§ This part of this Act has application to companies qualified hereunder as "Job Ownership Companies".").
§ The noble Lord said: This is perhaps a slightly unusual form of amendment and needs a little explanation. A job ownership company is a form of cooperative. Unfortunately, the word "co-operative" is now used to cover a very large diversity of organisations, some of which are nothing more than a small partnership and others of which have thousands of members. Their history has, to put it mildly, been very erratic. Mr. Robert Oakeshott, who I expect many of your Lordships have heard of, and who has made a study of the worker co-operative movement from both a theoretical and a practical point of view over many years, has just published a book (which I have not brought with me but which I strongly recommend everybody to read) which he called The Case for Worker Co-operatives. He could actually have called it, I think, The Case Against Worker Co-operatives, because it is a completely objective account from very early days of the co-operative movement with examples of those which have succeeded and those which have failed.
§ As I say, it is an entirely objective study and really a most important contribution, I believe, to our knowledge. It is as a result of the work that he and his colleagues have done, and particularly of the study they have made of the remarkably successful enterprise in Spain known worldwide as Mondragon, that this addition to the Companies Bill is being put forward. I think I should explain a little about Mondragon, which perhaps some noble Lords do not know. A film of it was shown some time ago and had another showing yesterday, which some noble Lords came to see, and I think they were very impressed by what they saw.
§ Mondragon is a town or city in the Basque country. It was a very poor little village in 1955, when the first co-operative was started. It employed about 1,500 people. Today, 25 years later, it employs 18,000 people; its sales are something in the order of 896 £350 million, or its equivalent; and they have had no unemployment since it started. The only strike they had was one in the biggest of the co-operative members, which has about 3,000 people, when 17 revolutionaries organised a strike and the rest of the workers quickly threw them out of the works and they went on normally. In fact, there are 62 manufacturing worker units in this organisation. There are other co-operatives of various types, including agricultural ones. The main principle is that the workers are the owners of all the shares in the company and in the organisation, and it is on the basis of this concept that this amendment is put forward.
§ It is rather interesting that the whole origin of Mondragon in fact came from this country. It was a local priest who had studied the thoughts and works of Robert Owen and the Rochdale pioneers who started the Mondragon scheme. It is also interesting that he pointed out at the time why Robert Owen's pioneers and their factory failed. They started the same way, with the workers owning all the shares in the business. They began to expand fast, and they started to take in outside capital, with outside shareholders. Very soon these outside shareholders took control and put in their own management, and in due course the business failed. The original concept was, I think, a very good one, and it worked for quite a long time until they over-expanded.
§ A job ownership company which is now proposed is something quite different, as I have said, from the usual concept of a workers' co-operative, and has the following purposes. First, to establish a class of companies owned by those who work in them and, in effect, only by those who work in them; secondly, to enable such companies to purchase their own shares, as without this facility the first requirement is not practicable. That I shall come back to later because there is an amendment set down by the Government which very considerably facilitates the operation of the organisation which is proposed.
§ The aim of the clauses is to make available a simple form of business organisation which can be owned and directed by those who work in it and which has special advantages as follows. First, to escape from the traditional confrontation between capital and labour. We all know that change must come in the structure of industry if there is to be harmony and increasing productivity. We must get away from management by confrontation. Sooner or later this will happen. Secondly, to assist in the spread of wealth in a tangible and realisable form, and at a valuation that does not depend on the whims of portfolio investors. Mondragon employees who entered some years ago, in its early days, have now been retiring, and they find that they have something in the order of £20,000 of realisable assets on which to retire. Thirdly, which I think is important, to avoid the dangers of absentee ownership, which can result in mergers and takeovers which are not in the interests of the company or those who work in it, and which in fact ruined Robert Owen's theories.
§ This type of company would be particularly useful and appropriate in those cases, which are not uncommon, where there is a succession problem and the proprietor wishes to hand over or sell his interests to those who have worked with him over many years in 897 the business. It seems particularly relevant to me in view of the rapid growth of management takeovers at the present time, and perhaps I may give your Lordships a concrete example of what has been happening in the last few years in this field. Before about three years ago it was very difficult to get over Section 54, which I believe we are going to discuss later, in order to organise these management takeovers, in view of the fact that the company could not lend money to any of its employees or to anybody else to buy its own shares, and was to be taken to be a reduction in capital. But we found a way round this. I think it was fairly close to the wind, but we found a legal way round it some three years ago, and in my last year as chairman of ICFC we in fact did about 38 management buy-outs. Since then—and I see that Lord Caldecote is here; he can confirm my figures—we in fact did about 49 in the year which ended the 31st March last year, very nearly one a week, and this year it is running at about 70 in the financial year, which is getting near to 1½ a week.
§ We are not the only people in the field, and in fact it has become very infectious. This is a growing form of change in the business and industrial structure of this country. It is, I think increasing the number of small and medium-sized businesses, which is highly satisfactory; and I believe that what we are putting forward today is in fact something which would be very welcome to quite a number of these private proprietors who are wishing to hand over their businesses, not only to their senior management, perhaps, but to all the employees in the firm.
§ There are other advantages which I hope subsequent speakers will mention, but there is one important point which I wish to make and which convinces me that this legislation is necessary. I am sure the point will be made that there is adequate provision, or there shortly will be, for such a structure to be set up without further legislation. I personally doubt whether this is true, and I should like to see a memorandum and articles of association drawn up to prove the case. But even if it were true, I find the case for consolidation and simplification very strong. After all, it is necessary to dip into the Industrial and Provident Societies Acts, the Industrial Common Ownership Act and no doubt others.
