." The Parliamentary draftsmen were unable to confirm whether "printed" included "typed". If it does not, I suggest it is 572 rather burdensome upon small companies to have to print rather than type their annual returns.
My suggestion is simply this. The Bill before us deals mainly with the protection of creditors or potential creditors, rather than of the shareholder. Given that it is highly unlikely that there will be time within the next months, or even the next years, for the introduction of a full-scale Companies Bill, I should like to suggest a small, modest and straightforward amendment which would be of marginal help to small shareholders in public companies. It is not by any means without precedent to introduce into a Bill a clause rectifying a matter which is not directly connected with the main subject matter of the Bill.
When the majority of blue chip companies, the majority of second line companies, the majority of third line companies and the majority of investment trusts send out their annual reports enclosing proxy forms or proxy cards so that the shareholder can indicate his consent to the adoption of the report and the re-election of the directors, or when they send out similar cards in connection with raising the authorised share capital, reconstructing the company's capital, making acquisitions or disposals of subsidiaries and so on, in nearly all cases (or in the vast majority of cases, at any rate) these proxy cards and proxy forms are reply-paid.
I have made notes on companies whose annual reports I have had to study over the past months and, confining myself to household names only, I have to concede that certain companies—namely, British American Tobacco, Grand Metropolitan Hotels, Dunlop and Carrington Viyella—do not send out reply-paid cards. On the other hand, Associated Newspapers, the National and Commercial Banking Group, Guest Keen and Nettlefold, Shell, Debenhams, Trust Houses Forte, Burmah Oil, Coats Patons, EMI, Fairey, ICI and the Rockware Group do; that is 75 per cent. of the companies concerned. The proportion is much the same among second line companies, and even greater among investment trusts, where about 85 per cent. of firms do so. There does not seem to me to be any hardship in requiring the minority to fall into line with the majority here.
573 We know that postal charges have gone up enormously in the past few years and are going to go up further, and it makes it that much more difficult for the proverbial widows and orphans—the people who cannot afford it; those who live a long way from a post office or in a country district, and who may not have a stamp—to exercise any control over a remote board of directors. It also redresses the balance slightly vis-à-vis institutional shareholders. It may be said—it has been said when I have suggested this privately before—that fewer than 10 per cent. of individual shareholders reply. Be that as it may, it is the principle that counts. I realise that the noble Lord on behalf of the Government could not possibly commit himself at this stage to approval in detail; but I hope that he will indicate in principle that the Government would keep an open mind if I put down an Amendment on these lines in Committee.
§ 4.10 p.m.
§ Lord REIGATE
My Lords, since this is a Second Reading debate and not a Committee stage, I will not give the noble Lord, Lord Winterbottom, my views on the minor Amendments that might be made to this Bill. So far as I am concerned, this is an excellent Bill. My complaint is that it is an excellent little Bill. I should like in particular to echo every word of my noble friend Lord Limerick as to the summary way in which most of the provisions of the 1973 Bill have been abandoned. I shall revert to that in a few minutes.
The noble Lord, Lord Brown, is not in his place now, but I thought that he made a rather maladroit interruption in the debate by trying to make a Party point about company legislation. I forget his exact statistics, but I think it is worth reminding the House that the Jenkins Committee reported in 1962 and it was only five years after that, understandably, that we had the Companies Act 1967. Then we had the Conservative White Paper in 1972—or 1973, I am not sure—and the Bill which was introduced and abandoned in 1974. It is quite obvious that the timing of companies legislation—let us leave out the partisan matters—such as might be covered by the Bullock Report, the ordinary bread and butter 574 legislation, will have to straddle the life of more than one Parliament. It is absurd to try to make Party points about the presence or absence of legislation—although I think in this case when legislation has been so summarily abandoned, as it was in 1973, one is in a position to point an accusing finger at the delay which is going to ensue.
For example, the 1973 Bill was an affair of 120 clauses and 11 Schedules; this Bill has 35 clauses and 3 Schedules. Heaven forbid that I should suggest that length is necessarily a test of merit in legislation, but it gives some idea of the number of issues which have been burked. When the noble Lord says that they are awaiting a comprehensive review, I cannot believe that, although there are parts of the 1973 Act that it would have been reasonable to leave out, many other parts could not have been brought in and adopted, as they have adopted in the Bill today. I think it is a sad reflection on what I can only describe as partisan views of the Minister to choose to take this course.
I am a little fearful as to when we shall get this Bill, if the Bullock Committee which is covering the very large side of what, in shorthand, is called "industrial democracy" is to report by the end of this summer and we are told we are going to have legislation in the 1976–77 Session. Perhaps the noble Lord will correct me if I misunderstood him, but it seems to me almost incredible that we shall have only such a very short time (and apparently no White Paper or Green Paper) to consider the implications of Bullock other than the Report itself. If we call the Report a Green Paper, we should, at least, need a White Paper on the Government's views and a long period of consultation in the drafting of the Bill. That is only for what I would call the industrial democracy side. What is going to happen to all the other things that have been left out of this Bill, some of which I will come to later?