§ The reason why I want to make so much of this point is that in the many years that I have been providing finance and, at times, advice for small and medium-sized companies I have found that smaller firms of accountants and solicitors, although having high professional skills, cannot have the specialist partners, and certainly not specialist departments, who have the capability for the elaborate adaptation of provisions not designed especially for the purpose. The critical argument, therefore, for a new class of company embodying these principles in statutory form is precisely that it would be widely available to the many professional advisers to whom company law is familiar but to whom co-operative law is a closed book.
§ Much was said at the Second Reading of this Bill about the help needed for small businesses. It is my opinion that there is as great a need for comprehensible procedures as there is for finance. I have recently seen a draft of a report prepared by a very large 898 company about small businesses and their problems over eight of the major countries in OECD, and right at the beginning they point out that the main problem they have discovered is not necessarily finance; it is simplification and decentralisation. If small businesses are to grow I feel quite certain we have got to go for this simplification.
§ I believe that the clauses we have put in our suggested amendments to the Bill would in fact remove a great cloud of fog which, to many, has the density of a pea-souper. I also believe that these proposed changes fit very well into this Bill, and help to achieve one of the main objectives; that is, to facilitate the formation and growth of small and medium industrial enterprises. The clauses have been carefully worded to meet the needs of the directive; and, really, a lot of them are mainly a form of consolidation. I very much hope that we can come to some agreement on this Bill, particularly in view of the new proposals put forward by the Government on companies buying their own shares, which I am sure will need further discussion and which in fact does not quite meet the full requirements that we have put forward in the proposals for job ownership companies. I beg to move.
§ 5.50 p.m.
I should like to support, with certain reservations, the new clause moved by the noble Lord, Lord Seebohm. If in what I say I seem to stress the reservations rather than the support, this is because the noble Lord himself, it seems to me, has made out admirably the general case for the setting up of job-ownership companies; and, as he has explained, they are a different kind of company. They would incorporate some features of conventional companies and some features of workers' co-operatives; but they would be neither one nor the other. When I put forward my reservations and suggestions, it is in the hope that they may help the noble Lord improve on the scheme which he has put forward in Committee. Perhaps I should explain that I approach the whole question of enterprises owned by those who work in them from the point of view of a lifelong co-operator; and maybe I should indicate an interest in that I am the chairman of the Co-operative Development Agency, which your Lordships may know as a body set up by Parliament for the encouragement of co-operatives and which, in its first two years, has concentrated particularly on the encouragement of industrial cooperatives.
Co-operatives of all kinds, including industrial cooperatives, need to conform to a number of well-known principles of which two are of particular importance; and I stress them. The first is that the membership should be open to all who can directly benefit from the operations of the society—in the case of industrial co-operatives this means the workers in the enterprise—and the members should exercise full control over the enterprise on the principle of one member, one vote.
That is provided for in the new clause that the noble Lord has moved. It means that the member, as a person, together with his fellow-members, exercises control irrespective of the size of his own shareholding. It is on the basis of one member, one vote, This distinguishes a co-operative sharply from a conventional 899 business and ensures that there shall be democracy in the exercise of control. The second essential cooperative principle that I would wish to stress is that profits at the end of a trading period are divided among the members in accordance with their transactions with the society. In the case of worker co-operatives this means that profits are distributed in proportion to the input of work or of skills to the operations of the enterprise. It is what they put in that is the basis for the calculation of the division of profits.
It is in the light of these two principles that I should like briefly to examine the noble Lord's new clause, because I find in respect of both of these principles that his new clause is somewhat defective, although not seriously so. The definition that the noble Lord put forward is that members are required to be employees, workers, in the enterprise. But I can find no provision—perhaps this was an oversight—that all employees should have the right to become members. In other words, there is no indication that the first co-operative principle is to be operative—that is, that there should be open membership in the sense that have defined it earlier. It seems to me that unless the noble Lord incorporates such a requirement in his proposition, it is possible that a small number of the employees could get control of the company and establish themeslves as an élite from which other workers would be excluded.
§ Lord Seebohm
I apologise for intervening; but in our plans every worker must be a member and must have a stake in the company.
I am glad to hear that but I suggest that it is not contained in the new clause. I suggest, therefore, that it would be an improvement if at a later stage that could be made clear. It is perfectly clear that all members must be workers; but it is not clear that all workers should have the right to be members; and that should be included.
Equally, I believe that additional thought needs to be given by the noble Lord to the question of how profits are to be divided. I can find nothing in this new clause on that point. Looked at from the point of view of a co-operative organisation, I think that that is an important thing to be taken care of. The noble Lord might say that it is not his intention that profits should be divided according to the co-operative principle which I have described. In that case, no doubt we could agree to differ as to our objectives in that respect, but I would point out to him that when the Chancellor of the Exchequer introduced his Budget only last week he brought forward a most welcome concession to industrial co-operatives. I will not detail it now, but it was an important concession; and I have no doubt that that concession will be administered according to clear precepts as to what an industrial co-operative is. I have no doubt, also, that the Inland Revenue will wish to see that the profit sharing is on a proper co-operative basis if an industrial cooperative is to benefit from the concession that he makes. Therefore, I suggest that unless the noble Lord takes care of this point, the company which he envisages might well not qualify for the concession which, in a welcome way, the Chancellor of the 900 Exchequer brought forward last week.
I welcomed what the noble Lord said by way of description of the highly successful co-operative nexus at Mondragon, in the Basque country. But there are many other examples—in France, Italy, Denmark and elsewhere—of equal success. It is Mondragon that has caught the public eye, but there are many other examples throughout the world of the successful application to industry, to manufacturing, and the provision of services of the principles which I have described. In the Mondragon enterprises they apply the principle of admitting to membership all the workers in the enterprise and they divide the profits among the workers in proportion to their input of work and skills within the enterprise. In other words, in my judgment they are bona-fide co-operative societies. I believe it true to say that if what the noble Lord has in mind is the growth in this country of comparable enterprises it is possible (as I think the noble Lord, Lord Lyell, said at the Second Reading of this Bill) for them to be set up under the existing state of the law. But we have listened to what the noble Lord has said and it may be that a change of this kind could facilitate it. As I see it at the moment, there are the defects—which I hope that I put forward in a friendly and constructive way—and if they could be taken care of I think it would make the proposition that the noble Lord puts forward stronger than it is already.
§ 6 p.m.
§ Lord Lloyd of Kilgerran
I am pleased to have the opportunity to follow the noble Lord, Lord Oram, as my name is associated with this amendment. Your Lordships are probably aware that the Liberal Party has been closely concerned with a number of job ownership schemes, and indeed a former leader of the Liberal Party who is still a Member of the other place, Mr. Jo Grimmond, is, I believe, chairman of certain job ownership schemes. It seems to me that at the present time this kind of scheme, if it can be called a scheme, so lucidly and clearly explained by the noble Lord, Lord Seebohm, is extremely appropriate today. It provides a convenient vehicle, similar to a partnership but with limited liability, to deal with an increasing number of men and women in this country who have been made redundant in their thirties and who wish to combine together in order to work in this form. There is a lot of redundancy money in areas such as South Wales. The first reaction of many of the men and women who are made redundant and receive a large amount of redundancy pay is to have a little leisure, but they get tired of a trip to Miami or wherever it is they go, and they group together wanting to work and make things which they can market in the local area.
I am presently concerned with finding commercial outlets for men and women who have made simple inventions which they can manufacture with the minimum of tools and apparatus, and there is a demand for these simple inventions which the normal firm—large or small—would not necessarily take up. These skilled men and women know their markets, and if they can have an opportunity to get places where the rent is cheap, or where the premises are given to them without any rent being charged, then that is an opportunity for them to make a living. The question then 901 arises, how should they form themselves? It seems to me that it is in a system of this kind that they would find the greatest opportunity.
I was very glad to hear the helpful observations made by a person so experienced as the noble Lord, Lord Oram, and I am personally grateful for the observations he made to improve this amendment. With regard to one point he raised about all employers having the right to be members of the scheme, it seems to be inherent in the amendment as it stands, as the noble Lord, Lord Seebohm, has explained, that all employees shall have the right to be members of the scheme. I should like to support this amendment very strongly, and my remarks are directed not only to Amendment No. 105 but also to Amendments Nos. 106 and 107.
§ Lord Boyd-Carpenter
It would be wrong for any noble Lord to feel that enthusiasm for schemes of this sort was confined to one side of the Committee. I believe many of us feel that in these days a variety of developments for dealing with what may be called the "we-they syndrome" in industry are required and should be encouraged. I myself thought that the noble Lord, Lord Seebohm—and I nearly said, for personal reasons, "my noble friend" because in everything except the purely technical, procedural sense I like to think he is—made a very important speech and one having a good deal of significance, perhaps, in the longer term. I do not think he would claim that in this amendment and those which follow it he has evolved a perfect scheme. I believe there was some force in the moderate criticisms which the noble Lord, Lord Oram, made, based on his own great experience. However, I think that the general proposition made by the noble Lord, Lord Seebohm, that some form of structure a little different from that of a normal Companies Act company would facilitate the growth of these worker co-operatives is very soundly based indeed.
For the reasons which the noble Lord gave—and I will not weary the Committee by repeating them—there are practical difficulties in complying with our somewhat complex company law (which we are at the moment busily engaged in making even more complex) when one is setting up an organisation of this sort and perhaps starting on a modest scale without being able to afford or obtain high-grade professional advice. The noble Lord's initiative is a very valuable one indeed. I am sure he would not contend, and if he did so contend I would not agree, that it is the only method of dealing with this problem. I happen myself to be the chairman of a company having a normal company structure which has encouraged employee shareholding to the extent that today over 90 per cent. of our employees in the United Kingdom hold shares in the company. We have been assisted in this by Finance Act legislation of successive Governments, although the tax limitations on the development of such schemes are still, in my view, unduly severe. We have certainly found, in a normal Companies Act structure, that the wide development of employee shareholding such as we have is very valuable; and, based, on strong practical experience, I would commend it strongly to the Committee.
I accept that we want varieties and that the ordinary Companies Act structure, for the reason that I mentioned 902 earlier, is not necessarily the sole or only answer to this problem. I should be extremely interested to hear what my noble friends on the Front Bench have to say. If 1 may say this without impertinence, I hope they will not confine themselves to seeking to point out defects in Lord Seebohm's clauses, because I have not the slightest doubt that with their great abilities and with their staffs behind them they would be able to do so. With respect, I do not believe that at this stage that is what the Committee is particularly interested in. What I hope they will say is that they would like to see encouragement given to the development of activities of this kind.