I think that what has happened is tragic. It means, if I may say so to my noble friends who urged consolidation, that that is further off than ever. It would be absurd to consolidate at this stage or until we have this lengthy Bill before us.
575 My Lords, I could have given a long list of the problems which have not been tackled. My noble friend Lord Limerick gave one or two. There are one or two others that I should like to add but I am in a little difficulty. I managed to get hold of a copy of the 1973 Bill only late yesterday. It is out of print in the Stationery Office; there is one copy in the House of Commons Library and that is in my possession at the moment. So far as I know, there is no other copy available. However, I can draw attention to one or two points. First, insider dealing. Have the Government no views on that? I realise that it is a complex, difficult and contentious subject, but have they no views on anything that may occur in that field? Now warehousing—to use that quaint jargon word. Is there no view on that? Non-voting shares. Is there no view on that? Are we all waiting for—I was going to say Godot—the Bill or the Report? Is there no attempt to tackle inflation accounting? Is that too large a subject for this Government to deal with in their own lifetime?
I could give a long shopping list of omissions. I went through the whole of the text of the Bill and I noted about 12 points which seem to have been left out but which seem to have been of a reasonably non-political nature and which could have been included. I must ask the noble Lord, Lord Winterbottom, to give me a definite answer about one of them. He will speak with the noble Lord, Lord Davies of Leek, at his back. Clause 103, together with Schedule 6 to the 1973 Bill, provided for the use of the Welsh language for purposes connected with the Companies Acts by companies whose registered offices are in Wales. Why has that been abandoned? Could they not have taken the glorious opportunity of giving a sop to the Welsh Nationalist vote? Why? Was there any harm done?
§ Lord DAVIES of LEEK
My Lords, the noble Lord cannot blame me for that. We should like it. But I do not see that it is necessary.
§ Lord REIGATE
My Lords, the noble Lord, Lord Davies of Leek, knows that I would not blame him for anything. He and I are old friends and I am probably one of the very few in this House who knows that, aside from being an eminent 576 Welsh-speaking Peer, he is also an honorary chieftain in Western Samoa. I was present at his installation—and I have been looking for an opportunity for years to bring that into a speech. My Lords, I think this is a thoroughly disappointing Bill in that respect.
There is one other point that I would refer to. In introducing the Bill, the noble Lord drew your Lordships' attention to the ignominious fact that this was the Companies (No. 2) Bill. I hope that all of your Lordships have furnished yourselves with copies of the original Companies Bill introduced by Sir Brandon Rhys Williams into the other place. It received its First Reading—and having been introduced seven times before, that is quite an achievement—but it has not so far reached the stage of being given a Second Reading, and it looks as though it will be blocked by the Government's efforts. That is a pity, because it is a rather good Bill. It does one or two things which I should have thought anybody with a reasonably impartial approach would think at least worth discussing or the Government considering for incorporation into this Bill.
It is the first time, I think, that the role of the outside director—that is to say, the director without any executive duties—has been taken into consideration. The purpose of the Bill is to require each company of a certain size to have at least three directors without executive responsibilities. Furthermore, it imposes on those directors certain duties which I will briefly outline. One of them is to inform the shareholders publicly of their view of the management of the company and of their use of the company's assets. This would bring into effect in this country what is sometimes known as the management audit and therefore would obtain for the shareholders—and it follows, since it would be public, for the workers as well and, indeed, for all concerned with the firm—an independent view of the efficiency with which the enterprise is being conducted. I would hazard a guess that something on the lines of this Bill will ultimately come out of the Bullock Report, and therefore I should like to know why the Government, except for reasons of loss of face, have chosen to ignore the earlier Bill and why they will not consider incorporating in this Bill at least some of its provisions. However, 577 of the Bill as a whole, I think we would all say that it represents an opportunity missed.
§ 4.21 p.m.
§ Lord WINTERBOTTOM
My Lords, I should like first to thank the House for the very constructive approach which has been taken towards this Bill. As I said in my opening speech, it is a technical Bill. We are not operating in areas of Party political disagreement. What we are trying to do is to carry into effect as soon as possible those proposals of the Conservative Administration which are obviously of immediate importance and which can be carried through in the present Parliament to the benefit of everyone operating in this field. My note tells me that, in fact, the original 1973 legislation covered eight particular areas, of which we are dealing with three: the filing of company accounts, auditors and administrative matters concerning Companies House. These were in the 1973 Bill and are being included in the present one. Of the other five matters, the definition of public and private companies was mentioned by the noble Lord, Lord Lyell.