They may argue, and the noble Lord, Lord Lyell, did so on the Second Reading, that there really are no difficulties under present company law. I do not think the weight of evidence would support them, and even if there was a certain amount to that argument, as there may be, I hope they will not underrate the presentational and moral advantages of putting into our law a new provision deliberately tailored to job ownership, co-operation, or whatever one likes to call it and one likely to have an encouraging effect on people who are hesitating as to whether to go forward with these proposals. It would be something more than a gesture; it would be an indication of Government sympathy and understanding and indeed of Government encouragement. I, for one, should very much like to see this. I think it is wholly in the spirit in which this Government were elected that we should seek to encourage developments of this sort, and I hope that when one of my noble friends replies from the Front Bench he will, whatever his comments on the details of the amendments may be, indicate a broad sympathy with them—and, more than that, indicate a desire on the part of Her Majesty's Government to help forward movements of this kind.
§ Viscount Caldecote
I would support most strongly the noble Lords, Lord Seebohm and Lord Boyd-Carpenter, and in particular the words used by Lord Boyd-Carpenter when he said in the latter part of his speech that this would encourage people to set up this kind of company. As the noble Lord, Lord Seebohm, has already pointed out, there has been a very great success rate with what has been called management buyouts, and this amendment would provide for employee buy-outs on a larger scale. I therefore support it strongly. I agree that there are all the advantages which the noble Lord, Lord Seebohm, put forward, and I support them strongly too.
Whilst the co-operative principle which the noble Lord, Lord Oram, put forward, is no doubt important, I believe I am right in thinking that the job ownership company involves the ownership of shares in the company by the employees. All employees have the right to participate but not necessarily all employees would be shareholders. There might be some who would not but they would have the right if they so wished. So if there were certain tax advantages of becoming closer to co-operatives, as the noble Lord suggested, then no doubt these companies could take advantage of them.
I should like to make a plea that there may well be detailed problems connected with this proposed new 903 clause. I very much hope that we take the advice of the noble Lord, Lord Boyd-Carpenter, and look for ways of implementing it and not look for difficulties. Let the best not be the enemy of the good. This is a real opportunity—as I said on Second Reading—of moving from a property-owning democracy to a company-owning democracy. I should like to give this new clause my very strong support.
§ 6.12 p.m.
§ Lord Diamond
There is very little left for me to say except to make it clear that support for this kind of approach comes from every possible quarter of the Committee. I have been interested in this problem for very many years. I took part in drawing up a plan which the Labour Party considered. However, the plan has not yet reached manifesto status. I hope that it might do so at some time or other. It is a problem to which we all want to address our minds.
I subscribe to what has been said about the practising accountant and, I dare say, the practising solicitor, finding it a great and difficult problem to show the way to a group of people who want to get together and form a job ownership scheme of this kind. This is a new clause and what we are doing is giving a Second Reading to a new proposal, although in technical terms we are in Committee. This proposal would provide a fillip of the kind which is more than necessary. It would also be a clarification. It will be a great encouragement and I am sure a great success.
My anxiety is that and number of the tiny businesses that we are so anxiously pushing inexperienced workers into trying to run, might fail to a surprisingly and unpleasantly large extent. If an organisation of the kind was suggested there would be a much greater chance of such activities being successful. I do not see this merely in terms of small businesses. When in Spain one is bound to notice the fact that practically every refrigerator one sees is made by the factory within the Mondragon village. They are very successful in terms of both domestic production and sales and overseas exports. There is no reason why business should not be carried on in an increasing and extensive scale within this kind of system.
I am sure that the noble Lord, Lord Seebohm, will not object if a dot or comma is excluded. What we are anxious to do is urge the Government—and encourage people outside the Committee—to take this step forward to enable people to take in this venture. It is an excellent way of overcoming all sorts of problems. It is entirely within the development of the philosophy of the Companies Acts which we are now considering, especially in terms of buying one's own share capital, and I hope that the Government will give the idea the encouragement which our economy needs.
§ Lord Rochester
I had not intended to say a word. I am not sure that I should do so now as I have little of substance to add to what has been said. However, like the noble Lord, Lord Diamond, I have been enormously impressed by the degree of support that has come for this amendment from all parts of the Committee and, if I may say so, by the calibre of those 904 who have lent it support. Like the noble Lord, Lord Diamond, I should like in these few words to add my personal support and express the hope that the Government will take these factors into account. Whatever are the defects of detail in this amendment, I hope that the Government will find it possible to speed the underlying principle of it on its way.
§ Lord Kilmarnock
I am sure that the noble Lord, Lord Seebohm, is anxious to hear what reception the Government will give to this proposal. My only reason for intervening at all is that I have visited Mondragon, as no doubt have other noble Lords. I was there about 18 months ago. The note I made in October 1979, when I returned, was:If the two sides of industry could be more widely dissolved on Mondragon lines and if Mondragon type agreements on rewards were to replace the clumsy ritual of free collective bargaining, that would be a great step forward in the direction of a fairer and less divisive society".That was simply a personal note that I made on return from a three-day trip to the Mondragon complex of co-operatives.
The atmosphere there is extraordinarily impressive. There is tremendous sense of participation and dedication. It is important to point out that there is nothing wild or woolly about this scheme. The Mondragon complex is extremely professional. Before a co-operative is set up at least three years of studies go into the preparation. Once it has been accepted into the major group, it is monitored for a further two or three years. There is a very stringent rolling accounting procedure. There is absolutely nothing which could be vague or merely idealistic about this. There is obviously a basis of idealism to it but it is also profoundly and very stringently practical.
Something that attracted me about it is the ratio of rewards. The noble Lord, Lord Seebohm, mentioned that there is a general 1:3 ratio. In other words, the newest apprentice begins by getting one and the managing director does not get more than three. This differential is even narrower in practice. The apprentice speedily jumps to 1:2 in the ratio: many of the top management do not get more than 2:6 or 2:7 of the ratio, though I understand that technological requirements these days produce some variants and some outside advisers are being paid a higher wage or get a higher participation.
In terms of motivation for collaboration in industry, there is no doubt that this is a most impressive experiment. It is true, as the noble Lord, Lord Oram, has said, that there are other examples of this around Europe and Mondragon has slightly scooped the headlines. Simply on those grounds I do not think that we should turn ourselves away from the experience it can offer us.
I am not qualified to comment on the technicalities of Lord Seebohm's clause. Many members of the Committee seem to feel that in general principle it is correct, although there could be some improvement at a further stage. I hope that the Committee will give it a fair wind.
§ Lord Davies of Leek
I have just come into the Committee because I was interested in this matter and I apologise for speaking. I have taken an interest in this experiment and it is rather remiss of me to indulge 905 on the good temper of the Committee by making a long speech, having, by accident, absented myself. Nevertheless, may I record, without going into the arguments which I have read and the history of the Spanish experiment and others, that this development may be very worthwhile. Without going into it in detail, having missed the full debate, I should like to put it on record that I support this amendment and if we go into the Lobbies I shall go into the Lobbies in favour of it.
The Earl of Halsbury
If I may come to the help of the noble Lord who has just spoken, I, too, sincerely apologise to the Committee because I missed the beginning of this debate; it was called a little earlier than I had budgeted for, and I arrived late. Like the noble Lord, I do not wish to take up the time of the Committee by doing more than recording my support for this amendment. I think that one or two bits of sandpaper could perhaps be used before Report stage, but I should like my noble friend to be assured of my support.
§ 6.21 p.m.
§ Lord Mackay of Clashfern
A great deal of support in principle for these interesting proposals has been manifested on all sides of the Committee. So far as Her Majesty's Government are concerned, they are interested to promote enterprises of this kind and to make it reasonably easy for them to promote themselves and to be continued. It is in that spirit that I approach the amendments which have been proposed by the noble Lord, Lord Seebohm. The principles he has explained and the desires he seeks to achieve are ones which we would certainly seek to facilitate.
As I think has already been acknowledged, a company which is broadly on the lines of the company proposed in these amendments can presently be set up under the Companies Acts, subject to two major matters. The more important of them is the difficulty about the purchase of its own shares by a company, and it is in order to facilitate that in proper circumstances that the Government have proposed in later amendments new clauses to provide more generally for the purchase by a company of its own shares, subject to certain safeguards. There are also questions with regard to the restrictions imposed by Section 54 of the 1948 Act to which the noble Lord, Lord Seebohm, referred and we have proposed in this Bill a certain relief in this respect.
If these later amendments to which I have referred are passed, the result would be that, subject to safeguards of detail which I would not propose to go into fully now, in the spirit of my noble friend Lord Boyd-Carpenter, the sort of company that is here proposed could be set up. However, it is important not to lose sight of the point made by a number of your Lordships: this is not the only vehicle by which the sorts of objective we are here seeking to promote can be achieved and therefore it may not be wise, or indeed in the best interests of the ultimate success of this development, that it should be singled out for very special treatment in the Companies Acts. Surely it is better to look at the obstacles to the development which have been experienced and see to what extent those obstacles can be removed, under proper safeguards. That has been Her Majesty's Government's 906 approach and, as I say, the most important obstacle to the formation of these companies was undoubtedly the difficulty over a company purchasing its own shares. That we have sought, by the proposal of the later clauses, to remove.
I appreciate, as the noble Lord, Lord Seebohm, pointed out—and it was a point also taken up by other speakers—that the Companies Acts are apt to be a little complicated. I am not certain that I would go along with the view that we are now engaged in making the provisions more complicated: in some ways we are giving considerable help and alleviation to small and medium-sized companies in connection with the rules with which they must comply. Nevertheless, the Companies Acts are somewhat complicated and I appreciate that people to whom small enterprises might go—solicitors, accountants and possibly even members of the Bar—might not be familiar with the details of the model that the particular amendment incorporates. We would suggest that the way to overcome that is not to put this particular model, in its present stage of development, into statute but to engage in publicising it so that even the humblest practitioner will come to be aware of it. Indeed, it may be wise to circulate it in other sorts of literature apart from professional literature.
We feel that we have, by the general provisions I have referred to, sought to overcome the principal obstacles to the development of this type of company and we would suggest that the right way forward is for such companies to develop, making use of these general relaxations. We would also suggest to the Committee that it may not be in the best interests of this development, as I have mentioned, to "freeze" it at this stage into an Act of Parliament. Once it is in an Act of Parliament, as your Lordships know, it is not particularly easy to have it altered; and experience might show that in some details it could be improved in practice. Therefore, we would suggest that the objectives of these amendments can be achieved without the necessity of particular provisions of this kind. I shall not go into details of the provisions now—
§ Lord Diamond
I am most grateful to the noble and learned Lord for giving way. He was referring to the fact that the Government proposes to publicise methods whereby this can be achieved within the framework of the Companies Acts. Did he have in mind, for example, that there would be a new model Table A and that anyone could take the whole of that table and the articles of association and say, "This is a model of the way in which you could operate, for example, this job-ownership scheme"?