Then there is insider dealing and warehousing, which I touched upon earlier and which is obviously not something which will be overlooked when we come to the main legislation. The same can be said of disclosure. The noble Earl, Lord Limerick, mentioned the implementation of most of the remaining Jenkins recommendations. These are "unfinished business", and to them we have to add the very important findings of the Bullock Committee. The noble Earl, Lord Limerick, and the noble Lord, Lord Reigate, both stressed the need for an "early warning" to both Houses of the findings of the Bullock Committee and, indeed, of the proposals of the Government concerning company law reform. Certainly these proposals should receive the earliest possible publicity—perhaps first in the form of a Green Paper, followed by a White Paper and, as soon as possible thereafter, a draft Bill. This extraordinarily important new legislation—and it is delayed because it is so important and so complex—should be studied in a dispassionate and informed manner by both Houses of Parliament. I can give the House the assurance that a Green Paper on future company legislation 578 will be considered and the views of your Lordships will obviously be studied by my right honourable friend the Secretary of State. Much, obviously, will depend on the report of the Bullock Committee, but it is the Government's wish to bring forward legislation in 1976–77. That is consistent with the wish for the widest possible debate to take place over the Bullock Committee's recommendations. At this moment, I cannot say whether a Green Paper or a White Paper would be more appropriate, but I am fully seized of your Lordships' views and I will see that my right honourable friend the Secretary of State is informed.
I hope that noble Lords will excuse me if I do not, at this stage, answer the very numerous points raised by the noble Lords, Lord Lyell and Lord Monson, and by the noble Earl, Lord Limerick, which are mainly appropriate for a Committee stage. The noble Lords have kindly said that I might write to them, but it would be useful for us to have a thorough discussion at Committee stage of this Bill because many technical matters are involved. We are in agreement over our aims, and all we are trying to do is to send the best possible Bill to another place. Therefore, I, for one, would welcome a very thorough study of the Bill during its Committee stage.
The noble Lord, Lord Lyell, among other speakers, raised several points of importance. One of them concerned the question of printing in Clause 1. Although this is a comfortable phrase for the draftsman it is probably extremely inconvenient for a small company with limited resources, and I take note of what has been said by noble Lords about this. The noble Lord, Lord Lyell, raised another point of extreme importance concerning Clauses 15 and 16 on the question of whether an auditor could be sued for libel as a result of having resigned and stated his reasons, or whether his view would be privileged information. This is something which I hope the noble Lord will raise during the Committee stage, and I shall then do my best to answer his points. What we are trying to do is to strengthen the hand of the weaker brethren. Powerful auditors from powerful companies are not afraid of standing up to their clients, but I am sure there are areas where an auditor would be only 579 too glad of a little backing from legislation in facing some of his rather formidable customers.
Another suggestion I found extremely interesting was that we are reaching an era where, while dealing with our domestic legislation we have also to consider parallel EEC legislation at the same time. As your Lordships may have noticed from the Order Paper, we are to take the Committee stage and a debate on EEC legislation on company law in the same week. I had hoped that the two could be interrelated, which would give your Lordships' House an interesting "first". Unfortunately, the EEC legislation which we are to discuss refers to only one very small part of the area covered by this Bill. Nevertheless, that point made during the debate is interesting and may become of greater importance when we come to what may perhaps be called the main Bill—the one we are waiting for with interest on some sides and apprehension on all, because of the massive area it is likely to cover.
The noble Lord, Lord Reigate, mentioned the Conservative Administration's proposals, and caused me some worry in case I should still be here to deal with any future legislation on these matters. May I thank the noble Lord, incidentally, for introducing a light note into our discussions. I should also welcome translation of the various company documents into some less abrasive language than English, but at the moment we have to be content with our own English tongue.
My noble friend Lord Davies of Leek made an intervention about the move to Cardiff of Companies House. I thought this was a most ungrateful attitude towards something which I should have thought he would warmly welcome. He probably knows that the original intention was to send it to Newcastle, but at the end of the day it was decided that Cardiff gave us the best advantages.
§ Lord DAVIES of LEEK
My Lords, I was not denigrating Wales or my nationality. I was thinking of the most use to the greatest public. Naturally, 580 thinking of the best for Britain I thought that access by smaller companies was easier in London. Nevertheless, having listened to my noble friend on the reformation that will take place, I am sure that there will be excellent service from Cardiff.
§ Lord WINTERBOTTOM
My Lords, I should like to assure my noble friend that London search facilities will continue, because this is obviously most important. This will be made much easier by the microfiche documentation, which will economise in space and time. It is interesting that microfiching covers 640,000 companies, so this is obviously a mammoth task which must be spread over a couple of years. But I am confident that the services supplied by Companies House at Cardiff, plus the London search facilities, will in no way hinder the individual who wishes to conduct a search, and indeed will provide an even more efficient service than at present.
I should like to thank the noble Earl, Lord Limerick, for the very kind tribute he paid to the Registrar of Companies House and his staff. He speaks from knowledge; I speak only from hearsay. But they have served the country well, and I think that this is a very appropriate moment at which to express our thanks.
My Lords, there is very little else that I have to say now. As I said earlier, I look forward to a thorough scrutiny of this Bill during the Committee stage, because, although it is not as wide as certain noble Lords have indicated it might be, it is nevertheless useful and can be improved. For that reason, I look forward to the next stage of our discussions.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.