§ Lord Mackay of Clashfern
I did not mean to imply that the publicity would necessarily be undertaken by the Government, although no doubt the Government might be able to assist in one way or another in such publicity. To frame an alternative to Table A on the lines of these proposals might have the kind of difficulty I have mentioned. It would tend to put the company, in its present stage of development or in the formulation of its memorandum and articles in its present state of development, into the statute, and thus inhibit further development. Therefore, while I can see that doing so would achieve a fair measure of 907 publicity for the form, it would have the sorts of disadvantage to which I have drawn attention and, certainly for my part, I would suggest that publicity of a more general character might be more appropriate.
I was saying a moment ago that I did not propose to go into the details of the clauses that have been proposed by the noble Lord at the present stage, because our principal view is as I have expressed it. However, as the noble Lord, Lord Oram, has mentioned it, I would say that my understanding of the clauses as they are at present is that they restrict membership of the company to the employees, but not conversely. In other words, not every employee would have a right, in terms of this memorandum and articles to be a member; but of course—
§ Lord Seebohm
I would just intervene once more to say that it is the full intention of our scheme that every employee should be a shareholder.
§ Lord Mackay of Clashfern
I can well understand that; and I was just about to say that I can well understand that that sort of arrangement would be over and above the provisions of the memorandum and articles: in other words, it might well be a condition of part of the employee's contract on taking up the employment that he should be entitled to become a member of the company. Perhaps it would be more appropriate to have a contractual arrangement of that sort rather than to incorporate it into the memorandum and articles; and of course it does mean that this sort of proposal we are talking about would have flexibility to be used, for example, in a case where for some good reason the general co-operative arrangement to which the noble Lord, Lord Oram, referred might not be appropriate. Apart altogether from the question of development forward of this project, we would also say that in the interests of flexibility, in the interests of trying to fit this kind of scheme into a number of different situations, it is unwise to legislate about it in too much detail.
In the light of that explanation, I hope the noble Lord will feel that, while we support very much the objectives which he is seeking to achieve here, the way in which we have put it is perhaps preferable. I should be happy if the noble Lord felt that, between now and Report stage, we could look at it, possibly with him, to see whether there were any points about our general proposals which he felt required to be altered in any way to accommodate his proposal.
§ Lord Wilson of Langside
Before the noble and learned Lord spoke, it had never occurred to me to address your Lordships on this amendment, because I cannot match the knowledge and experience of the several of your Lordships who have spoken to it. I found the response of the Government, as expressed by the noble and learned Lord on the Front Bench, to these imaginative and potentially exciting innovations in the industrial scene more than somewhat disappointing. Indeed, I thought, in spite of the note on which the noble and learned Lord concluded, that the Government's approach to these matters tended just a little—I hope that this is not an unkind thing to say—to express the spirit of a man who has a problem for every solution.
§ Lord Mackay of Clashfern
Perhaps I might be allowed to say that I greatly regret that the noble and learned Lord should feel that. That is certainly not the spirit in which we have approached this matter—quite the reverse. I would say, particularly, that the fairly elaborate amendments which we have brought forward to provide for the purchase by a company of its own shares are a very positive response to trying to push forward the kind of proposal which the noble Lord, Lord Seebohm, has made. Far from trying to put obstacles in his way, we have sought to deal with these obstacles to some extent. I should perhaps correct one thing that I said earlier about Section 54. We have certainly made proposals in relation to Section 56. We are considering what could be done in relation to Section 54.
§ Lord Wilson of Langside
I certainly apologise to the noble and learned Lord if I misinterpreted the spirit in which he replied to the amendment. I readily apologise for that, but, certainly, that was the impression I gathered. But, of course, I may have been wrong.
§ Lord Mishcon
I wonder whether, upon that note which the noble and learned Lord sounded of Government encouragement to what is a brave initiative in this field and to an amendment for which the Committee is deeply grateful—because it has been a most interesting debate—I may say this. The noble and learned Lord caught the spirit of the Committee in wanting to further the principle behind the amendment, and very correctly referred to the general policy in certain clauses of this Bill, which would make what I think will inevitably be called JOCs something better known and something practised.
But I also wonder whether, bearing in mind that the noble Lord is speaking for the Departments of Trade and Industry in connection with this Bill, he could make the Committee a little happier—and I am not criticising him for not having made the Committee happy up till now—by saying that it is the Government's intention, so welcome is this proposal, to conduct in very near months from now discussions with the Confederation of British Industry, discussions with commerce and discussions with the trade unions, and perhaps the co-operative movement, on the furtherance of this idea, so that the publicity of which he spoke, and for which, understandably, he did not want to take responsibility on behalf of the Government at this stage, is something that is likely to be fairly imminent.
Many of us know of the good intentions of the noble and learned Lord. What we are scared of is that, having had this useful debate, with all the trouble taken by the noble Lord who moved the amendment, the proposal will be lost in the labyrinths of our Official Report and not come forward once we have excluded it from the Bill. If the noble and learned Lord could help with some pronouncement of intention to further the scheme, most members of the Committee, who have spoken in favour of this amendment, would be happier.
§ Lord Mackay of Clashfern
I am inclined to the view that actions speak loudly in this context and I would have said that in this field the Government have shown, 909 by action, their encouragement, by bringing forward their amendments in order to enable companies, subject to certain qualifications, to purchase their own shares. That is an active response to this matter.
§ Lord Mishcon
I must persist but only for one moment, because I do not want to bore the Committee. This is an important matter, and we do not want this debate to resolve itself into mere print upon pages, with all of us praising ourselves tonight for the speeches we have made and the matter resting there. The noble and learned Lord is a very frank person, and I do not think that he would put forward to the Committee that the reasons for looking at Section 56, and, ultimately, for looking at Section 54 and at the whole idea of a company's ability to purchase shares, were specifically in relation to our debate on these amendments. There were many other reasons why the Government had, quite properly, to look at those provisions and to bring in those reforms.
The noble and learned Lord will be the first to admit that, if we merely pass these sections in regard to a company's ability to purchase shares, and to finance the purchase of shares, and they become enacted, that will not forward the scheme in any way. What we are anxious about is that the scheme itself should go forward, not just the enabling powers. I therefore press the noble and learned Lord again. Is he prepared, on behalf of the Departments of Trade and Industry, to say that discussions to further this kind of scheme will be initiated by his departments?
§ Lord Seebohm
I so much agree with what the noble Lord, Lord Mishcon, has said. I had hoped that we should get more encouragement than we have had from the Front Bench. It is perfectly easy for legislation to do what I have put forward. But unless there is some positive encouragement from the Government, by way of stating the case—by no means do I say that this evening has been wasted—the Government will not have done what I wanted. I do not believe that a single person has spoken against my amendment.
§ Lord Lloyd of Kilgerran
May I attempt to clarify a few points by asking the noble and learned Lord the Lord Advocate two questions? I, too, was a little disappointed at his approach, but I may have misunderstood him in this matter. In the early part of his speech, he referred to the fact that he was not going to deal with these amendments in detail. He was talking about the whole scheme, subject to certain details, but he did not want to bore the House, he said—or words to that effect—and did not give us the details which he had in mind in relation to these amendments. As the noble and learned Lord will appreciate, one of the amendments associated with what the noble Lord, Lord Seebohm, spoke about was the new clause for amendment of the Companies Act 1980, to enable a limited company to acquire its own fully paid shares.
Secondly, when the noble and learned Lord so courteously and in a friendly way suggested that there should be talks, I was not clear about the nature of those talks. Would they be talks relating to the structure of these amendments and taking place before Report? Or did the noble and learned Lord have in mind other kinds of talks? As I have my name down 910 to this amendment, I think it would be very helpful if the noble and learned Lord could assure us that the talks which he has suggested will relate to the clauses which we have put into the Marshalled List.
§ 6.40 p.m.
§ Lord Mackay of Clashfern
I did not examine the clauses in tremendous detail because I sensed that the Committee had accepted the suggestion put forward by my noble friend Lord Boyd-Carpenter. I certainly am in a position to give to the Committee views about the clauses in considerable detail, if that is thought to be wise. However, I concluded, rightly or wrongly, that perhaps it was unnecessary at this stage to go into that kind of detail. When I spoke earlier, the kind of further discussions which I had in mind were discussions about whether we had, to the extent necessary to allow the scheme to proceed in the general clauses, met the points which the noble Lord, Lord Seebohm, considers to be essential. That is the sort of discussion which I had in mind, for the reasons which I have explained. I hope I have made it clear that it seems to us not to be right to go ahead along the lines of these particular clauses, for the reasons which I have mentioned. I submit that the correct and wise approach is to remove, so far as possible, the obstacles as general obstacles and to permit therefore development of this sort of idea without these obstacles.
§ Lord Lloyd of Kilgerran
May I thank the noble and learned Lord the Lord Advocate for his explanation of why he did not go into the matter in detail? However, another aspect of the speech which he has just made reminds me that he seemed to suggest that possibly these amendments are not suitable for a Companies Bill. I thought he indicated to the Committee, with his great skill in these matters, that these clauses should not be in a Companies Bill. I feel, however, that these clauses ought to be contained in a Companies Bill, subject to the discussions to which the noble and learned Lord referred regarding certain improvements to their drafting.
§ Lord Mackay of Clashfern
In that case, I have not made my main proposition very clear. The view which we take is that the sort of company which is proposed in these amendments is of a very specialised form and subject to the matters which I have mentioned, could be created under the Companies Acts as they presently stand. If therefore they are a good thing—and your Lordships have plenty of evidence that for some circumstances they are an extremely good thing—then it is right that they should proceed. But in order for that to happen there is no need to put them into the Companies Acts as a special model. To select one possible model and to give it pre-eminence in the Companies Acts would be a mistake and possibly would inhibit the very development which your Lordships are anxious to promote.
There are other models which are possible. If one were to have the Companies Acts full of all possible models for doing everything that is good, the Companies Acts would be infinitely more complicated than they are. Accordingly, it is our view that the thing to do in the Companies Acts is, so far as it is right, to remove obstacles to desirable developments. That leaves the 911 developments to take place at the initiative of those who want them, helped, so far as it is desirable, by Her Majesty's Government. In that connection, which may help the noble Lord, Lord Mishcon, may I say that, as the noble Lord, Lord Oram, has already pointed out, my right honourable friend the Chancellor of the Exchequer gave in his Budget very practical help in the direction of enterprises such as this.
§ Lord Mishcon
The noble and learned Lord has helped me, but only by a minuscule amount. I was asking him, as he very well knows, for something further. The Committee in my judgment, and I shall be corrected if I am wrong, regards the debate we have just had as very valuable. As has been pointed out, not one speaker—and we have heard speakers of great experience—has spoken against the proposals. The noble and learned Lord has given very good reasons, in my judgment, as to why it is not appropriate to legislate within this Companies Act for a specific type of company. I do not want to argue with him about that; he has given very good reasons why we should not have another Table A. I think that point is debatable, but I do not want to argue about it. However, the noble and learned Lord, I am sure not intentionally, has evaded the one question which I put to him.
This Committee, I feel, wants action upon this point—not just action which enables, from a legislative point of view, but action to encourage companies of this kind to be set up. Therefore I ask the noble and learned Lord, in straightforward, simple English, are the Government, through the Departments of Trade and Industry, prepared in the near future, having heard what this debate has told the Government and which the Government themselves have been good enough to say they have looked upon with favour, to initiate discussions with these organisations which are concerned with these matters to try to progress companies of this kind? Without that, we are in a position of de mortuis nil nisi bonum—concerning the dead say nothing but good. And this clause will be dead, and these amendments will be dead, and we shall have done nothing but express good about them.
As I understood the Minister, he wanted to confine his talks with the noble Lord, Lord Seebohm, to the practicalities of the Government's amendments which are on the Marshalled List. I wonder whether I may press the noble and learned Lord to go somewhat wider than that and to offer to enter into discussions with the noble nord, Lord Seebohm, with a view to looking at the position which we may reach at the Report stage in order to find out whether or not some other form of amendment might be moved. I believe that talks of that wider kind might help the Committee out of the present difficulty in which it is placed.
I have considerable sympathy with the Minister's position in not wanting to give approval to a particular pattern of progress in this respect. I did not make this point in my earlier remarks, but I am very conscious that there is a completely different area of law under the Industrial and Provident Societies Acts which were specifically enacted for the setting up of co-operative 912 societies. I believe this to be very relevant to the discussions which we are having this evening. If the Minister could go somewhat wider than he has about the possibility of this matter being further discussed, perhaps informally outside the Chamber, it might help.
§ Lord Boyd-Carpenter
Before my noble and learned friend replies, may I say that I am a little surprised that my noble and learned friend's, I thought, very helpful response has not been, apparently, as fully appreciated by one or two noble Lords as, frankly, I should have expected. Certainly they do not seem to regard it in the same favourable terms as I do.
However, can we not leave the matter like this? My noble and learned friend on the Front Bench has said that he would like to have discussions with the noble Lord, Lord Seebohm. The noble Lord, Lord Seebohm, is a great enthusiast who has done a great deal of work on the subject. Both he and my noble and learned friend are reasonable men. I should have thought the sensible thing to do would be to allow them both to have a discussion such as has been promised and to await the outcome of that discussion. If unhappily they are unable to agree, then anybody will be free—the noble Lord, Lord Seebohm, or any other noble Lord—to raise the subject at Report. However, to attempt to pin down my noble and learned friend in advance of the discussion with the noble Lord, Lord Seebohm, seems to me to be rather counter-productive. I hope the Committee will feel that the stage we have reached is a good one. There has been a successful debate with, as everybody has pointed out, general agreement with the spirit of the proposals made by the noble Lord, Lord Seebohm. There is a suggestion of a discussion between the two (if I may so describe them) protagonists at this moment; would it not be sensible to await the outcome of those discussions?
§ Lord Lloyd of Kilgerran
I should like to express my thanks to the noble Lord, Lord Boyd-Carpenter, for his helpful suggestion. I heard the noble and learned Lord the Lord Advocate refer to discussions and in my further speeches I tried to evaluate what those discussions would comprise. As my name is associated with this amendment as well as that of the noble Lord, Lord Seebohm, I would welcome such discussions if the noble Lord, Lord Seebohm, agrees. I would welcome such discussions with the Government as soon as possible in the context of the amendments as now in the Marshalled List, in order to see whether we can go any further without detaining this Committee any longer.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 106, 107 and 108 not moved.]
§ Clause 35 agreed to.
§ Clauses 36 to 39 agreed to.913
§ Clause 40 [Provisions supplementary to Sections 36 to 39]:
§ Lord Ponsonby of Shulbrede moved Amendment No. 109:
Page 45, line 24, at end insert—
("(11) References in sections 37, 38 and 39 of this Act to the issue of shares at a premium include references to the issue of shares where the value of the consideration given for the shares exceeds the nominal value of the shares issued whether or not the excess is or would but for those sections be recorded in the share premium account.").
§ The noble Lord said: Clause 39(1) provides retrospective relief from Section 56 of the 1948 Act where the issuing companies issued shares at a premium, and it would seem to be helpful if it were made clear that "issued at a premium" includes issues made at a premium, whether expressly or by implication. The intention of this amendment is to clarify the situation. I beg to move.
§ Lord Mackay of Clashfern
The question of whether or not a share premium has arisen is a question of law to be determined in the light of the facts, and I should have thought that the amendment was unnecessary. The Bill as it stands achieves its purpose and I would suggest that in the light of the ordinary principle of economy this amendment should not be agreed to.
§ Lord Ponsonby of Shulbrede
I thank the noble and learned Lord for his reply, which I will study in detail. The intention of the amendment was to clarify the situation and I will see whether in fact his remarks meet that situation. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Trefgarne
I understand that it has been agreed through the usual channels that we should now adjourn consideration of this Bill in Committee, proceed with the other business, and then continue with this Bill again at eight o'clock. Accordingly, I beg to move that the House do now resume.
§ Moved accordingly, and, on Question, Motion agreed to.
§ House resumed.